Impact of Production Efficiency

Improvement on Reserves and

field life
Andy Carr - OGA

Date 21 May 2015

 Introduction

What is “Production Efficiency” and why it is important

How to include Production Efficiency in decline curves

Some insights from applying this technique

Some general observations

2 PE Improvement - impact on reserves and field life

 A Definition of Production Efficiency

Loss categories:

Production
Reservoir
Wellwork
Planned Plant Losses
SMPP
recorded
Unplanned Plant against
SMPP
Planned Export
Unplanned Export
Planned Well / Oil Gas Water Export Market Actual
reservoir Production
Shutdown availability Plant
potential
Market
Actual Production x 100%
Unallocated
Structural Maximum Production Potential

3 PE Improvement - impact on reserves and field life

 Background

Production Efficiency (PE) is a

key indicator of asset
stewardship in the UKCS

PILOT Work Group discussions

in 2013/14/15
• Production Efficiency Task
Force (PETF)
• Northern North Sea
Infrastructure Rejuvenation
Work Group (NNSR WG)
Both highlighted declining
Production Efficiency as an issue

4 PE Improvement - impact on reserves and field life

 Background

Discussion in various sub groups on impact of PE on reserves and field life.

I wanted to get a “quick look” estimate

I have looked at using decline curves

For exponential decline curves, there is a simple relationship between the current rate,
the rate of decline, the economic cutoff rate and the remaining reserves.
Given any 3 of these, we can calculate the fourth, and also the remaining field life.

We can also include Production Efficiency (PE) explicitly in these equations.

5 PE Improvement - impact on reserves and field life

 Assumptions in the decline curve approach

Let us make the following simplifying (“heroic”) assumptions :

1. Late field life production profile can be described by an exponential decline which
can be analysed using a straight line plot of production rate (y axis) vs cumulative
production (x axis).
Furthermore, this relationship is not rate dependent and represents the maximum
rate the reservoir can deliver on a given day (ie this relationship doesn’t depend
on facilities performance)

2. Operating costs at the end of field life are a known constant (that does not depend
on production rate or PE) and the oil price is known – hence we can calculate the
production rate at the economic limit and this defines the Cessation of Production
(COP) date.
Further let us assume the COP decision is based on average rate over a period of
time rather than the maximum rate on any given day

6 PE Improvement - impact on reserves and field life

 Field Example
Field Example
showing a 120,000
straight line
relationship
100,000
between oil
production
rate and 80,000

cumulative
production in
Rate (bpd)

60,000
late field life

40,000

20,000

0
0 50 100 150 200 250 300 350 400 450
Cumulative Oil Production (mmstb)

Source - PPRS

7 PE Improvement - impact on reserves and field life

 Equations

The rate at time t ( qt ) is related to the current rate ( q0 , at time t = t0 ) by

qt = PE * q0 e -  PE (t-t )
0
……….. (1)

( is not the annual decline rate, but is closely related to it)

We can estimate the decline parameter  from a plot of rate q vs cumulative

production Q, and extrapolate this straight line to the economic limit qCOP to
calculate the remaining reserves QREM

(Note that qCOP is an average rate, so qCOPavg = qCOPmax * PE )

We can solve the above equation to calculate the time to COP (tCOP) from QREM

QREM = 1 q0 ( 1 - e -  PE t
COP )


8 PE Improvement - impact on reserves and field life

 Field Example
Field Example
showing how
the decline
14000 Actual
curves
low PE
(equation 1 on 12000 High
slide 5) predict
Oil Rate (stb/d)
PE

an extension 10000
of field life as
a result of 8000
improving PE
6000

4000

2000

Source - PPRS

9 PE Improvement - impact on reserves and field life

 Field Example
Field Example
showing the
predicted 30000
increase in
Oil Production
reserves as a Rate (bpd)
25000
result of Match Points

improved PE
20000
Oil Rate (stb/d)

15000

10000

5000

0
380 390 400 410 420 430 440 450 460
Cum Oil (mmstb)
Source - PPRS

10 PE Improvement - impact on reserves and field life

 Field Example
Field Example
showing how
the decline
40000
curves Actual
(equation 1 on 35000 low PE
slide 5) predict Oil Rate (stb/d)
High PE
a reduction in 30000

field life as a 25000

result of
improving PE 20000

(but there is 15000

still an
10000
increase in
reserves) 5000

Source - PPRS

11 PE Improvement - impact on reserves and field life

 Conclusions from the decline curve approach

A decline curve approach offers the following insights :

An increase in PE will increase reserves.

The amount of the increase depends on economic limit and the change in PE – it
does not depend on current production rate or field maturity

An increase in PE will increase the observed annual decline rate (assuming no

changes to reservoir management plan)

An increase in PE may or may not extend field life – depends on field maturity –
the more mature the field the more likely that an increase will extend field life

Operators will want to use more complex models to quantify the cost/benefit of
various options to improve PE. However, I suggest if these models don’t show the
behaviours above, the user should carefully check the underlying assumptions within
the model.

The above analysis does not take into account the “positive domino” effect (an
improvement in one field can have a beneficial impact on fields that share the same
infrastructure

12 PE Improvement - impact on reserves and field life

 Some Observations

Recent low oil prices highlights need for action to improve PE

Continued poor PE =>

• Increased lifting costs, worsens the asset economics
• Difficult to attract project capital
• Difficulty in attracting third party business
• Early COP / decommissioning
• Resources left in place
• Near field potential left stranded

Improving PE will receive even more focus from OGA

13 PE Improvement - impact on reserves and field life

Thank you

Questions ?

Presentation title - edit in Header and Footer

 UKCS PE history

Weighted overall UKCS Production Efficiency since 2004

90%

85%

80%
Production Efficiency

75%

70%

65%

60%

55%

50%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
 SMPP, production and losses, 2005 - 2013

1600
Plant - unplanned
1400
Production, losses and SMPP (Mmboe)

Shutdown

Reservoir
1200
Export

1000 Wellwork
SMPP
Plant - planned

Otherdecline rate
800

Actualincreased
Production in
600
2011
400 Note:
'Other' includes
flare, market
200 & unallocated
losses
0
2005 2006 2007 2008 2009 2010 2011 2012 2013