Resource
Evaluation Committee
Subcommittee
to Review the United States Onshore Continuous (Unconventional)
Gas
Assessment Methodology Used by the USGS
Report
Submitted by
John Curtis (Colorado School of Mines), Naresh Kumar (Growth Oil and Gas),
Pulak Ray (Minerals Management Service), Rusty Riese (BP Amoco Americas,
Inc) and John Ritter (Texaco)
Recommendations
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The subcommittee
recommends that the full Committee on Resource Evaluation (CORE) endorse
the general methodology being used for assessing unconventional gas
resources by the United States Geological Survey in its ongoing National
Oil and Gas Assessment. If the Committee approves this recommendation,
then we also recommend that the Executive Committee also endorse this
approval.
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Because of
its national and international significance, and the potential usefulness
of the products coming out of this project, we recommend that the
Committee ask the AAPG Executive Committee to support publicity for
the project by in the AAPG Explorer.
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Due to the
fact that this assessment is ongoing, we consider this to be a progress
report. Based on the current schedule, assessment activity will continue
until 2004, when final review of the last of the 25-targeted basins
will be complete. We recommend the Committee consider another at least
one additional review during the course of the evaluation and prior
to issuance of any final report. This revisit is necessary because
some of the procedures are still being refined/clarified.
Background
At
the CORE meeting held at the offices of the Oklahoma Geological Survey
in Norman, Oklahoma on November 8-9, 2000, the USGS, through CORE member
Tom Ahlbrandt, requested a review of the methodology used by the USGS
to estimate unconventional gas resources in the United States. This
assessment is part of the ongoing National Oil and Gas Assessment currently
being carried out by the USGS. John Ritter was requested asked to form
a subcommittee to meet with USGS personnel to review the assessment
methodology. Formation of this subcommittee follows two previous subcommittee
activities, chaired by Richard Nehring and Naresh Kumar, respectively,
to review both the ANWR and World Energy Project assessment methodologies.
In both of these previous cases, the methodology was found by CORE to
be technically and scientifically sound. The AAPG Executive Committee
later endorsed this the USGS methodology in both instances.
The National
Oil and Gas Assessment is another major resource assessment project
being carried out carried out by the USGS. The last major national assessment
performed by the USGS was carried out released in 1995. This assessment
varies significantly from the that previous assessment both in both
methodology and review areas. In particular, the 1995 study was based
on assessment of 72 individual provinces. The while the current study
focuses on 25 major basins. Therefore, the USGS wanted an industry panel
to review the methodology being utilized and provide comments and suggestions
to the assessment team. Because of the importance of this type of project
to the AAPG membership, CORE approved its involvement.
John Ritter
initially met with the USGS team, headed by Chris Schenk, at the Survey’s
offices in Denver, on December 11, 2000. The full subcommittee, consisting
of John Curtis (Colorado School of Mines), Naresh Kumar (Growth Oil
and Gas), Pulak Ray (Minerals Management Service), Rusty Riese (British
Petroleum BP Americas, Inc.), and John Ritter (Texaco) met for a detailed
review of the project on February 26, 2001. This report summarizes the
committee’s observations, comments and recommendations.
National
Oil and Gas Assessment
For the current
project, which was initiated in 1999, the USGS is concentrating on 25
major US basins. A timeline depicting the planned evaluation process
is included as Attachment 1. These basins cover approximately 96% of
the producing, and/or prospective, hydrocarbon accumulations in the
onshore United States. These basins are subdivided initially into Total
Petroleum Systems, or mappable entities encompassing genetically related
petroleum deposits, whether discovered or undiscovered. Further subdivisions
break these total petroleum systems into Assessment Units (AU), or mappable
volumes of rock within the systems that encompass accumulations (discovered
or undiscovered), which share similar geologic traits and socio-economic
factors. In some cases, an AU may equate to a Total Petroleum system.
These AUs are themselves broken into cells, subdivisions or areas within
an AU related to the drainage area of a individual wells. An eExpanded
definitions for Total Petroleum System, Assessment Unit and cell is
are included in the glossary (Attachment 2), which also contains definitions
for other terms used by the USGS team in the course of the assessment.
(all attachments are included in the
PDF on this site)
For each of
these basins, the USGS is evaluating both conventional (or discrete)
as well as and unconventional, hereafter referred to as continuous,
deposits. While the National Assessment includes both oil and gas, the
primary driver is the estimation of natural gas resources with the focus
of the CORE review being the methodology surrounding underpinning the
assessment of the continuous deposits. Continuous deposits are defined
as petroleum accumulations that are pervasive throughout a large area
and are not significantly affected by hydrodynamic influences. Characteristics
of continuous deposits include some, but not necessarily all, of the
following for any given accumulation:
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Lack of
well-defined downdip water contact;
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Lack of
obvious seal or trap;
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Large areal
extent;
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Abnormal
pressures;
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Close association
with source rocks;
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Low recovery
factors.
Typical examples
include coalbed methane, low permeability reservoirs, shale gas/oil,
basin-centered gas and gas hydrates.
The Survey
USGS has assembled a team consisting of more than 50 Survey employees
to undertake this project. A senior Survey scientist, in this instance
Chris Schenk, acts as the project chief and review team leader. Included
in the 6-person assessment review team is a production engineer, employed
to bring balance to the overall evaluation. A list of the assessment
review team members is included in Attachment 3.
(all attachments are included in the PDF on
this site)
Sources
of Information and Data Bases
Data used
for this evaluation builds on are additive to the data used in the 1995
assessment. Considerable additional new data and additional data, particularly
production data, has have been accumulated since the last evaluation.
This type of information is of prime importance to the evaluation process;
particularly considering the increased attention the industry has given
to the exploitation of continuous resources since 1995. For example,
the Gas Research Institute estimates that US annual production from
coal-bed methane has risen from 538 BCF in 1992 to over 1.1 TCF by 1997
(Gas Research Institute, North American Coalbed Methane Resource Map,
1999), indicating dramatic increases in production from continuous accumulations.
In respect
to the Evaluation of individual basins, involves designation of a geologic
the project team that then undertakes a minimum two-year or longer evaluation
phase, during which time data relating to the hydrocarbon resource base
of the basin is examined in detail. The project team relies on a number
of databases to assist in the accumulation of relevant data, as follows:
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Petroleum
Information (PI) Well History
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Petroleum
Information (PI) Production
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Nehring
Significant Fields of US and Canada
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Geomark
Research Inc.’s (Geochemical)
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Petroconsultants
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Oil and
gas Integrated Field Files (OGIFF - DOE) - proprietary
When combined
with the detailed geologic knowledge of specific US basins possessed
by many of the Survey scientists, significant volumes of data have been
can be incorporated into the study. Addition of a reservoir engineer
to the evaluation staff, absent for the 1995 assessment, has allowed
the production data to be more fully utilized to define assessment criteria.
The
Assessment Methodology
The assessment
of continuous deposits begins with the geologic framework and with the
definition of one or more "Total Petroleum Systems", as previously
discussed. These systems are defined for each of the 25-targeted basins.
For each of the Total Petroleum Systems, one or more "Assessment
Units" have been mapped. The form used to capture the theseis data
is included as Attachment 4. (all attachments
are included in the PDF on this site)
Following
definition of Assessment Units are next defined for a particular Total
Petroleum System,. eEstimation of resources within the an Assessment
Unit is then based on an analytical probabilistic and spreadsheet software
system called Analytic Cell-based Continuous Energy Spreadsheet System
(ACCESS). The ACCESS method is based upon mathematical equations derived
from probability theory with the final ACCESS spreadsheet used to calculate
estimates of undeveloped oil, gas and NGL (natural gas liquids) resources
in a continuous-type assessment unit. Calculation of recoverable volumes
for each assessment unit can therefore be seen to follows three distinct
steps: First, the geological assessment model is defined; second, the
analytic probabilistic method is derived; and third, the ACCESS spreadsheet
is described.
The purpose
of the ACCESS system is to allows define definition of a subset of the
Assessment Unit referred to as a cell, the size of which is related
to the drainage area of a well. Definition of the cells has been handled
in such a way that for each assessment unit, the probability of hydrocarbon
accumulation for all cells (discovered and undiscovered) is assigned
a single probability for charge, rocks (reservoir, trap and seal), timing
of geologic events, and accessibility. An assessment unit with the probability
of finding at least one accumulation of certain minimum size, or one
in which there is existing production, has a unit probability of one,
whereas those with no known accumulations are hypothetical units with
varying degrees of probabilities for hosting undiscovered fields. Geologic
analogs across province and region boundaries are used for assessing
areas of no known discoveries.
Based on
all the literature and data available, the assessment geologist for
each of the assessment units defines a set of nine variables, including
Assessment Unit area, percentage of Assessment Unit that is untested,
percentage of untested area with the potential to add reserves, area
per cell, recovery per cell, coproduct ratios, and percent of unit allocated
either onshore or offshore. Of these, Assessment Unit area, percentage
of assessment unit area that is untested, percentage of untested area
with the potential to add reserves, and area per cell are used to determine
the potential number of cells remaining to be tested. Finally, three
descriptive parameters for each of the nine variables, representing
Minimum (F100), Median (F50) and Maximum (F0), are assigned. Following
assignment, the geologic assessment model, called the FORSPAN model,
is considered complete.
The ACCESS
system is then applied to the FORSPAN model. The ACCESS system utilizes
the descriptive parameters defined in the FORSPAN model for each of
the nine variables to produce probability distributions. Distribution
shapes are set for each independent variable; with considerable effort
having been expended on determining the probability function that would
best depict the sizes and numbers of undiscovered fields. The team has
experimented with normal, lognormal, shifted lognormal and triangular
distribution functions. After much trial and error and experimentation,
either truncated, shifted lognormal or triangular distributions were
used, with all but recovery per cell being defined by median-based triangular
distributions. ACCESS then relates the parameters, computing means,
standard deviations, minimums and maximums.
The ACCESS
system then feeds a spreadsheet consisting of 54 separate panels, consolidated
into four worksheets. Conditional (unrisked) and unconditional (risked)
estimates of undeveloped petroleum resources are developed for the assessment
unit, including mean, standard deviation, F95 and F5. A more detailed
review of the ACCESS methodology is described in USGS Open File Report
00-044.
Because our
task has been to review the methodology, specific numbers for any of
the areas were neither requested by us nor were presented during our
discussions.
Concerns
and Suggestions
-
During our
discussion, we did not have enough time to querry the USGS personnel
on how they subdivide a Total Petroleum System into Assessment Units
(AU’s). We suggest that the final document clearly describe the
rationale on by which Assessment Units are defined. The assumptions
used in defining hypothetical Assessment Units also need to be clearly
specified. Additionally, we are concerned that some AUs may be erroneously
called "continuous" while the problem may be lack of data.
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2. It should
be clearly stated that this methodology does not deal with in-place
resources and does not assign a recovery factor. The methodology assigns
a range of producible hydrocarbons from a cell and determines the
final resource by aggregating all the "successful" cells.
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USGS currently
believes that at the cell level, cell size and EUR are probably highly
correlated. However, the assessment analysis is at the (aggregate)
assessment unit level, and at this level the variables of cell size
and EUR are not as highly correlated. The issue of dependency needs
to be further investigated.. Is it possible to treat that as a range
when the two are fully dependent to when they are fully independent?
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The term
"societal relevance" suggests pre-screening before
an assessment has been made. Perhaps the untruncated and truncated
EURs should be reported so that the filters used and their impacts
can be clearly seen. The idea of a 30-year time frame is reasonable.
Perhaps, USGS could just define the Assessment Units as those areas
that contribute within that time frame.
-
Our subcommittee
lauds the inclusion of an engineer to the assessment team. However,
we recommend that besides analyzing the decline curves, the engineer
on the team utilize pressure data and material balance calculations,
wherever possible. At the minimum, a few cases of comparison between
decline-curve analysis and material-balance calculations should be
made.
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The distribution
of EURs from cells attempts to capture the possibility of "sweet
spots" within the Assessment Units (AU). In real life, geology
would demand that these sweet spots would be clustered within various
parts of the AU. Does treating the EUR as an independent variable
capture the possibility of clustering of the sweet spots?
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There is
some strong concern that a the use of a triangular distribution for
input variables other than EUR may be will yield results that are
too optimistic. Perhaps The USGS wshould carry out some scenarios
sensitivity testing with other types of distributions and see if changing
the shape of the distribution makes a significant difference to the
estimated resources. If there is an overestimation, and we believe
there will be, could this can be reduced by using some other sampling
than Monte Carlo redefining the types of distributions that underpin
the evaluation?.
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Because this
methodology does not have a "success ratio", there is no
accounting for "dry holes". In a typical economic analysis,
the project bears the cost of dry holes out of the successful ones
until a positive cash flow is achieved. In the current methodology,
USGS is using a variable size cell size with variable EURs to distinguish
highly productive cells from "dry" cells. It may work for
assessing the "technically recoverable" but it is not clear
how the economically recoverable volumes will be determined using
this methodology. Some clarification is needed at this time.
Summary
and Conclusions
Our committee
believes that the methodology being used by the United States Geological
Survey is sound and despite our comments and suggestions above, is an
improvement over the past methods. However, as the evaluations becomes
more sophisticated, so also they become more complex. Small changes
in definitions of distributions could have significant impact on final
results, hence the need for rigorous sensitivity testing. Additionally,
because we did not review the economic analysis part of this assessment,
we can recommend in advance that that part(portion) of the assessment
is as robust as the geological assessment. In additionFinally, the geological
assessment and the economic analysis have to be mutually compatible
and linked.
Our committee
believes that with a detailed discussion of assumptions used and distributions
utilized, the cell-based assessment of continuous deposits will provide
supportable results. With "full disclosure" of assumptions,
other assessors can make their own estimates by incorporating their
own assumptions.
Contacts
numbers and addresses for the Subcommittee Members
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John B.
Curtis
Associate Professor
Director, Petroleum Exploration and Production Center
Potential Gas Agency
Colorado School of Mines
Golden, CO 80401
Telephone: (303)-273-3887
Fax: (303)-273-3574
jbcurtis@mines.edu
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Naresh
Kumar
Growth Oil and Gas
P.O.Box 835961
Richardson, Texas, 75083-5961
Telephone: (972)-404-1782
naresh@fastlane.net
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Pulak
Ray
Mineral Management Service
Parkway Atrium Building
Herndon, VA 20170-4817
Telephone: (703)-787-1511
Fax: (703)-787-1621
pulak.ray@mms.gov
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Rusty
Riese
BP Amoco Corporation
501 Westlake Park Boulevard
Houston, Texas 77079
Telephone: (282)-366-0775
Fax: (281)-366-7836
Rriese1@bp.com
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John Ritter
Texaco
3901 Briarpark
Houston, Texas 77042-5301
Telephone: (713)-954-6106
Fax: (713)-954-6911
ritteje@texaco.com
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