1 Introduction
Oil and gas are essential sources of energy in the modern world. They are found
in subsurface reservoirs in many challenging environments. Modern reservoir man-
agement relies on asset management teams composed of people from a variety of
scientific and engineering backgrounds to produce oil and gas. The purpose of this
book is to introduce people with diverse technical backgrounds to reservoir manage-
ment. The book is a reference to topics that are often encountered by members of
multidisciplinary reservoir asset management teams and professionals with an inter-
est in managing subsurface resources. These topics are encountered in many
applications, including oil and gas production, coalbed methane production, uncon-
ventional hydrocarbon production, geothermal energy production, and greenhouse
gas sequestration. This chapter presents an overview of reservoir management.
1.1 Life Cycle of a Reservoir
The analysis of the costs associated with the development of an energy source
should take into account the initial capital expenditures and annual operating
expenses for the life of the system. This analysis is life cycle analysis, and the costs
are life cycle costs. Life cycle costing requires the analysis of all direct and indirect
costs associated with the system for the entire expected life of the system. In the
case of a reservoir, the life cycle begins when the field becomes an exploration
prospect, and it does not end until the field is properly abandoned.
The first well in the field is the discovery well. Reservoir boundaries are established
by seismic surveys and delineation wells. Delineation wells are originally drilled to
define the size of the reservoir, but they can also be used for production or injection
later in the life of the reservoir. The production life of the reservoir begins when fluid
is withdrawn from the reservoir. Production can begin immediately after the discovery
well is drilled or years later after several delineation wells have been drilled. The
number of wells used to develop the field, the location of the wells, and their flow
characteristics are among the many issues that must be addressed by reservoir
management.
1.1.1 History of Drilling Methods
The first method of drilling for oil in the modern era was introduced by Edwin
Drake in the 1850s and is known as cable-tool drilling. In this method, a rope
connected to a wood beam had a drill bit attached to the end. The beam was raised
Integrated Reservoir Asset Management. DOI: 10.1016/B978-0-12-382088-4.00001-3
Copyright # 2010 Elsevier Inc. All rights reserved.
and lowered, which lifted and dropped the bit and dug a hole into the ground. Cable-
tool drilling does not work in soft-rock formations, where the sides of the hole might
collapse. Cable-tool drilling has been largely replaced by rotary drilling.
Developed in France in the 1860s, rotary drilling was first used in the United
States in the 1880s because it could drill into the soft-rock formations of the
Corsicana oil field in Texas. Rotary drilling uses a rotating drill bit with nozzles
for shooting out drilling mud to penetrate into the earth. Drilling mud is designed
to carry rock cuttings away from the bit and lift them up the wellbore to the surface.
Rotary drilling gained great popularity after Captain Anthony F. Lucas drilled the
Lucas 1 well at Spindletop, near Beaumont, Texas. The Lucas 1 well was a discov-
ery well and a “gusher.” Gas and oil flowed up the well and engulfed the drilling
derrick. Instead of flowing at the expected 50 barrels of oil per day, the well pro-
duced up to 75,000 barrels per day. The Lucas gusher began the Texas oil boom
(Yergin, 1992, pp. 83–85). Since then, rotary drilling has become the primary means
of drilling.
Once a hole has been drilled, it is necessary to “complete” the well. A well is
completed when it is prepared for production. The first well of the modern era
was completed in 1808 when two American brothers, David and Joseph Ruffner,
used wooden casings to prevent low-concentration saltwater from diluting the
high-concentration saltwater they were extracting from deeper in their saltwater well
(Van Dyke, 1997).
It is sometimes necessary to provide energy to extract oil from reservoirs.
Oil can be lifted using pumps or by injecting gas into the wellstream to increase
the buoyancy of the gas-oil mixture. The earliest pumps used the same wooden
beams that were used for cable-tool drilling. Oil companies developed central
pumping power in the 1880s. Central pumping power used a prime mover—a power
source—to pump several wells. In the 1920s, demand for the replacement of on-site
rigs led to the use of a beam pumping system for pumping wells. A beam pumping
system is a self-contained unit that is mounted at the surface of each well and
operates a pump in the hole. More modern techniques include gas-lift and electric
submersible pumps.
1.1.2 Modern Drilling Methods
Advances in drilling technology are extending the options available for prudently
managing subsurface reservoirs and producing fossil fuels, especially oil and gas.
Modern drilling methods include horizontal wells, multilateral wells, and infill
drilling.
A well is a string of connected, concentric pipes. The path followed by the string
of pipes is called the trajectory of the well. Historically, wells were drilled vertically
into the ground, and the well trajectory was essentially a straight, vertical line.
Today, wells can be drilled so that the well trajectory is curved. A curved wellbore
trajectory is possible because the length of each straight pipe that makes up the well
is small compared to the total well length. The length of a typical section of pipe in
2 Integrated Reservoir Asset Management
a well is 30 to 40 feet. Wells with one or more horizontal trajectories are shown
in Figure 1.1.
A well can begin as a vertical well and then later be modified to a horizontal or
multilateral well. The vertical section of the well is called the main (mother) bore or
trunk. The point where the main bore and a lateral meet is called a junction. When
the vertical segment of the well reaches a specified depth called the kick-off point
(KOP), mechanical wedges (whipstocks) or other downhole tools are used to change
the direction of the drill bit and alter the well path. The beginning of the horizontal
segment is the heel, and the end of the horizontal segment is the toe. The distance,
or reach, of a well from the drilling rig to final bottomhole location can exceed
six miles. Wells with unusually long reach are called extended reach wells.
Wells with more than one hole can be drilled. Each hole is called a lateral or
branch, and the well itself is called a multilateral well. For example, a bilateral well
is a well with two branches. Figure 1.1 shows examples of modern multilateral well
trajectories.
Multilateral wells make it possible to connect multiple well paths to a common
wellbore, and they have many applications. For example, multilateral wells are used
in offshore environments where the number of well slots is limited by the amount of
space available on a platform. They are also used to produce fluids from reservoirs
that have many compartments. A compartment in a reservoir is a volume that is
isolated from other parts of the reservoir by barriers to fluid flow such as sealing
faults.
Horizontal, extended reach, andmultilateral wellbores that follow subsurface form-
ations provide access to more parts of the reservoir from fewer well locations. This
provides a means of minimizing the environmental impact associated with drilling
and production facilities, either on land or at sea. Extended reach wells make it possi-
ble to extract petroleum from beneath environmentally or commercially sensitive
areas by drilling from locations outside of the environmentally sensitive areas.
Extended reach wells make it possible to produce offshore fields from onshore drilling
locations and reduce the environmental impact of drilling by reducing the number of
surface drilling locations.
Reservoir Formation Cross-Section
HorizontalWell
BilateralWell
MultilateralWell
Figure 1.1 Multilateral wells.
Introduction 3
Infill Drilling
Infill drilling is the process of increasing the number of wells in an area by drilling
wells in spaces between existing wells. The increase in well density, or number of
wells per unit area, can improve recovery efficiency by providing fluid extraction
points in parts of the reservoir that have not been produced. Changes to well patterns
and the increase in well density can alter flow patterns in displacement processes
and enable the displacement of in situ fluids by injected fluids. Infill drilling is
especially useful in heterogeneous reservoirs.
Geosteering
Geosteering is the technology that makes it possible to accurately steer the well to
its targeted location and is a prerequisite for successful extended reach drilling.
Microelectronics is used in the drilling assembly to provide information to drill
rig operators at the surface about the location of the drill bit as it bores a hole into
the earth. Operators can modify the trajectory of the well while it is being drilled
based on information from these measurement-while-drilling (MWD) systems.
Geosteering and extended reach drilling can reduce costs associated with the con-
struction of expensive, new offshore platforms by expanding the volume of the res-
ervoir that is directly accessible from a given drilling location. In some cases, wells
drilled from onshore drilling rigs can be used to produce coastal offshore fields that
are within the range of extended reach drilling.
1.1.3 Production Systems
A production system can be thought of as the collection of subsystems illustrated in
Figure 1.2. Fluids are taken from the reservoir using wells, which must be drilled
and completed. The performance of the well depends on the properties of the reser-
voir rock, the interaction between the rock and the fluids in the reservoir, and the
properties of the fluids in the reservoir. Reservoir fluids include the fluids originally
SurfaceFacilities
Well Drillingand
Completion
WellModel
}
ReservoirModel
Figure 1.2 A production system.
4 Integrated Reservoir Asset Management
contained in the reservoir, as well as fluids that may be introduced as part of the res-
ervoir management program. Well performance also depends on the properties of
the well itself, such as its cross-section, length, trajectory, and type of completion.
The completion of the well establishes the connection between the well and the res-
ervoir. A completion can be as simple as an open-hole completion where fluids are
allowed to drain into the wellbore from consolidated reservoir rock, to completions
that require the use of tubing with holes punched through the walls of the tubing
using perforating guns.
Surface facilities are needed to drill, complete, and operate wells. Drilling rigs
may be moved from one location to another on trucks, ships, or offshore platforms;
or drilling rigs may be permanently installed at specified locations. The facilities
may be located in desert climates in the Middle East, stormy offshore environ-
ments in the North Sea, arctic climates in Alaska and Siberia, and deepwater
environments in the Gulf of Mexico and off the coast of West Africa.
Produced fluids must be recovered, processed, and transported to storage
facilities and eventually to the consumer. Processing can begin at the well site where
the produced wellstream is separated into oil, water, and gas phases. Further pro-
cessing at refineries separates the hydrocarbon fluid into marketable products, such
as gasoline and diesel fuel. Transportation of oil and gas may be by a variety
of means, including pipelines, tanker trucks, double-hulled tankers, and liquefied
natural gas transport ships.
1.2 Reservoir Management
Modern reservoir management is generally defined as a continuous process that
optimizes the interaction between data and decision making during the life
cycle of a field (Saleri, 2002). This definition covers the management of hydrocar-
bon reservoirs and other reservoir systems, including geothermal reservoirs and
reservoirs used for geological sequestration. Geological sequestration is the long-
term storage of greenhouse gases, such as carbon dioxide, in geological formations.
The reservoir management plan should be flexible enough to accommodate techno-
logical advances, changes in economic and environmental factors, and new informa-
tion obtained during the life of the reservoir, and it should be able to address all
relevant operating issues, including governmental regulations.
Many disciplines contribute to the reservoir management process. In the case of a
hydrocarbon reservoir, successful reservoir management requires understanding the
structure of the reservoir, the distribution of fluids within the reservoir, drilling and
maintaining wells that can produce fluids from the reservoir, transport and processing
of produced fluids, refining and marketing the fluids, safely abandoning the reservoir
when it can no longer produce, and mitigating the environmental impact of operations
throughout the life cycle of the reservoir. Properly constituted asset management
teams include personnel with the expertise needed to accomplish all of these
tasks. These people are often specialists in their disciplines. They must be able to
communicate with one another and work together toward a common objective.
Introduction 5
Reservoir management studies are important when significant choices must be
made. The choices can range from “business as usual” to major changes in invest-
ment strategy. For example, decision makers may have to choose between investing
in a new project or investing in an existing project that requires changes in oper-
ations to maximize return on investment. By studying a range of scenarios, decision
makers will have information that can help them decide how to commit limited
resources to activities that can achieve management objectives.
Reservoir flow modeling is the most sophisticated methodology available for
generating production profiles. A production profile presents fluid production as a
function of time. Fluid production can be expressed as flow rates or cumulative pro-
duction. By combining production profiles with hydrocarbon price forecasts, it is
possible to create cash flow projections. The combination of production profile from
flow modeling and price forecast from economic modeling yields economic fore-
casts that can be used to compare the economic value of competing reservoir man-
agement concepts. This is essential information for the management of a reservoir,
and it can be used to determine reservoir reserves. The definition of reserves is
summarized in Table 1.1 (SPE-PRMS, 2007).
The probability distribution associated with the SPE-PRMS reserves definitions
can be illustrated using a normal distribution. We assume that several statistically
independent models of the reservoir have been developed and used to estimate
reserves. In the absence of data to the contrary, a reasonable first approximation
is that each model has been sampled from a normal distribution of reserves. Given
this assumption, an average m and standard derivation s may be calculated to
Table 1.1 SPE/WPC Reserves Definitions
Proved Reserves l Those quantities of petroleum, which by analysis of geoscience and
engineering data, can be estimated with reasonable certainty to be
commercially recoverable, from a given date forward, from known
reservoirs and under defined economic conditions, operating meth-
ods, and government regulations.l There should be at least a 90 percent probability (P90) that the quan-
tities actually recovered will equal or exceed the estimate.
Probable Reserves l Those additional reserves that analysis of geoscience and engineer-
ing data indicate are less likely to be recovered than proved reserves
but more certain to be recovered than possible reserves.l There should be at least a 50 percent probability (P50) that the quan-
tities actually recovered will equal or exceed the estimate.
Possible Reserves l Those additional reserves that analysis of geoscience and engineer-
ing data suggest are less likely to be recoverable than probable
reserves.l There should be at least a 10 percent probability (P10) that the quan-
tities actually recovered will equal or exceed the estimate.
6 Integrated Reservoir Asset Management
prepare a normal distribution of reserves. For a normal distribution with mean m and
standard deviation s, the SPE-PRMS reserves definitions are
Proved reserves ¼ P90 ¼ m� 1:28sProbable reserves¼ P50 ¼ mPossible reserves ¼ P10 ¼ mþ 1:28s
ð1:2:1Þ
Figure 1.3 shows a normal distribution for a mean of 189 MMSTBO and a stan-
dard deviation of 78 MMSTBO. The SPE-PRMS reserves from this distribution are
Proved reserves ¼ P90 ¼ 88MMSTBO
Probable reserves¼ P50 ¼ 189MMSTBO
Possible reserves ¼ P10 ¼ 289MMSTBO
ð1:2:2Þ
In this case, the normal distribution is used to associate an estimate of the likelihood
of occurrence of any particular prediction case with its corresponding economic fore-
cast. For example, we use Figure 1.3 to see that a reserves estimate of 200 MMSTBO
corresponds to a probability of approximately P43.
1.3 Recovery Efficiency
One of the objectives of reservoir management is to develop a plan for maximizing
recovery efficiency. Recovery efficiency is a measure of the amount of resource
recovered relative to the amount of resource originally in place. It is defined by
comparing initial and final in situ fluid volumes. An estimate of expected recovery
0
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00100.0 200.0
Reserves (MMSTBO)
Pro
babi
lity
of A
ttain
ing
Res
erve
s
300.0 400.0
Probability
Figure 1.3 The production system.
Introduction 7
efficiency can be obtained by considering the factors that contribute to the recovery
of a subsurface fluid.
Recovery efficiency is the product of displacement efficiency and volumetric
sweep efficiency. Displacement efficiency ED is a measure of the amount of fluid
in the system that can be mobilized. Volumetric sweep efficiency EVol expresses
the efficiency of fluid recovery in terms of areal sweep efficiency and vertical sweep
efficiency:
EVol ¼ EA � EV ð1:3:1Þ
Areal sweep efficiency EA and vertical sweep efficiency EV measure the degree of
contact between in situ and injected fluids. Areal sweep efficiency is defined as
EA ¼ swept area
total areað1:3:2Þ
and vertical sweep efficiency is defined as
EV ¼ swept net thickness
total net thicknessð1:3:3Þ
Recovery efficiency RE is the product of these efficiencies:
RE ¼ ED � EVol ¼ ED � EA � EV ð1:3:4Þ
Each of the recovery efficiencies is a fraction that varies from 0 to 1. If one or
more of the factors that enter into the calculation of recovery efficiency is small,
recovery efficiency will be small. On the other hand, each of the factors can be rel-
atively large, and the recovery efficiency will still be small because it is a product of
factors that are less than one. In many cases, technology is available for improving
recovery efficiency, but it may not be implemented because it is not economic. The
application of technology and the ultimate recovery of fossil fuels depend on the
economic value of the resource.
1.4 Reservoir Management and Economics
The definition of reservoir management presented previously recognizes the need to
consider the economics of resource development. The economic value of a project is
influenced by many factors, some of which can be measured. An economic measure
that is typically used to evaluate cash flow associated with reservoir management
options is net present value (NPV). The cash flow of an option is the net cash gen-
erated or expended on the option as a function of time. The time value of money is
included in economic analyses by applying a discount rate to adjust the value of
money to the value during a base year. Discount rate is the adjustment factor, and
8 Integrated Reservoir Asset Management
the resulting cash flow is called the discounted cash flow. The NPV of the cash flow
is the value of the cash flow at a specified discount rate. The discount rate at which
NPV is zero is called the discounted cash flow return on investment (DCFROI) or
internal rate of return (IRR).
Figure 1.4 shows a typical plot of NPV as a function of time. The early time part
of the figure shows a negative NPV and indicates that the project is operating at a
loss. The loss is usually associated with initial capital investments and operating
expenses that are incurred before the project begins to generate revenue. The reduc-
tion in loss and eventual growth in positive NPV is due to the generation of revenue
in excess of expenses. The point in time on the graph where the NPV is zero after
the project has begun is the discounted payout time. Discounted payout time in Fig-
ure 1.4 is approximately four years.
Table 1.2 presents the definitions of several commonly used economic measures.
DCFROI and discounted payout time are measures of the economic viability of a
Cash Flow
−4.00
−2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
0 1 2 3 4 5 6 7 8 9 10
Time (years)
NP
V (
$ m
illio
ns)
Base Case
Figure 1.4 Typical cash flow.
Table 1.2 Definitions of Selected Economic Measures
Economic Measure Definition
Discount Rate Factor to adjust the value of money to a base year
Net Present Value (NPV) Value of cash flow at a specified discount rate
DCFROI or IRR Discount rate at which NPV ¼ 0
Discounted Payout Time Time when NPV ¼ 0
Profit-to-Investment (PI)
Ratio
Undiscounted cash flow without capital investment divided by
total investment
Introduction 9
project. Another measure is the profit-to-investment (PI) ratio, which is a measure of
profitability. It is defined as the total undiscounted cash flow without capital invest-
ment divided by total investment. Unlike the DCFROI, the PI ratio does not take
into account the time value of money. Useful plots include a plot of NPV versus
time and a plot of NPV versus discount rate.
The preceding ideas are quantified as follows. NPV is the difference between the
present value of revenue R and the present value of expenses E; thus,
NPV ¼ R� E ð1:4:1Þ
If we define DE(k) as the expenses incurred during a time period k, then E may be
written as
E ¼XN�Q
k¼0
DEðkÞ1þ i0
Q
� �kð1:4:2Þ
where i0 is the annual inflation rate, N is the number of years of the expenditure
schedule, and Q is the number of times interest is compounded each year. A similar
expression is written for revenue R:
R ¼XN�Q
k¼0
DR kð Þ1þ i
Q
� �kð1:4:3Þ
where DR(k) is the revenue obtained during time period k, and i is the annual inter-
est or discount rate. Equations (1.4.2) and (1.4.3) include the assumptions that i andi0 are constants over the life of the project, but i and i0 are not necessarily equal.
These assumptions let us compute the present value of money expended relative
to a given inflation rate i0 and compare the result to the present value of revenue
associated with a specified interest or discount rate i.Net present value takes into account the time value of money. NPV for an oil
and/or gas reservoir may be calculated for a specific discount rate using the
equation
NPV ¼XN
n¼1
PonQon þ PgnQgn � CAPEXn � OPEXn � TAXn
1þ rð Þn ð1:4:4Þ
where
N ¼ Number of years
Pon ¼ Oil price during year nQon ¼ Oil production during year nPgn ¼ Gas price during year nQgn ¼ Gas production during year n
10 Integrated Reservoir Asset Management
CAPEXn ¼ Capital expenses during year nOPEXn ¼ Operating expenses during year nTAXn ¼ Taxes during year n
r ¼ Discount rate
In many cases, resource managers have little influence on taxes and prices.
On the other hand, most resource managers can exert considerable influence on
production performance and expenses. Several strategies may be used to affect
NPV. Some strategies include accelerating production, increasing recovery, and lower-
ing operating costs. One reservoir management challenge is to optimize economic
measures like NPV.
Revenue stream forecasts are used to prepare both short- and long-term budgets.
They provide the production volumes needed in the NPV calculation. For this rea-
son, the asset management team may be expected to generate flow predictions using
a combination of reservoir parameters that yield a range of recoveries. Uncertainty
analysis is a useful process for determining the likelihood that any one set of
parameters will be realized and estimating the probability distribution of reserves.
Reservoir management must consider how much money will be available to pay
for wells, compressors, pipelines, platforms, processing facilities, and any other
items that are needed to implement the plan represented by the model. The revenue
stream is used to pay taxes, capital expenses, and operating expenses. The economic
performance of the project depends on the relationship between revenue and
expenses. Several economic criteria may be considered in the evaluation of a proj-
ect, such as NPV, internal rate of return, and profit-to-investment ratio. The selec-
tion of economic criteria is typically a management function. Once the criteria are
defined, they can be applied to a range of possible operating strategies. The
strategies should include assessment of both tangible and intangible factors. A com-
parative analysis of different operating strategies gives decision-making bodies
valuable information for making informed decisions.
1.5 Reservoir Management and the Environment
The impact of a project on the environment must be considered when developing a
reservoir management strategy. Environmental studies should consider such topics
as pollution evaluation and prevention, and habitat preservation in both onshore and
offshore environments. An environmental impact analysis provides a baseline on
existing environmental conditions and provides an estimate of the impact of future
operations on the environment. Forecasts of environmental impact typically require
risk assessment, with the goal of identifying an acceptable risk for implementing a
project (Wilson and Frederick, 1999). Computer flowmodels are often used to prepare
forecasts as well as guide remedial work to reclaim the environment.
A well-managed field should be compatible with both the surface and subsurface
environment. Failure to adequately consider environmental issues can lead to tangi-
ble and intangible losses. Tangible losses have more readily quantifiable economic
Introduction 11
consequences. For example, if potable water is contaminated, the cost to remediate
can adversely affect project economics. Intangible losses are more difficult to quan-
tify, but they can include loss of public support for an economically attractive proj-
ect. For example, the poor public image of the oil industry in the United States has
contributed to political opposition to oil industry development of land regulated
by the federal government. In some cases, the intangible loss can take the form
of active opposition to an otherwise economically viable project. In many parts of
the world, it is necessary to provide an environmental impact statement as part
of the reservoir management plan.
Environmental issues must always be considered in the development of a reser-
voir management strategy. For example, the Louisiana Offshore Oil Production
(LOOP) facility is designed to keep the transfer of hydrocarbons between pipelines
and tankers away from sensitive coastal areas. Periodic water sampling of surface
and produced waters can ensure that freshwater sources are not contaminated. In
addition, periodic testing for the excavation or production of naturally occurring
radioactive materials helps ensure environmental compliance.
The advantages of operating a field with prudent consideration of environmental
issues can pay economic dividends. In addition to improved public relations, sensi-
tivity to environmental issues can minimize adverse environmental effects that may
require costly remediation and financial penalties. Remediation often takes the form
of cleanup, such as the cleanup required after the oil spill from the Exxon Valdezoil tanker in Alaska. Technologies are being developed to improve our ability to
clean up environmental pollutants. For example, bioremediation uses living
microorganisms or their enzymes to accelerate the rate of degradation of environ-
mental pollutants (Westlake, 1999).
It becomes a question of business ethics whether a practice that is legal but can
lead to an adverse environmental consequence should nonetheless be pursued
because a cost-benefit analysis showed that economic benefits exceeded economic
liabilities. Typically, arguments to pursue an environmentally undesirable practice
based on cost-benefit analyses do not adequately account for intangible costs. For
example, the decision by Shell to dispose of the Brent Spar platform by sinking it
in the Atlantic Ocean led to public outrage in Europe in 1995. Reversing the deci-
sion and disassembling the platform for use as a quay in Norway resolved
the resulting public relations problem, but the damage had been done. The failure
to anticipate the public’s reaction reinforced a lack of public confidence in the
oil and gas industry, and it helped motivate government action to regulate the
decommissioning of offshore platforms in northwestern Europe (Wilkinson, 1997;
Offshore Staff, 1998).
1.5.1 Sustainable Development
The concept of sustainable development was introduced in 1987 in a report prepared
by the United Nations’ World Commission on Environment and Development
(Brundtland, 1987). The commission, known as the Brundtland Commission, after
chairwoman Gro Harlem Brundtland of Norway, said that societies should adopt a
12 Integrated Reservoir Asset Management
policy of sustainable development that allows them to meet their present needs
while preserving the ability of future generations to meet their own needs. The three
components of sustainable development are economic prosperity, social equity, and
environmental protection.
Sustainable development is intended to preserve the rights of future generations.
It is possible to argue that future generations have no legal rights to current natural
resources and are not entitled to any. From this perspective, each generation must do
the best it can with available resources. On the other hand, many societies are
choosing to adopt the value of preserving natural resources for future generations.
National parks are examples of natural resources that are being preserved.
1.5.2 Global Climate Change
One environmental concern that is facing society currently is global climate change.
Measurements of ambient air temperature show a global warming effect that corre-
sponds to an increase in the average temperature of the earth’s atmosphere. The
increase in atmospheric temperature has been linked to the combustion of fossil
fuels (Wigley et al., 1996).
When a carbon-based fuel burns, carbon can react with oxygen and nitrogen in
the atmosphere to produce carbon dioxide (CO2), carbon monoxide, and nitrogen
oxides (often abbreviated as NOx). The combustion by-products, including water
vapor, are emitted into the atmosphere in gaseous form. Some of the gaseous
byproducts are called greenhouse gases because they contribute to the greenhouse
effect, illustrated in Figure 1.5 (Fanchi, 2004). Some of the incident solar radiation
from the Sun is absorbed by the earth, some is reflected into space, and some is
captured by greenhouse gases in the atmosphere and reradiated as infrared radia-
tion (heat). The reradiated energy would escape the earth as reflected sunlight if
Atmosphere
IncidentSolar
Radiation
Reflected
“Greenhouse”Gas Absorbs and
Reemits IR
InfraredRadiation
Earth’sSurface
Sun
Figure 1.5 The greenhouse effect.
Introduction 13
greenhouse gases were not present in the atmosphere. Greenhouse gases include car-
bon dioxide, methane, and nitrous oxide, as well as other gases such as volatile
organic compounds and hydrofluorocarbons.
Carbon dioxide (CO2) is approximately 83 percent of the greenhouse gases emit-
ted by the United States as a percent of the mass of carbon or carbon equivalent.
Wigley and colleagues (1996) projected ambient CO2 concentration through the
twenty-first century. Pre-industrial atmospheric CO2 concentration was approxi-
mately 288 parts per million, and the current atmospheric CO2 concentration is
340 parts per million. The concentration of CO2 that would establish an accept-
able energy balance is considered to be 550 parts per million. To achieve the
acceptable concentration of CO2 through the next century, societies would have to
reduce the volume of greenhouse gases entering the atmosphere.
Many scientists attribute global climate change to the greenhouse effect. The
Kyoto Protocol is an international treaty that was negotiated in Kyoto, Japan, in
1997 to establish limits on the amount of greenhouse gases a country can emit into
the atmosphere. The Kyoto Protocol has not been accepted worldwide. Some
countries believe the greenhouse gas emission limits are too low and would
adversely impact national and world economies without solving the problem of
global warming. Another criticism of the Kyoto Protocol is that it does not apply
to all nations. For example, China is exempt from greenhouse gas emission
limitations in the Kyoto Protocol even though it has one of the world’s fastest-
growing economies and the world’s largest population.
Concern about global climate change has motivated a change in the definition of
pollution. For example, it used to be an acceptable practice to release natural gas
into the atmosphere by flaring the gas. This practice is now prohibited in many parts
of the world as an undesirable practice because natural gas is a greenhouse gas. One
proposed method for reducing the climatic greenhouse effect is to collect and store
carbon dioxide in geologic formations as part of a process known as CO2 sequestra-
tion. The sequestration of CO2 in subsurface formations is a gas storage process that
must satisfy the three primary objectives in designing and operating natural gas stor-
age reservoirs: verification of injected gas volume, monitoring of injected gas
migration, and determination of gas injectivity. The goal of geologic carbon seques-
tration and similar programs is to provide economically competitive and environ-
mentally safe options to offset all of the projected growth in baseline emissions of
greenhouse gases.
CS.1 Valley Fill Case Study: Introduction
The primary purpose of the Valley Fill case study from a pedagogical perspective is to showhow to apply reservoir management concepts using a realistic example. The incised valleymodel is useful for describing reservoirs in both mature and frontier basins around theworld (e.g., Bowen et al., 1993; Peijs-van Hilten et al., 1998). Each chapter presents infor-mation that is integrated into the reservoir management example. The reservoir of interestis an oil reservoir that has been producing for a year. Wells in the field are shown inFigure CS.1A.
14 Integrated Reservoir Asset Management
Exercises
1-1. List several questions you would want to have answered if you were trying to decide
how to manage the Valley Fill reservoir.
1-2. Suppose displacement efficiency is 27 percent, areal sweep efficiency is 60 percent, and
vertical sweep efficiency is 75 percent. Estimate recovery efficiency.
1-3. We want to drill a 5,000-foot-deep vertical well. We know from previous experience in the
area that the drill bit will be effective for 36 hours before it has to be replaced. The average
drill bit will penetrate 20 feet of rock in the area for each hour of drilling. Again, based on
previous experience, we expect the average trip to replace the drill bit to take about 8 hours.
A “trip” is the act of withdrawing the drill pipe, replacing the drill bit, and then returning the
new drill bit to the bottom of the hole. Given this information, estimate how long it will take
to drill the 5,000-foot-deep vertical well. Hint: Prepare a table like the following.
Incremental Time
(hrs)
Incremental
Depth (ft)
Cumulative Time
(hrs)
Cumulative
Depth (ft)
1-4. Complete the following table and estimate the proved, the probable, and the possible
reserves. Assume the reserves are normally distributed.Hint:Reserves¼OOIP�Recovery
Factor.
Model OOIP (MMSTB) Recovery Factor Reserves (MMSTB)
1 700 0.42
2 650 0.39
3 900 0.45
4 450 0.25
5 725 0.43
¤
● 8 ¤
●
●
2 10
1
Protective well Dry hole
● ¤ ●¤ 4 11 6 ¤
7 ● 12
3 ¤
¤
●9 5
Figure CS.1A Well locations in an area that is 6,000 feet long by 3,000 feet wide.
Introduction 15
1-5. Any reader interested in participating in the Valley Fill case study should complete Exer-
cises 1-5 through 1-8.
A three-dimensional, three-phase reservoir simulator (IFLO) is included with this
book. Prepare a folder on your hard drive for running IFLO using the following
procedure.l Make a directory on your computer called RMSE/VALLEY.l Go to the website http://www.bh.com/companions/0750675225 and copy the zip file
to RMSE/VALLEY.l Extract all of the files to RMSE/VALLEY.l Some of the files may be labeled “Read Only” when you copy the files to RMSE/
VALLEY. To remove this restriction, select the file(s) and change the properties
of the file(s) by removing the check symbol adjacent to the “Read Only” attribute.
What is the size of the executable file IFLO.EXE in megabytes (MB)?
1-6. Several example data files are provided with IFLO. Make a list of the data files (files
with the extension “DAT”). Unless stated otherwise, all exercises assume that IFLO
and its data files reside in the RMSE/VALLEY directory.
1-7. The program IFLO runs the file called “ITEMP.DAT”. To run a new data file, such as
NEWDATA.DAT, copy NEWDATA.DAT to ITEMP.DAT. In this exercise, copy
VFILL1_HM.DAT to ITEMP.DAT, and run IFLO by double clicking on the IFLO.
EXE file on your hard drive. Select option “Y” to write the run output to files. When
the program ends, it will print “STOP”. Close the IFLO window. You do not need to
save any changes. Open run output file ITEMP.ROF, and find the line reading “MAX
# OF AUTHORIZED GRID BLOCKS”. How many grid blocks are you authorized to
use with the simulator provided with this book?
1-8. The program 3DVIEW may be used to view the reservoir structure associated with IFLO
data files. 3DVIEW is a visualization program that reads IFLO output files with the
extension “ARR”. To view a reservoir structure, proceed as follows:l Use your file manager to open your folder containing the IFLO files. Unless stated
otherwise, all mouse clicks use the left mouse button.
a. Start 3DVIEW (double click on the application entitled 3DVIEW.EXE).
b. Click on the button “File”.
c. Click on “Open Array File”.
d. Click on “ITEMP.ARR” in the file list.
e. Click on “OK”.l At this point you should see a structure in the middle of the screen. The structure is
an oil-filled channel sand. To see the channel, use the left mouse button to select
Model/Select Active Attribute/SO. This displays oil saturation in the channel.l To view different perspectives of the structure, hold the left mouse button down and
move the mouse. With practice, you can learn to control the orientation of the struc-
ture on the screen.l The grid block display may be able to be smoothed by selecting Project/Smooth
Model Display.
To exit 3DVIEW, click on the “File” button and then click “Exit”.
16 Integrated Reservoir Asset Management