Published:January 01, 2001
Reconstructing Parent Field-size Distributions from Offshore FSDs
Ordinarily, when one constructs a field-size distribution (FSD) for a given offshore producing trend (=play), it has already been effectively truncated at the low end by the cost of platform construction and installation. Smaller uncompleted accumulations—the kinds of accumulations that would routinely be completed as small fields if the trend were onshore—are simply reported as “good shows” encountered while drilling an exploratory dry hole. Ordinarily these will be indicated by positive drill-stem tests, or probable productive zones evidenced by borehole geophysical logs.
Moreover, the chance of success (Pc), defined by geologic chance factors (Pg), and multiplied by the percent of the natural distribution of accumulations of commercial size or larger, reflects this truncation.
But the parent FSD can be recreated, and the natural chance of success (defined by geologic chance factors) can be estimated, as illustrated below.
First, consider an FSD in a mature province such as west Texas, where you will complete any discovery well finding reserves adequate to cover completion costs, regardless of how much of the original exploratory investment (G&G, leasing, drilling, overhead) will be recovered (Figure 38a). Practically, this means that any flowing discovery will be completed.
By comparison, suppose that exactly the same natural endowment and distribution of petroleum accumulations was present in a developing offshore trend in which 10 fields had been discovered and completed, and 14 of 40 total exploratory dry holes had reported flowing shows of oil and gas, which had been judged inadequate to support a platform (Figure 38b).
Now, let us suppose an observed offshore FSD (10 fields) as shown below:
FIELD . EUR (MMBOE) . FRACTILE CUMULATIVE % . J 5.6 90.9 I 7.4 81.8 H 9.5 72.7 G 12.8 63.6 F 17.0 54.5 E 23.5 45.5 D 35.0 36.4 C 55.0 27.3 B 100.0 18.8 A 235.0 9.1 FIELD . EUR (MMBOE) . FRACTILE CUMULATIVE % . J 5.6 90.9 I 7.4 81.8 H 9.5 72.7 G 12.8 63.6 F 17.0 54.5 E 23.5 45.5 D 35.0 36.4 C 55.0 27.3 B 100.0 18.8 A 235.0 9.1
The natural or parent distribution can be reconstructed as follows:
Assume P99% = «10,000 BOE—estimated minimum reserves required to flow (i.e., to be detected);
Total number of accumulations (14 shows + 10 fields) = 24= n;
Incremental fractile % assigned to each accumulation = 100% ÷ (n + 1) = 25 = 4%;
Reconstructed parent distribution (Figure 38b):
Discussion: This reconstruction (Figure 38b) suggests that the effective (= commercial) threshold is currently about 5 MMBOE = P42%, so Pmefs = 42%.
|FIELD .||EUR (MMBOE) .||FRACTILE CUMULATIVE % .|
|FIELD .||EUR (MMBOE) .||FRACTILE CUMULATIVE % .|
If, with additional technology and infrastructure, fields down to 2 MMBOE could be produced, the reconstructed FSD suggests that perhaps four of the show-holes may represent such fields.
Also, if one estimates the likelihood of finding a field larger than, say, 100 MMBOE (given that the test well indeed makes a discovery in the first place!), using the observed offshore FSD, such an event has a chance of about 18%. However, if one employs the “correct” FSD, reflecting the natural or parent distribution, the chance of finding the same 100 MMBOE or larger accumulation is greatly reduced, to only about 8% (Figure 38b).
The important things for the offshore explorationist to grasp are that:
Any offshore FSD has already been naturally truncated by platform costs;
The parent FSD can be reconstructed (Figure 38b);
Marginally economic opportunities are represented by uncompleted show-holes whose number can be estimated;
Probabilities associated with larger fields will be substantially overestimated unless the reconstructed parent FSD is used, especially for economically demanding offshore ventures; and
The operative chances of geologic and economic success for offshore trends can be “backed out” from the results reported to date.
Risk Analysis and Management of Petroleum Exploration Ventures
During the 1990s, many international petroleum companies improved their exploration performance significantly by using principles of risk analysis and portfolio management, in combination with new geotechnologies. While exploration risk cannot be eliminated, it can certainly be reduced substantially, on a portfolio scale. And the widespread adoption of standardized risk analysis methods during the 1990s brought badly needed discipline to petroleum exploration. By the mid-1980s, most well-informed major international petroleum firms that were engaged in exploration recognized that, globally, the average size of new discoveries was diminishing. Not coincidentally, the class of exploratory prospects categorized as “high risk/high-potential” was showing marked signs of underperformance. For major companies, when all such ventures, which averaged around a 10% perceived probability of success, were considered, less than 1% actually discovered profitable oil and gas reserves, and the sizes of these discoveries were generally far smaller than predicted. All in all, such exploration for new giant fields destroyed value, rather than creating it, in the 1980s and early 1990s. Consequently, exploration, as a corporate function, lost credibility. It badly needed to begin delivering on its corporate promises. It needed to become more efficient, and thereby more profitable. To optimize the allocation of exploration capital, concepts of portfolio management began to be considered.