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Peter R. Rose1,
Brett Edwards2
(1) Rose, Edwards & Associates, L.L.P, Austin, TX
(2) Rose, Edwards & Associates, Evergreen, CO
Abstract: Could this prospect turn out to be a mediocre little one-well field?
Most modern oil companies acknowledge persistent and significant optimistic bias in their forecasts of prospect reserves (estimated ultimate recovery=EUR) for their exploration discoveries. Annual exploration portfolios commonly discover only 5% to 50% of EUR's. This causes the following problems: 1) Exploration Departments lose credibility; 2) Portfolio composition isn't optimized; and 3) Stakeholders don't maximize return on their investments.
Recent reviews of the drilling portfolios of more than a dozen companies confirms this pattern of overoptimism, even though most such firms have now adopted probabilistic estimating methods (the problem is even worse among deterministic estimators).
Counter-intuitively, the dominant cause of such overoptimistic reserves bias is not that the "high-side" (P1% and P10%) reserves estimates are too high; rather it is that the "low-side" (P99% and P90%) reserves estimates are too high. This commonly produces reserves-variances for new-field wildcat prospects that are properly characteristic of development wells, or step-outs.
Field-size distributions (FSD's) in well documented onshore trends, where the P99% field size ordinarily ranges between 1,000 and 10,000 barrels, provide an effective and practical reality-check for both prospectors and decision-makers. Ask this question: "Could this prospect turn out to be a mediocre little one-well field?" For most onshore prospects, the honest answer must be "yes", and therefore the low-side case must reflect such a small accumulation, consistent with the closure's perceived geometry. Offshore FSD's already reflect commercial truncation by platform cost, so the equivalent question for offshore wildcats is "Could this turn out to be just a flowing show?"
AAPG Search and Discovery Article #90914©2000 AAPG Annual Convention, New Orleans, Louisiana