RE:RE:RE:To value RECO use: $ 6/bbl of oil * how much oil????TurnToTheRight wrote: This is exactly my point T10, Jarvis has repeatedly estimated 120 billion bbl IN PLACE, no one disputes this, and you seem unable to understand that only a fraction of these barrels will ever be produced. This is an example of you not being able to properly use the data given to make informed posts or conclusions, and when someone challenges you you say "I trust the experts" without actually understanding what the experts are saying. Jarvis has NEVER said that 120 billion barrels will be produced or that they will be booked reserves, only that those barrels are estimated to exist (that's called OOIP - and I would ask you to explain to me what OOIP means, if you are unable to, you clearly don't know how to use the info the experts are providing)
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Turn right I appreciate you taking time to post ..... love learning ... been trying to figure all this stuff out myself .. came across this ...seems to explain what maybe you are referring to..
When geologists ‘define pay’ they often use cut-offs or ‘reservoir limits’ for rock properties such as porosity. The criteria to define such cut-offs is at best tenuous. For example, in the pre-1980s, porosity cut-offs were often defined empirically. ‘In this pool we don’t achieve production unless porosity exceeds 10%’. This in fact is a better way of defining what rock properties are needed to produce economically than say, correlating the porosity to permeability and then applying a generic permeability cut-off of 1mD for oil or 0.5mD for liquids rich natural gas.
First, what are ‘cut-offs’? They are nothing more than a set of screening criteria to identify rock capable of outputting oil or gas at an economic rate. It is basically defining a ‘permeability highway’ that can be used to drain hydrocarbons from adjacent rock. Remember the old ‘Bow Island’ gas reservoirs in Southern Alberta? They often have a thin high permeable conglomerate string at the top of a relatively low permeable sand reservoir. The idea was that natural gas from the low permeable reservoir could drain via this permeability ‘highway’ into the well bore.
Fractures are often permeability ‘highways’ that help drain hydrocarbons from adjacent ‘tight rock’. The same is true for more conventional cut-offs. Cut-offs define rock intervals with enough permeability to produce nearby hydrocarbons. There is so much arbitrariness in the establishment of such cut-offs. You could even argue that the oil or gas price is implicated as we often use cut-offs to help identify zones of economic production. But these cut-offs also depend on technological capacity; grain size, shale content, oil viscosity and even on water saturation combined with relative permeability. This makes these cut-offs often company specific and nearly arbitrary.
If we measure net pay using such cut-offs, then we make the measurement of ‘net pay’ just as arbitrary. The next step, after mapping net pay in such a fashion is doing volumetrics! Even if your net pay was measured using normalized logs (i.e. wire line logs calibrated to give consistent rock quality responses) we would come up with an entire range of ‘OOIP’ numbers (Original Oil In Place) depending on the cut-offs being used. In fact, some create sets of ‘cut-offs’ to determine the ‘OOIP’ for various scenarios.
Aside from the determination of volumetric hydrocarbon reserves, a recovery factor is required to get an idea of the recoverable reserves. Thus, the hydrocarbon production for a pool is measured and when that number is divided by the OOIP number it results in a ‘recovery factor’. The factor would have only some meaning if it was estimated for the recovery from a pool over its entire productive life. But even if you had such a number, this includes again economics because a pool would be abandoned based on whether its production operation remains economic! There are too many factors in such a ‘recovery factor’ to even be credible. Yet this is how we estimate our ‘recoverable reserves’ and how we make our economic decisions. We have often not even considered how much more could be recovered because of waterflooding or drilling the pool out with horizontal wells, or other available production strategies.
Some engineers may jump up and down excitedly and shout: “I knew it is all geo-fantasy!” but nothing is further from the truth. Besides many such arguments can also be made about determining reserves from production decline-analysis. That is just as imperfect if not worse. To think that the value of many companies is based on those reserves is scary to say the least! We have seen how company’s share prices react to a ‘reserves revision’ up to the point of bankruptcy.
There is a lot of value in determining volumetric reserves, but we must do it right and consistently. OOIP or Original Oil In Place should be determined without cut-offs. Cut-offs are not about recognizing ‘producible hydrocarbon reserves ‘, but about the optimal interval to complete. The Original Oil In Place number is about the entire volume of oil in the formation occurring in a specific area and should NOT involve ‘cut-offs’. OOIP can be determined with some confidence when the geologist knows the rocks of the play and extrapolates this knowledge using consistent normalized wire line log data augmented with conventional and special core analysis as well as by applying meaningful petrophysics. This can only be done if one works from the ‘rock to the log’ - the mantra at our company Eucalyptus Consulting Inc. I highly recommend that this mantra is applied by any self-respecting geologist in the oil patch. Then we may also push our friends the reservoir engineers to better determine their recovery factors. In this day-and-age, we believe way too much in our numbers without understanding what underlies them – especially when pretty computer pictures are involved.