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 MONTE CARLO SIMULATION FOR TREATING UNCERTAINTY
Prof. T. Kumar
Dept. of Petroleum Engg.
IIT(ISM), Dhanbad 826004

In reservoir engineering calculations such as reserve estimation, the methods like volumetric,
material balance and decline curve, there are several input variables which are required to be used for
final solution. The same is the case for many economic evaluation calculations such as present worth,
ROR etc. For the purpose of illustration we have taken the case of reserve estimation by volumetric
method in this discussion.
One of the important steps in reserve estimation is to obtain these input data as accurate as
possible. Where there is uncertainty in the value of any of the input parameters, the effort is to obtain
its average value or most acceptable value. In other words, in this approach, the best singular value of
the input parameter is obtained and used in the equations for final result. Here we use the deterministic
approach. For example,

Recoverable oil Np by volumetric method is calculated as

7758 A h  (1– Swi) Rf

Np = -------------------------------
Bo

Where, the terms have their usual meaning. By different sources, the values of A, h, , Swi and Rf are
first collected, and then using statistical methods, the most likely single value of each of these is
determined. Then it is the simple matter to evaluate the value of Np, using single values of each of the
input parameters. No doubt, this method will yield a favourable value of N p, but unfortunately, this
calculated value of Np, need not necessarily be the most likely value of Np, since it is unlikely that all the
most likely values alone for the input variables would occur simultaneously.

Probabilistic approach
Input variables for most practical problems are not precisely known; there is usually an
uncertainty in their value. The degree of uncertainty may vary from one variable to another. Variables
that are known accurately are called determinates. For instance, the gravity of crude obtained from
particular pool may be precisely, and therefore, is a determinate. The degree of precision with which
this quantity can be determined increases as data describing the pool are accumulated during the
development of the field and the producing life of the pool.
The uncertainty of a parameter may result from difficulty in directly and accurately measuring
the quantity. This is particularly true of the physical reservoir parameters which, at best, can only be
sampled at various points, and which are subject to errors caused by presence of the borehole and
borehole fluid or by changes that occur during the transfer of rock and the fluids to the laboratory
temperature and pressure conditions. Uncertainty may also result in attempting to predict future
parameter values. This type of uncertainty is particularly evident on investment analysis involving future
costs, prices, sales volumes and product demand. Uncertainty in the solution to investment problems
is often called risk and its study is called risk analysis.
The Monte Carlo simulation technique is generally used for evaluating uncertainty in the
solution involving a number of input variables, each one of these having estimated probability
distribution, and one or more interrelationships between these variables. The method of solution is as
follows:- A value of each independent random variable appearing in the expression is selected from
its respective probability distribution. This set of values is then substituted into the expression being
studied, and an initial value is computed of the dependent variable.

Consider the Monte Carlo simulation of the same Recoverable oil reserve calculation,

7758 Ah  (1– Swi) Rf

Np = -----------------------------------
Bo
Where, A, h, , Swi, Rf and Bo are independent random variables and Np is the dependent variable
which has to be evaluated. Form their respective distributions, initial values of the six variables would
be selected as random. Substituting these initial values into the above equation, yields an initial value

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of Np. Subsequent values of variable Np are obtained by repeating the simulation process with
additional sets of randomly sampled values of the six variables.
A probability distribution is obtained from the calculated values of Np, which approximates the
true probability distribution of the variable, Np, where true distribution is defined as that existing, if the
process were conducted an infinite number of times. Approximate distribution approaches true
distribution as the number of computation or the sample size increases.
The management expects that the outcome, in terms of costs and profits of any project
submitted to them also contains an estimate of uncertainty or conversely, the reliability of these reported
results.
This is best accomplished by developing the probability distribution for the output parameters.
These distributions display not only the most likely outcomes, but also the more attractive and
unfavourable possibilities, together with a measure of the likelihood that these various outcomes will
occur. The outcome of the probability distribution is quite significant, as this provides the clear-cut
information regarding acceptance of the most likely value of the variable. In other words, the range of
uncertainty of the answer with respect to the expected range(s) of variable(s) that determine the answer
can be considered as an important piece of information that single case calculations with single values
of input parameters cannot provide.

MONTE CARLO SIMULATION EXAM PLE: RECOVERABLE OIL RESERVE ESTIM ATION
DATA SHEET:

Cumulative A h  Swi Rf Bo
% Probability (acre) (ft) (%) (%) (%) (Ratio)
00.04 490 90 15 17 30 1.105
05-09 490 90 16 17 32 1.105
10-14 490 90 16 18 32 1.105
15-19 490 90 17 18 34 1.105
20-24 490 90 17 20 34 1.105
25-29 500 100 17 20 34 1.106
30-34 500 100 18 20 35 1.106
35-39 500 100 18 22 35 1.106
40-44 500 100 18 22 35 1.106
45-49 500 100 18 22 35 1.107
50-54 500 100 18 22 35 1.107
55-59 500 100 18 22 35 1.107
60-64 500 100 18 22 35 1.107
65-69 500 100 18 22 36 1.107
70-74 500 100 18 22 36 1.107
75-79 510 110 18 22 36 1.108
80-84 510 110 19 24 36 1,108
85-89 510 110 19 24 37 1.108
90-94 510 110 19 25 37 1.108
95-99 510 110 20 25 38 1.108

EQUATION:

7758 A h  (1– Swi) Rf

Np = ----------------------------------- Million bbl of Oil
1,000,000 x Bo
PROCEDURE:
Calculate Np using Random values of input (taking help of random No. table) a large number of times.
Then make frequency distribution, thus probability plots of recoverable oil using above formula.
RESULT: Most likely value of recoverable reserve is reported in MMbbl associated probability

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Random Number

31 28 18 10 23 22 64 47 64 55 20 08 73 58 23 68 15 05 98 02 65 49
70 57 67 23 50 96 71 90 54 97 61 52 68 05 48 65 41 20 68 68 81 75
53 60 16 61 30 58 35 21 75 64 51 91 16 21 17 39 78 07 66 15 56 23
86 17 71 47 09 09 90 59 06 04 59 87 02 88 80 64 86 75 54 56 96 11
32 64 43 25 99 16 30 54 73 53 63 72 22 97 12 60 77 80 86 69 37 70

78 20 68 39 06 43 90 16 10 28 03 21 60 00 74 78 11 97 74 00 47 91
26 27 47 34 87 98 28 63 20 04 61 84 49 97 37 46 17 67 77 74 83 67
64 58 24 35 52 31 91 22 62 83 19 28 50 22 64 54 42 67 60 74 91 17
45 61 19 70 01 76 72 22 70 82 88 16 72 88 80 97 10 46 73 59 11 01
12 30 97 68 72 81 32 90 52 04 20 69 31 24 92 52 74 26 47 29 85 77

99 23 92 98 47 50 02 85 04 23 62 94 57 89 72 59 54 31 75 89 67 17
52 41 03 37 85 91 76 22 55 62 46 48 17 65 38 70 74 85 71 28 85 23
43 47 35 04 66 95 51 90 36 22 83 09 82 55 73 06 83 59 23 99 09 06
84 48 60 05 72 10 64 58 00 13 90 83 76 20 63 39 20 72 19 71 94 34
38 19 91 38 70 59 54 14 01 26 20 39 99 08 25 46 65 97 16 11 91 75

40 07 27 09 17 69 02 87 98 10 47 34 18 20 58 71 74 17 32 23 93 92
19 90 69 64 65 51 17 63 35 87 46 02 71 28 27 47 20 07 92 00 28 05
87 02 22 38 45 62 81 39 30 86 19 18 37 33 99 02 00 18 38 47 38 47
83 57 82 37 02 47 38 82 02 47 83 37 29 37 19 28 19 92 72 82 62 28
73 26 64 19 37 28 26 28 29 09 00 72 18 36 81 36 46 77 18 18 23 77

84 29 36 44 91 11 39 92 92 63 82 16 37 28 46 28 23 74 92 01 03 95
29 83 80 30 84 82 19 36 92 40 92 38 67 72 13 19 12 99 03 00 63 01
09 58 27 34 33 19 16 68 39 43 13 34 13 82 19 75 50 65 11 15 33 27
02 41 09 60 21 45 62 38 98 42 84 18 42 61 08 83 98 23 00 55 80 51
20 13 59 97 91 68 58 38 18 38 00 03 52 43 93 16 12 18 82 50 06 53

54 55 13 20 70 33 82 28 28 24 66 04 22 99 66 64 38 05 71 90 08 23
57 68 61 37 30 94 81 21 84 81 48 64 45 69 32 98 09 74 59 37 19 06
00 16 45 84 18 33 38 37 39 97 98 76 78 63 98 40 58 73 58 54 21 02
83 28 82 36 91 09 81 24 55 21 57 22 92 50 40 20 35 46 61 97 85 62
95 14 80 68 53 34 79 75 32 54 70 68 46 93 45 04 93 02 84 40 12 23

78 40 29 92 21 20 63 46 16 45 41 44 66 87 25 78 36 57 03 28 77 10
80 62 74 64 26 23 57 99 84 51 29 41 11 66 30 41 40 97 15 72 31 11
23 08 87 23 90 69 65 07 39 39 96 62 74 75 90 07 04 10 86 23 21 80
31 26 65 08 36 08 30 22 67 27 92 06 69 77 16 16 14 84 34 36 23 63
72 70 81 68 17 31 54 16 54 22 09 00 75 02 07 91 93 72 93 16 48 57

90 88 22 92 92 45 56 85 89 61 84 84 19 32 56 54 85 26 83 79 40 30
60 14 25 68 61 37 74 74 68 79 87 10 67 14 96 92 28 66 44 67 40 79
34 56 82 00 93 47 29 47 58 58 29 02 17 38 46 08 29 93 64 06 99 00
82 36 92 10 03 83 63 92 26 29 63 91 73 10 10 39 28 84 82 92 62 27
29 71 83 72 92 01 94 72 39 49 59 92 72 19 00 09 18 38 72 39 03 16