PPA Intro, Risk - 1

Prospect and Play Assessment
Presented by
Dr. Michael I. Treesh

PetroSkills
PPA - 1
2005 PetroSkills LLC, All Rights Reserved
Chapter 1 - Introduction
PPA - 1
My Challenge to You
Redefine our view of ourselves
Business man or woman with technical expertise
Focus upon the business problem to solve

Apply technical expertise to solve business problems
This approach will define your strategies to exploration problems P. 1-1

PPA - 1 2005 PetroSkills LLC, All Rights Reserved
Daily Schedule
Day 1
Overview Risking Prospect volumetrics
Statistics
Prospect guides
Day 2
Prospect exercise Prospect HC charge Other approaches
P. 1-2
Daily Schedule
Day 3
Prospect workshop Summations Play assessment
Day 4
Play guides Play risking Play exercise
Day 5
Play maps Play workshop Selling your play Perspectives
P. 1-2
Course Logistics
Daily schedule
Hours Breaks Lunch Last day
Mobile phones off Toilets Emergency evacuation Contact Mikes room number
Paperwork
1. Did anyone bring payment for the class?
Contact me at the break
2. Complete yellow sheet by end of day

Leave on your desk top
3. Registration form
Check your information and correct as needed Provide your email address
4. Insert your business card in the holder

The Course Material

Manual
Chapters Page numbers Guides - Chapters 3 and 9 References, glossary Exercises and answers
Course CD Please ask questions as they arise

Introductions/Expectations
Your Job, Experience, Education Experience with Assessment?

Team experience?
Learning expectations from this week

P. 1-3
Your knowledge Level prospects and plays
What is risk? Define uncertainty? Contrast deterministic versus probabilistic reserves What are play-wide or dependent risks? How are risked reserves best used? Define lognormal distribution of fields
P. 1-3
PPA - 1
SKILL
1. Principles of Geological Risk and Uncertainty
AWARENESS
Describe the factors controlling technical risks and uncertainties of an exploration play, prospect or development opportunity
BASIC
Assess risk factors governing the occurrence of a given investment opportunity. Identify those factors that are critical to the existence of the opportunity. Quantify uncertainties, report on the factors to achieve and overall risk/ uncertainty assessment Combine reservoir parameters to produce statistically correct assessment curve. Determine ranges of values for reservoir parameters, from multiple sources and ranges of uncertainty of each to combine for volumetric calculation. Distinguish and characterize plays by controlling parameters geologic setting, economics, water depth, etc.
ADVANCED
Propose methods to mitigate the assessed risks and reduce uncertainty. Make recommendations of activity based upon assessed and quantified risk/ uncertainty and geological insight into the potential of uncertainties.
MASTERY
Develop company-wide consistent measures to apply to risk and uncertainty assessment. Provide input into developing business strategies to minimize risk/uncertainty
2. Prospect Volume Calculation
Describe techniques of assessing trap volumes and calculating statistical ranges of expected volumes
Provide selection priorities for choices among prospects within organization. Review current and past evaluations to develop internal consistency in application.
a). Recognize a play as a group of prospects or leads sharing common controls (petroleum system) b). Understand reserve distribution in a play
Prepare play summaries and maps. Classify multiple plays by their potential and use of analogues
3a,b,c. Play Analysis Principles, Techniques
Predict number and size distribution of prospects in a play. Choose representative prospect(s) in which to test the play.
Apply lessons learned in play evaluation to other areas
Propose exploration strategies compatible with the business objective of the organization. Offer ranking of these opportunities based upon potential, risk, and organizational fit
c). Describe risks associated with finding a successful play
Calculate dependant (play-wide) risk factors that may prevent play success
Map distribution of critical play risks to prioritize play evaluation. Propose strategies to mitigate or further define play risk
P. 1-4
Describe the factors controlling technical risks and uncertainties of an exploration play, prospect or development opportunity Propose methods to mitigate the assessed risks and reduce uncertainty. Make recommendations of activity based upon assessed and quantified risk/ uncertainty and geological insight into the potential of uncertainties.
Assess risk factors governing the occurrence of a given investment opportunity. Identify those factors that are critical to the existence of the opportunity. Quantify uncertainties, report on the factors to achieve and overall risk/ uncertainty assessment
2. Prospect Volume Calculation
Describe techniques of assessing trap volumes and calculating statistical ranges of expected volumes
Combine reservoir parameters to produce statistically correct assessment curve. Determine ranges of values for reservoir parameters, from multiple sources and ranges of uncertainty of each to combine for volumetric calculation.
Provide selection priorities for choices among prospects within organization. Review current and past evaluations to develop internal consistency in application.
Recognize a play as a group of prospects or leads sharing common controls (petroleum system)
Distinguish and characterize plays by controlling parameters geologic setting, economics, water depth, etc.
Prepare play summaries and maps. Classify multiple plays by their potential and use of analogues
b). Understand reserve distribution in a play
Predict number and size distribution of prospects in a play. Choose representative prospect(s) in which to test the play.
Apply lessons learned in play evaluation to other areas
c). Describe risks associated with finding a successful play
Calculate dependant (play-wide) risk factors that may prevent play success
Map distribution of critical play risks to prioritize play evaluation. Propose strategies to mitigate or further define play risk
Course Objectives
Best available assessment methods
Trap volumetrics and HC charge for prospects Potential field number and size for plays
Quantify all geologic risks/uncertainties Forms, guides for making judgments Insights for:
1. 2. 3. 4. Assessing assessments Avoiding pitfalls Highgrading exploration opportunities Planning selectively
P. 1-5
PPA - 1
Course Objectives
Provide knowledge and unique tools
Pre-drill assessment of potentially recoverable oil and gas volumes Exploration prospects and plays Probability of occurrence of prospect or play
Focus on geologic concepts for P. 1-5 assessment

Uses of Assessments
Guide exploration by ranking opportunities (risk vs. potential) Base for economic analyses Long-range planning (technologic and capital needs) Discovery-rate and supply forecasts P. 1-6
Perspective on Assessments
We will usually be wrong on details of individual assessments Unless we predict 1.0 or 0 for the existence of an individual factor, we will always be wrong Successful assessments reserves found = average P. 1-6 expectations
Chapter 2 Prospect Assessment
Tools:
Risking Probability distribution Monte Carlo techniques Assessment curves Geostatistics Mapping Making choices
Definitions
Lead potential prospect lacks a key controlling factor Prospect potential oil or gas field Play group of geologicallyrelated prospects with similar petroleum system P. 2-2
Assessment Techniques
Prospects Trap volume HC charge volumes HC fill Risk Assessment

PPA - 1
Plays
Summation of prospects Field numbers & sizes
Risk Assessment
P. 2-2
Objective Assessment Methods
Basins
Summation of plays Sediment volumes and yields
Regions
Summation of basins Life-cycle projections Discovery-rate extrapolations Econometric P. 2-2 models
PPA - 1
SEDIMENTARY BASIN
PETROLEUM SYSTEM
Economics NOT Important
Economics VERY Important
PLAY
PROSPECT P. 2-3
Play and Prospect Assessment

ID 1 10 11 16 19 20 87 107 110 Task Name
ESTABLISHING STANDARDS PLAY ASSESSMEMENT

PLAY RISK ASSESSMENT PLAY VOLUMETRICS
Duration W T 0.5 days 11.5 days 7.5 days 4 days 3 days 1 day 1 day 1 day 1 day
Feb 23, '03 S S M T W T
Mar 2, '03 S M T W T
PROSPECT ASSESSMENT
PROSPECT RISK ANALYSIS VOLUMETRICS ECONOMIC ANALYSIS POST-DRILL REVIEW
P. 2-3
PPA - 1
Typical exploration workflows

TRAP, SEAL, TIMING 0.8 Closure volume 0.9 Seal - top.lateral,no serious leakage by faults or fractures 1 Timing migration 1.- Relative Mapto the critical prospect factors RESERVOIR, POROSITY, PERMEABILITY (trap type and size, reservoir presence, porosity, source 0.8 Adequate reservoir thickness capability, drive mechanism, recoverability, etc) Porosity 2. Select ranges for factors that describe1 1 Permeability, Continuity prospect conditions SOURCE, MATURATION, MIGRATION 3. quantity/quality Combine factors to derive an assessment 1 Organic curve time, temperature, pressure) 1 Maturation (adequate 0.9 Migration Describes (primary, secondary, source trap) given local conditions sizes that can to occur E ffective thickness QUALITY, RECOVERY 4.PRESERVATION, Perform a HC risk assessment on the project 1 Preservation (no bad flushing, biodegradation) 1 HC Quality and concentration 1 Recovery (drive, pressure, depth) 0.72
0.8
0.9
Mean = 50.00 25.00 37.50 50.00 62.50 75.00
PPA - 1
2 Key Questions
Is an Oil or Gas field present?
What is probability?
Risk Assessment
What is its size? Volumetrics

Most likely amount Range of reserves expected
P. 2-5
Prospect Assessment
Success - meeting or exceeding minimum economic size Steps in assessment process
1. Define minimum economic size 2. Select ranges for individual factors 3. Combine factors to derive assessment curve P. 2-5 4. Estimate adequacy of achieving minimum economic size
Two issues in risk assessment
To what does the risk refer?

The risk of what potential future event?
How is the risk of each individual factor quantified?
PPA - 1
Risk of what? The possibilities

1.

Geological success?
Consistent through time Not a measure of the economic viability of the prospect
Presence of an oil and/or gas accumulation (producible hydrocarbons)?

Focuses on finding hydrocarbons, but not an economic accumulation
An economically successful accumulation?

Better business/economic measure But, threshold size can vary with time and location
Arguments against minimum economics
How do explorationists know how much of a factor will give an economically viable field? The economics can change rapidly
Makes choices and risk analyses ineffective
With our experienced explorationists, we do not need this extra step
P. 2-9
PPA - 1
Economic minimum - Advantages
Ties explorationists to business drivers of the organization Prevents spending time on uneconomic business Maximizes efficiency Enables explorationists to become better business people
PPA - 1
Economic minimum - Steps
1.
Gather data - the factors:
2. 3.
So we know what to Combine to establish threshold risk.
Oil and gas prices expected Development costs Infrastructure costs (pipelines, facilities, platforms, etc.) Production costs Production timing
How is the chance of success measured?
Measure the probability of success against a standard
PPA - 1
How to measure risk

Establish a standard throughout the organization
Assessments can be compared on the same basis Consistent through time
Compatible with:
Business processes, language, comfort for risk, and culture
Implement training that includes practice in making consistent assessments Prospect post-mortems to define risking success
PPA - 1
2 Key Questions
Is an Oil or Gas field present?
What is probability?
Risk Assessment
What is its size? Volumetrics

Most likely amount Range of reserves expected
Prospect Assessment
1. Define minimum economic size 2. Select ranges for individual factors 3. Combine factors to derive assessment curve P. 2-5 4. Estimate adequacy of achieving minimum economic size
1. Define Minimum Economic Size
Define the minimum field size determined to be economic in play Interactive process in company Factors to be considered
Oil and gas prices expected Development costs Infrastructure costs Production costs Production timing
P. 2-9
Prospect Assessment
1. 2. 3. Define minimum economic size Select ranges for individual factors Combine factors to derive assessment curve
4. Estimate adequacy of achieving P. 2-4 minimum economic size

Are any commercial O & G fields present?
Risk Assessment
P. 2-6
Describe the factors controlling technical risks and uncertainties of an exploration play, prospect or development opportunity
Assess risk factors governing the occurrence of a given investment opportunity. Identify those factors that are critical to the existence of the opportunity. Quantify uncertainties, report on the factors to achieve and overall risk/ uncertainty assessment
Propose methods to mitigate the assessed risks and reduce uncertainty. Make recommendations of activity based upon assessed and quantified risk/ uncertainty and geological insight into the potential of uncertainties.
P. 2-6
Exercise - Geologic Risk-Factors

The first and most crucial step in assessment is to have a firm understanding of the geologic factors controlling oil and gas occurrence. These control factors, if inadequate or missing at the prospect or play being assessed, become the geologic risks that deny success. List below all the factors that you can think of that are essential to the geologic creation of an oil or gas field having significant potentially recoverable reserves. You may choose to list more than 10. 1. 2. 3. 4. 5. 6.
PPA - 1
10 minute exercise with your partner

P. 2-7
Answers
Reservoir Porosity Permeability Continuity Closure Seal Timing Volume Source Migration Maturity Preservation Organic quantity/quality Recoverability Etc.
PPA - 1
Any fields present?

Based upon adequacy of basic controls:
Sealed Trap Reservoir Source Recoverability
Prediction of probability of P. 2-8 meeting minimum economic limit

Risk analysis Form

TRAP, SEAL, TIMING Closure volume Seal - top, lateral,no serious leakage by faults or fractures Timing - Relative to migration RESERVOIR, POROSITY, PERMEABILITY Adequate reservoir thickness Porosity Permeability, Continuity SOURCE, MATURATION, MIGRATION Organic quantity/quality Maturation (adequate time, temperature, pressure) Migration (primary, secondary, source to trap) PRESERVATION, HC QUALITY, RECOVERYP. 2-8 Preservation (no bad flushing, biodegradation) HC Quality and concentration Recovery (drive, pressure, depth)
Critical Element in Risking

Risk of What?
PPA - 1
Any fields present?

Based upon adequacy of basic controls:
Sealed Trap Reservoir Source Recoverability
Prediction of probability of meeting minimum economic limit P. 2-8

1. Define Minimum Economic Size
Define the minimum field size determined to be economic in play Interactive process in company Factors to be considered
Oil and gas prices expected Development costs Infrastructure costs Production costs Production timing
P. 2-9
All possible prospects
Sieve - Size = 5 MMBO Prospect too small are lost Economic prospects saved
P. 2-10
Types of Exploration Risks
Geologic existence risks Finding risks Economic risks Environmental risks Political risks P. 2-10
Uncertainty and Risk

Uncertainty - imprecision in estimating the size range of factors
Relates measures of volumetric factors
Probability - the likelihood of an event

number from 0 through 1 (a fraction) that represents the chance or likelihood that an event will occur
Risk - the probability of an event (ex. presence of reservoir)

Always stated as risk of .. This course - relates to minimum required for an economic accumulation
Adequacy (Chance of Success) - one minus risk

P. 2-10
Chance of Adequacy
(1- Risk) Used for individual factors or combined for entire accumulation Adequacy of prospect or play equals product of individual control factors: Sealed Trap, Reservoir, Source, Recoverability Adequacy of minimum economic accumulation not presence or absence
P. 2-11
Risk analysis Form

TRAP, SEAL, TIMING Closure volume Seal - top.lateral,no serious leakage by faults or fractures Timing - Relative to migration RESERVOIR, POROSITY, PERMEABILITY Adequate reservoir thickness Porosity Permeability, Continuity SOURCE, MATURATION, MIGRATION Organic quantity/quality Maturation (adequate time, temperature, pressure) Migration (primary, secondary, source to trap) PRESERVATION, HC QUALITY, RECOVERY Preservation (no bad flushing, bidegradation) HC Quality and concentration Recovery (drive, pressure, depth) 1 1 1 0.8 1 1 1 1 0.8 1 1 1
P. 2-12
Risking Guidelines
1.0 0.7 0.5 0.3 0 Certain Likely Equally likely/unlikely Unlikely Impossible P. 2-12
Used for individual controls or combined for a prospect or play likelihood

Another Qualitative Scale

Jones and Hillis, 2003
Sherman-Kent Scale for Eliciting and Quantifying Confidence Judgments*
Proven; definitely true Virtually certain; convinced Highly probably; strongly believe; highly likely Likely; probably true; about twice as likely to be true as untrue; chances are good Chances are about even, or slightly better than even or slightly less than even Could be true but more probably not; unlikely; chances are fairly poor; two or three time more likely to be untrue than true Possible but very doubtful; only a slight chance; very unlikely indeed; very improbable Proven untrue; impossible
98-100% 90-98% 75-90% 60-75% 40-60% 20-40% 2-20% 0-2%
P. 2-13
*Meyer and Brooker, 1991; Watson, 1998.PPA - 1
Risking Comparison
This Course Certain Likely Equally likely/unlikely Unlikely Non-existent
PPA - 1
Scale
Chevron 1.0 0.7 Favorable Encouraging Neutral Questionabl e Unfavorable

P. 2-13
1.0 0.7 0.5 0.3 0
Otis and Schneiderman, 1997

Risk levels, Rose, 1992

(WILL OCCUR)
1.0 .9 PROBABILITY SCALE .8 .7 .6 .5 .4 .3 .2 .1 0

PPA - 1
VIRTUAL CERTAINTY
REASONABLE GEOLOGIC CONFIDENCE 50/50 CHANCE SIGNIFICANT UNCERTAINTY
ONLY A MODERATE CHANCE HIGH-RISK GEOLOGIC FACTOR
P. 2-14
(WONT OCCUR)
Seal Classification
P. 2-14
PPA - 1
Risking seal capacity

Fault Throw (m, ft) Sedimentary Architecture (facies stacking geometry)
No Data
No Data
High-resolution seismic data Good prospect coverage
Offset well core Facies variability/uncertainty
No Data
Fault-Zone Architecture (single/multiple slip plane) 0 0.2 0.4 0.6 0.8 1
P. 2-15
Figure 2-3.
No Data
PPA - 1
Full Data Set 2005 PetroSkills LLC, All Rights Reserved (Data quality/control is excellent)
120
100
80
60
40
20
(Ma) Prospect: Country:
Cretaceous Neoc. Early Marine Shale Late
Tertiary Paleogene Neogene Pal. Eoc. Olig. Mic. Pl
Source Rock Deltaic Sands & Shales Deltaic Sands & Shales
Reservoir Rock
Seal Rock
Trap Formation Oil Window Critical Moment shale sandstone Generation/Mig. Preservation
P. 2-`16
From: Otis & Schneiderman, 1997
Rules of Thumb
Otis & Schneiderman, 1997
Evaluation Conventional Frontier
Same Play Adjacent Structure
Same Play Nearby Structure
New Play Same Trend Old Play New Trend
New Play New Basin or Play with Negative Data
Producing Area Delineation Prospect
Emerging Area Play
Frontier Area
Hydrocarbon System
VERY LOW RISK 0.50

Avg. Pg=0.75
LOW RISK
MODERATE RISK 0.25 0.12
HIGH RISK 0.06
VERY HIGH RISK
P. 2-17
Avg. Pg=0.375
Avg. Pg=0.183
Avg. Pg=0.092
Avg. Pg=0.05
Pg=Probability of Geological Success
Geostatistics and Risk Assessment
PPA - 1
Simulation
P. 2-20
after Wolfe et al. (1994)
P. 2-21
P. 2-21
P. 2-22
P. 2-22
PPA - 1
P. 2-23
P. 2-23
PPA - 1
PPA - 1
P. 2-24
Sand Distribution
30 25 20 15 10 5 0
9 8 7 6 5 4 3 2 1 8 1 2 3 4 5 6 7
Economic Threshold 40'
35%
65%
P. 2-25
PPA - 1
P. 2-25
Geostatistical Approach
Sand Distribution
30 25 20 15 10 5 0
4 5 2 7 6 3 8 1 1 8 5 4 3 6 7 2
100 trials to predict thickness
Economic Threshold 40'
35% - failure
The modeled probability 65% - of success success is 0.65
PPA - 1
P. 2-25
9 0
Prospect Probability of Success

TRAP, SEAL, TIMING
Closure volume Seal - top, lateral, no serious leakage by faults or fractures Timing - Relative to migration 1.00
0.8
Adequate reservoir thickness Porosity Permeability, Continuity
Organic quantity/quality
Maturation (adequate time, temperature, pressure) Migration (primary, secondary, source to trap)
This means that this prospect has a 33/100 chance to contain at least the minimum economics
RESERVOIR, POROSITY, PERMEABILITY SOURCE, MATURATION, MIGRATION PRESERVATION, HC QUALITY, RECOVERY
1.00 0.80
0.65
0.65 1.00 1.00
0.63
0.90 0.70 1.00
1
1.00 1.00 1.00
Preservation (no flushing, biodegradation) HC Quality and concentration Recovery (drive, pressure, depth)
PPA - 1
0.33
Handling Uncertainty
Engineers missed range for 2/3 of questions No difference for P30 and P90 ranges People prouder of answers than data would indicate Most dont widen ranges even when indicated P. 2-26 Problem can be costly
Handling Uncertainty - Solutions
Understanding the objectives of assessment Better knowledge - better ranges Training in predictions Using two ranges
Probability yes, Probability no
Lognormal or normal distribution? P. 2-26 Do more research

Prospect Assessment
1. 2. 3. Define minimum economic size Select ranges for individual factors Combine factors to derive assessment curve 4. Estimate adequacy of achieving minimum economic size P. 2-4

PPA Intro, Risk - 1

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PPA Intro, Risk - 1

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Prospect and Play Assessment

Dr. Michael I. Treesh

2005 PetroSkills LLC, All Rights Reserved

2005 PetroSkills LLC, All Rights Reserved

Focus upon the business problem to solve

This approach will define your strategies to exploration problems P. 1-1

2. Complete yellow sheet by end of day

4. Insert your business card in the holder

The Course Material

Course CD Please ask questions as they arise

Your Job, Experience, Education Experience with Assessment?

Learning expectations from this week

Your knowledge Level prospects and plays

2005 PetroSkills LLC, All Rights Reserved

2. Prospect Volume Calculation

3a,b,c. Play Analysis Principles, Techniques

Apply lessons learned in play evaluation to other areas

c). Describe risks associated with finding a successful play

1. Principles of Geological Risk and Uncertainty

2. Prospect Volume Calculation

3a,b,c. Play Analysis Principles, Techniques

3a,b,c. Play Analysis Principles, Techniques

b). Understand reserve distribution in a play

Apply lessons learned in play evaluation to other areas

3a,b,c. Play Analysis Principles, Techniques

c). Describe risks associated with finding a successful play

2005 PetroSkills LLC, All Rights Reserved

Focus on geologic concepts for P. 1-5 assessment

Chapter 2 Prospect Assessment

Prospects Trap volume HC charge volumes HC fill Risk Assessment

Objective Assessment Methods

Economics NOT Important

Economics VERY Important

Play and Prospect Assessment

ESTABLISHING STANDARDS PLAY ASSESSMEMENT

Feb 23, '03 S S M T W T

2005 PetroSkills LLC, All Rights Reserved

Typical exploration workflows

Mean = 50.00 25.00 37.50 50.00 62.50 75.00

2005 PetroSkills LLC, All Rights Reserved

What is its size? Volumetrics

Two issues in risk assessment

To what does the risk refer?

How is the risk of each individual factor quantified?

2005 PetroSkills LLC, All Rights Reserved

Risk of what? The possibilities

Presence of an oil and/or gas accumulation (producible hydrocarbons)?

An economically successful accumulation?

Arguments against minimum economics

With our experienced explorationists, we do not need this extra step

2005 PetroSkills LLC, All Rights Reserved

Economic minimum - Advantages

2005 PetroSkills LLC, All Rights Reserved

Economic minimum - Steps

Gather data - the factors:

So we know what to Combine to establish threshold risk.

How is the chance of success measured?

Measure the probability of success against a standard

2005 PetroSkills LLC, All Rights Reserved

How to measure risk

2005 PetroSkills LLC, All Rights Reserved

What is its size? Volumetrics