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Several petroleum industry models that use both physical and economic data and assumptions are analyzed and the importance of including appropriate physical parameters designed to characterize the future supply of petroleum is noted. To... more
Several petroleum industry models that use both physical and economic data and assumptions are analyzed and the importance of including appropriate physical parameters designed to characterize the future supply of petroleum is noted. To some extent these remarks can also be applied to mineral-supply modeling because deposit size distributions (of contained metal) for other minerals are highly skewed and because there appears to be little physical evidence of a relation between the grade and tonnage of copper ore bodies. As exhaustion of an area proceeds, the physical size distribution of remaining deposits declines systematically. If petroleum supply models are to be used for predicting future discoveries, ways must be found to capture analytically these systematic changes. Discovery process models such as those presented in this paper appear to provide the means for characterizing such changes. 16 references.
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The purpose of this paper is to examine several alternative behavioral hypotheses relating to the determinants of field level exploration activity. In particular, this paper examines the intertemporal relationship between operator... more
The purpose of this paper is to examine several alternative behavioral hypotheses relating to the determinants of field level exploration activity. In particular, this paper examines the intertemporal relationship between operator behavior, changes in profit expectations and the perceived field-size distribution. Alternative formulations and the duration of operator expectations are examined. The plan of the paper is as follows: First, the nature of field exploration activity is briefly described along with a formulation of field expectations. Following this, a discussion of the method of analysis and the data are provided. Empirical results and tests of alternative expectations mechanisms are then presented. The conducting section of the paper discusses the significance of the results for future reserve estimation and supply modeling efforts. 24 refs.
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The assumption of lognormal (parent) field size distributions has for a long time been applied to resource appraisal and evaluation of exploration strategy by the petroleum industry. However, frequency distributions estimated with... more
The assumption of lognormal (parent) field size distributions has for a long time been applied to resource appraisal and evaluation of exploration strategy by the petroleum industry. However, frequency distributions estimated with observed data and used to justify this hypotheses are conditional. Examination of various observed field size distributions across basins and over time shows that such distributions should be
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The unprecedented natural gas price increases in the late 1970's and early 1980's allowed a glimpse of part of the in-situ distribution of natural gas fields that had been hidden by economic truncation. Analysis of those... more
The unprecedented natural gas price increases in the late 1970's and early 1980's allowed a glimpse of part of the in-situ distribution of natural gas fields that had been hidden by economic truncation. Analysis of those discoveries shows the distribution to be characterized by progressively larger numbers of fields as size category declines. This paper demonstrates the effects of economic truncation for gas fields found in Texas State and Federal offshore areas in the Gulf of Mexico. Economic and policy implications of alternative in-situ field size distribution influence future gas supplies, the associated costs, and petroleum industry activity.
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Uncertainty in petroleum resource estimation can be mitigated by using different approaches in making resource estimates for a given area. We divide methods and data into two broad categories. The first is based on geologic data, which... more
Uncertainty in petroleum resource estimation can be mitigated by using different approaches in making resource estimates for a given area. We divide methods and data into two broad categories. The first is based on geologic data, which aim at estimating the resources of a basin by gaining an understanding of the processes of petroleum formation, migration, and trapping. The second is based on statistical methods, which estimate the resources of a basin by extrapolating the industry's past experience in drilling and discovery to forecast future discoveries. Results of these approaches are compared for Nigeria, North Africa, and many of the world's offshore areas. Undiscovered offshore petroleum resources outside the United States, Canada, and communist countries were estim ted by both methods to be ~ 130 billion bbl. For Nigeria the two methods agree at about 4-6 billion bbl of undiscovered oil. In contrast, for North Africa, where the geologic estimate of undiscovered petroleum is 16 billion bbl and the statistical estimate is 5 billion bbl, the two methods are not in close agreement.
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Field growth refers to the phenomenon of increasing estimates of ultimately recoverable oil and gas that occur as oil and gas fields are developed. From 1978 to 1990, growth of known fields in the United States has accounted for 90... more
Field growth refers to the phenomenon of increasing estimates of ultimately recoverable oil and gas that occur as oil and gas fields are developed. From 1978 to 1990, growth of known fields in the United States has accounted for 90 percent of the annual additions to proved reserves. Now that field growth is recognized as a significant source of additions to proved reserves, field-growth prediction models are being made more sophisticated so that the timing of these reserve additions can be forecast. This paper surveys the literature on field growth and methods of field-growth estimation. It also examines data of nonassociated gas fields of South America, Western Europe, the Middle East, Africa, non-Communist Far East, and the southwestern Pacific to demonstrate evidence of field growth. Field growth patterns are influenced by market conditions for the resource as well as physical characteristics. These data are also then used in an example that demonstrates field-growth analysis. Although international gas fields show clear evidence of field growth, the data are not yet sufficient for estimating reliable growth functions. 14 refs., 3 figs., 2 tabs.
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This paper analyzes the relationship between actual reservoir conditions and predicted measures of performance of carbon dioxide enhanced oil recovery (CO 2 –EOR) programs. It then shows how CO 2 –EOR operators might maximize the value of... more
This paper analyzes the relationship between actual reservoir conditions and predicted measures of performance of carbon dioxide enhanced oil recovery (CO 2 –EOR) programs. It then shows how CO 2 –EOR operators might maximize the value of their projects by approaching implementation using a “flexible selective” pattern development strategy, where the CO 2 –EOR program patterns are selectively developed based on site-specific reservoir properties. It also analyzes performance measures and economic consequences of utilizing a continuous CO 2 injection strategy intended to maximize CO 2 retention for a defined time period. “Net CO 2 utilization,” calculated as difference between the volumes of CO 2 injected and CO 2 recovered in the production stream divided by the oil produced, is a standard measure of CO 2 –EOR carbon utilization, but it can be a misleading predictor of the actual CO 2 retained in the reservoir. Asset value can be added to a CO 2 –EOR project by recognizing effects of variations in reservoir parameter values and basing incremental development decisions on those data. For policy analysts, the consequences of ignoring geologic variability within a reservoir that is a candidate for CO 2 –EOR will likely be to substantially overestimate predicted adoption of CO 2 –EOR in response to economic incentives. This result holds true whether the CO 2 –EOR program objective is to maximize net value by maximizing oil production or maximize CO 2 storage with oil recovery.
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Abstract The purpose of this paper is to demonstrate how physical characteristics of deposits and results of past exploration enter future exploration decisions. A proposed decision model is presented that is consistent with a set of... more
Abstract The purpose of this paper is to demonstrate how physical characteristics of deposits and results of past exploration enter future exploration decisions. A proposed decision model is presented that is consistent with a set of primitive probabilistic assumptions associated with deposit size distributions and discoverability. Analysis of optimal field exploration strategy showed the likely firm responses to alternative exploration taxes and effects on the distribution of future discoveries. Examination of the probabilistic elements of the decision model indicates that changes in firm expectations associated with the distribution of deposits cannot be totally offset by changes in economic variables.
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Sustained crude oil price increases have led to increased investment in and production of Canadian bitumen to supplement North American oil supplies. For new projects, the evaluation of profitability is based on a prediction of the future... more
Sustained crude oil price increases have led to increased investment in and production of Canadian bitumen to supplement North American oil supplies. For new projects, the evaluation of profitability is based on a prediction of the future price path of bitumen and ultimately light/medium crude oil. This article examines the relationship between the bitumen and light crude oil prices in the context of a simple error-correction economic-adjustment model. The analysis shows bitumen prices to be significantly more volatile than light crude prices. Also, the dominant effect of an oil price shock on bitumen prices is immediate and is amplified, both in absolute terms and percentage price changes. It is argued that the bitumen industry response to such market risks will likely be a realignment toward vertical integration via new downstream construction, mergers, or on a de facto basis by the establishment of alliances.
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Economics, Natural Resources, Asphalt, Prediction, Uncertainty, and 15 moreModels, Investment, Industry, Profitability, Projects, Error Correction, Oil Price, Inversion, Crude Oil, Vertical Integration, Uncertainties, Industrie, Market Risk, ENVIRONMENTAL SCIENCE AND MANAGEMENT, and Profitability Index
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Environmental Engineering, Civil Engineering, Geology, Computer Science, Water resources, and 12 moreApplied Economics, System Design, Network Design, Streamflow, Data Collection, Natural Phenomena, Natural Resource, Production Function, Economic Loss, Input Output, Information System, and Parameter Uncertainty
This note provides an alternative interpretation for sequential bid pricing strategies as initially formulated by Kortanek, Soden, and Sodaro [Kortanek, K. O., J. V. Soden, D. Sodabo. 1973. Profit analysis and sequential bid pricing... more
This note provides an alternative interpretation for sequential bid pricing strategies as initially formulated by Kortanek, Soden, and Sodaro [Kortanek, K. O., J. V. Soden, D. Sodabo. 1973. Profit analysis and sequential bid pricing models. Management Sci. 20 (3, November) 396–417.]. In particular, bid prices obtained from the sequential model are shown to result from a condition which incorporates the failure rate function as a means of including probable actions of competing firms. A reformulation of the bidder's criterion function in the context of utility theory is also discussed and shown to result in bidding strategies which may also be interpreted in the proposed fashion.
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In the 1989 National Oil and Gas Assessment prepared by the U.S. Geological Survey (USGS) and the Minerals Management Service, undiscovered oil and gas resources in small fields were assessed separately from resources in fields containing... more
In the 1989 National Oil and Gas Assessment prepared by the U.S. Geological Survey (USGS) and the Minerals Management Service, undiscovered oil and gas resources in small fields were assessed separately from resources in fields containing more than 1 million bbl of oil equivalent. This paper concerns the USGS Part of the study: onshore and state waters in the conterminous United States. After the resources in small fields were assessed by geologists, statistical techniques were used to allocate these resources to field-size distributions at the province level. The total numbers of small fields remaining to be discovered is estimated at about 77,800. They account for about 10.6 billion bbl of oil equivalent or 20% of the undiscovered resources in the conterminous United st tes. When an economic analysis was applied to the small fields, none of the offshore small fields were estimated to be commercially developable. For the onshore study area, about 52% of the small oil fields and 46% of the small gas fields are commercially developable. Overall, because more hydrocarbons are contained in the larger size classes of the small fields, about 70% of the undiscovered resources in small fields is expected to be commercially developable.
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The occurrence and quantity of world petroleum resources appears to be well understood. The numbers are so great, however, that even minor variants in the total picture can be responsible for enormous localized industrial activity.... more
The occurrence and quantity of world petroleum resources appears to be well understood. The numbers are so great, however, that even minor variants in the total picture can be responsible for enormous localized industrial activity. Specific knowledge of the widespread local occurrences of oil and gas, therefore, is important to economic development and to the free market distribution of energy. It is also clear, however, that a large proportion of the recoverable petroleum resources are found in only a few selected localities. We believe that, worldwide, recoverable conventional oil and gas exist in ultimate quantities approximating 2300 billion barrels (370 Gm3) of oil and 12 000 trillion cubic feet (340 TM3) of gas. These values are limited by our concepts of world petroleum geology and our understanding of specific basins; nonetheless, continued expansion of exploration activity, around the world, has resulted in only minimal adjustments to our quantitative understanding of ultim...
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Summary Estimates of oil and gas resources typically are presented in terms of proved and undiscovered resources. This paper presents a methodology for incorporating economic considerations into resource appraisals for petroleum basins. A... more
Summary Estimates of oil and gas resources typically are presented in terms of proved and undiscovered resources. This paper presents a methodology for incorporating economic considerations into resource appraisals for petroleum basins. A cost algorithm is used to calculate estimates of the costs of finding and developing undiscovered oil and gas fields in the Permian basin. The sensitivity of the resource estimates to variations in values of the variables in the costing model was investigated, and the results of this analysis are presented. The model indicates that at prices up to $40/bbl, the total reserves of oil and gas in barrels-of-oil equivalent (BOE's) from future discoveries will be less than 15% of the estimated ultimate recovery from fields discovered before Jan. 1 1975. Only discoveries to a depth of 20,000 ft were included. Introduction Estimates of both discovered and undiscovered oil and gas resources rarely are accompanied by estimates of the expected costs of fi...
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The National Oil and Gas Assessment of undiscovered recoverable conventional oil and gas resources assigned nearly 36% of the undiscovered U.S. onshore oil resources and 28% of the commercially developable undiscovered oil resources to... more
The National Oil and Gas Assessment of undiscovered recoverable conventional oil and gas resources assigned nearly 36% of the undiscovered U.S. onshore oil resources and 28% of the commercially developable undiscovered oil resources to onshore northern Alaska. Economic screening models were applied to the geologic play assessment to estimate the commercially developable resources. This paper presents the geologic and economic assessment methodology and results; it also focuses on the robustness of estimates of the commercially developable onshore resources to changes in economic assumptions. With the economic assumptions used in the national assessment, about 60% or 6.49 billion bbl of oil of the recoverable undiscovered resources of 10.76 billion bbl of oil assessed in fields larger than 1 million bbl of oil are estimated to be commercially developable. Changes in facilities costs induced the most significant cost-related response in the commercially developable resource estimates. Price increases or cost reductions that reduce the minimum commercially developable field size to 250 million bbl from the base case size of 380 million bbl added 1 billion bbl of oil to the commercially developable resources. If, through facilities sharing or satellite-field development, the minimum commercial field size is reduced to just below 100 million bbl, estimated developable oil woul increase to 9.17 billion bbl of oil or more than 85% of the assessed recoverable oil in onshore plays.
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Energy producers and utilities use oil and gas reservoirs for gas storage to meet peak seasonal demand or to supplement intermittent energy production. These reservoirs are also suitable for the long-term storage of carbon dioxide... more
Energy producers and utilities use oil and gas reservoirs for gas storage to meet peak
seasonal demand or to supplement intermittent energy production. These reservoirs are also
suitable for the long-term storage of carbon dioxide (CO2), a greenhouse gas. This study
reports on a reconnaissance analysis of the potential magnitude of storage resources in 9424
known oil and gas reservoirs from 24 countries within highly industrialized western Europe.
To standardize the storage resources of the oil and gas reservoirs, their volumetric capacity is
expressed in terms of metric tons (mass) of CO2. Estimates of recoverable oil and gas at the
surface are converted to subsurface volumes and then converted to the equivalent mass of
CO2 at reservoir conditions. The results indicate 36.7 gigatons of CO2 could be stored, with
oil reservoirs accounting for 32% of that total and natural gas reservoirs comprising the
remaining 68%. About four-fifths of the reservoir storage resource is offshore, with about
three-fourths of that offshore resource at water depths of 200 m or less. Most countries do
not have the reservoir storage resources to store 15 years of CO2 at 2017 emission levels.
With few exceptions the bulk of the storage is offshore for countries that do have at least
15 years of storage. The expansion of natural gas storage for strategic purposes in abandoned
onshore gas reservoirs is not expected to seriously impact CO2 storage. The contribution of
this analysis is the description of the spatial distribution of potential storage and physical
accessibility.
seasonal demand or to supplement intermittent energy production. These reservoirs are also
suitable for the long-term storage of carbon dioxide (CO2), a greenhouse gas. This study
reports on a reconnaissance analysis of the potential magnitude of storage resources in 9424
known oil and gas reservoirs from 24 countries within highly industrialized western Europe.
To standardize the storage resources of the oil and gas reservoirs, their volumetric capacity is
expressed in terms of metric tons (mass) of CO2. Estimates of recoverable oil and gas at the
surface are converted to subsurface volumes and then converted to the equivalent mass of
CO2 at reservoir conditions. The results indicate 36.7 gigatons of CO2 could be stored, with
oil reservoirs accounting for 32% of that total and natural gas reservoirs comprising the
remaining 68%. About four-fifths of the reservoir storage resource is offshore, with about
three-fourths of that offshore resource at water depths of 200 m or less. Most countries do
not have the reservoir storage resources to store 15 years of CO2 at 2017 emission levels.
With few exceptions the bulk of the storage is offshore for countries that do have at least
15 years of storage. The expansion of natural gas storage for strategic purposes in abandoned
onshore gas reservoirs is not expected to seriously impact CO2 storage. The contribution of
this analysis is the description of the spatial distribution of potential storage and physical
accessibility.
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Summary This paper considers industry structure and the exploration performance (by size class of operator) of firms searching for oil and gas in the U.S. Gulf of Mexico. It also tracks the changes in industry structure that have occurred... more
Summary This paper considers industry structure and the exploration performance (by size class of operator) of firms searching for oil and gas in the U.S. Gulf of Mexico. It also tracks the changes in industry structure that have occurred in response to a decline in the quality of remaining prospects in the area. Data presented indicate that because vertically integrated majors dominated in exploration in the early years of the Gulf of Mexico exploration history, they were able to discover 86% of the total hydrocarbons discovered through 1975. However, the data also show a dynamic relationship between the structure of the industry operating in an area and the quality of remaining prospects. The relative share of both credited discoveries and wildcat wells of nonmajor operators has increased as exploration in the gulf proceeded. For example, in state-owned waters from 1951 to 1955, major inns accounted for 85% of all wildcat wells drilled, whereas from 1971 to 1975 these firms accoun...
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Regional development and industrialization are investigated, via regression analysis, in relation to the pattern of water resource investments for the island of Puerto Rico. Initial results indicate such investments have little immediate... more
Regional development and industrialization are investigated, via regression analysis, in relation to the pattern of water resource investments for the island of Puerto Rico. Initial results indicate such investments have little immediate or short-term impact on development patterns •. However, other results suggest over longer periods, significant variations in the regional responses to these investments. By applying a variation of seemingly unrelated regressions of Zellner, subsets of parameter coefficients were restricted across regions. •The unrestricted coefficients were interpreted as explaining .systematic variation in responses to public investments within given regions. Indeed these regional differences are frequently neglected .when simply examining the overall development process. Furthermore, there appears to be a significant relationship, over.the period considered, between·changes in the distribution of income over the island and within given regions and the pattern of ...
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This paper identifies the drivers of the phenomenal growth in productivity in hydraulically fractured horizontal oil wells producing from the middle member of the Bakken Formation in North Dakota. The data show a strong underlying spatial... more
This paper identifies the drivers of the phenomenal growth in productivity in hydraulically fractured horizontal oil wells producing from the middle member of the Bakken Formation in North Dakota. The data show a strong underlying spatial component and somewhat weaker temporal component. Drivers of the spatial component are favorable reservoir conditions. The temporal component of well productivity growth is driven by increasing the number of fracture treatments and by increasing the volume of proppant and injection fluids used on a per fracture treatment basis. Random Forest, a nonparametric modeling procedure often applied in the context of machine learning, is used to identify the relative importance of geologic and well completion factors that have driven the growth in Bakken well productivity. The findings of this study suggest that a significant part of the well productivity increases during the period from 2010 to 2015 has been the result of improved well site selection. For ...