07 Oil and Gas Reserves Estimating - We Have Met the Enemy A

7/23/2019 07 Oil and Gas Reserves Estimating - We Have Met the Enemy A

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OIL AND GAS RESERVESESTIMATING

WE HAVE MET THE ENEMY, AND HE IS US

Peter R. Rose

Senior Associate, Rose & Associates, LLP.,and President AAPG

Austin, Texas


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1. rite !our na"e on t#e $or"

%. o''o( instructions

). Tr! #ard to ans(er o*+ecti e'!-. rite !our ans(ers do(n

. No +oint entures // (or0 inde endent'!

2. P34 is a s"a'' nu"*er5 P14 is a 'ar6enu"*er

R7LES O T8E GAME


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DETERMINISTI9 ESTIMATE A single number (best guess) amonga wide range of possible real

outcomes.

Low confidence in being preciselycorrect.

Amount of uncertainty affectswillingness to invest in your estimate.


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OR :%4, 8O M798 ARE ;O7 PREPARED

TO : >

:%> :1>4?>

%4?>14?>

?>9#ance o$ esti"atin6

t#e exact nu"*er o$ *eans>

!REMOTE!

UNCER A!N " # C$N%!&ENCE


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E=PRESSING 9ON IDEN9E I

' Traditiona' En6ineerin6 9on ention // @14 >

' Ran6es o$ Nu"*ers 9orres ondin6 to9on$idenceB

Confidence ( *)

* +, beans

* +,, beans

* + ,,, beans

* -,, beans

* - ,,, beans

* -, ,,, beans

er!, er! #i6#

#i6#

"oderate

$air'! #i6#

'o(

er!, er! 'o(

Confidence ( *)


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E=PRESSING 9ON IDEN9E II

LET 7S SPE9I ;

/0ig1 Confidence2 3,4 sure * 53, value

/Low Confidence2 +,4 sure * 5+, value

/6,76, Confidence2 6,4 sure * 56, 8edian


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Su eriorit! O$ Pro*a*i'istic Met#od

C. . . sti'' +ust esti"ates c'oa0ed in ro*a*i'ities> Advantages

+. 8easure our estimating accuracy by comparingprobabilistic forecasts against actual outcomes

-. Use statistical principles to ma9e better estimates(lognormal e:pectation calculate mean ofdistribution defined low;side # 1ig1;side criteria


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P1 Geo'o6ica''! ossi*'e5 *ut extre"e'! un'i0e'! P14 Reasona*'e Maxi"u" P 4 8a'$ *e'o(, 8a'$ a*o e, t#e Median P34 Reasona*'e Mini"u"P33 As s"a'' as it cou'd *e . . . ;et detecta*'e

5RAC !CAL A R!E" 5ARA8E ER=


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Su eriorit! O$ Pro*a*i'istic Met#od

C. . . sti'' +ust esti"ates c'oa0ed in ro*a*i'ities> Advantages

+. 8easure our estimating accuracy by comparingprobabilistic forecasts against actual outcomes

-. Use statistical principles to ma9e better estimates(lognormal e:pectation calculate mean ofdistribution defined low;side # 1ig1;side criteria

@. Reality;c1ec9s ;; natural limits unrealistic e:tremesanalog distributions

. %aster more efficient


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9o" are !our ori6ina' C*estesti"ate circ'ed nu"*er, ite" %,

co'ored $or"F (it# !our nei6#*or Does an!one in t#e audience #a e acirc'ed nu"*er t#at is E=A9TL;


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Anot1er bean slide . . .

Ne( con$idence/'e e'B

N$ E REA=$NA


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I a" CReasona*'! 9ertain t#at t#ere are *eans or "ore.

NOTEB T8IS IS A PRO


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9OMPLI9ATIONS+. A larger estimate may be in your personal

interest-. "our boss may prefer larger to smaller

estimates

@. 5ossible conseHuences if actual result is lesst1an your estimate

a) Negative 5ress

b) Employer &isciplinesc) =tate 5enaliIes


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7.S. SE9 RE 7SES TO SPE9I ;T8E 9ON IDEN9E/LEVEL OREASONABLE CERTAINTY

3 3 4 E

? , 4 E

3 6 4 E

F G 4 E

3 , 4 E G 6 4

E

3 ? 4 E

6 , 4 E


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. . .


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CPro ed Reser es

. . . are the estimated quantities which geologicaland engineering data demonstrate withreasonable certainty to be recoverable. . .

.sec.6o di isions cor $in $or"s re6sx. #t"

1is is t1e foundational statement of w1atwe t1in9 is an outdated (+3G?) system.

LetJs ta9e a loo9 at t1e evolution of t1e wording

r e a s o n a

b l e

c e r

t a i n t

y

(((


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13)2

E er! reasona*'ero*a*i'it!

132-Reasona*'e

certaint!

13J2

9a enSPE J3

13K1Re ised de$.$or ro ed

13KJ

Pro edro*a*'e &ossi*'e

13JK

Pro ed (reasona*'e

certaint!

API

"ergin and 0obbs -,,6 ogK

SPE

7S SE9 13K% ;ear/end

ricin6

133JPro*a*i'istic

"et#ods6uide'ines

u*'is#ed

CPro ed Reser es

r e a s o n a

b l e

c e r

t a i n t

y


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DETERMINISM GETS

IN9REASINGL; 9OMPLE=' Pro ed, Pro*a*'e, Possi*'e

' De e'o ed & 7nde e'o ed' ei6#tin6 sc#e"es to account $oruncertaint!

' > A 'ica*i'it! to 7ndri''ed Pros ectsand P'a!s>


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PRO


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PRO


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Reser es Esti"atin6B A Di ided Industr!

Ex 'orationB u''! Pro*a*i'istic

ProductionB Most'! Deter"inisticPro ed, Pro*a*'e, Possi*'e,

De e'o ed, 7nde e'o ed, etc.F


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T O VIE S O E&P OR BDeter"inistic Vie(B Pro*a*i'istic Vie(B

T I M

E & : :

7N9ERTAINT;

T I M E & : :

7N9ERTAINT;

CT8E ANS ER

Deter"inis"F

P 3

4

P .

4

P 1

4

STOPQ7se t#is ti"e &

:: to $ind ot#erros ects


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Deter"inis" Pro"otes 7naccounta*i'it!Atte" ts to re resent #i6#'! uncertain ara"eters (it#a sin6'e, C recise nu"*er, and (it#out ex ressin6

#o( "uc# uncertaint! surrounds it.Pro ed, Pro*a*'e, Possi*'eB ter"s not de$ined

uantitati e'!, so i" ossi*'e to "easure and ca'i*rateesti"atin6 a*i'ities o*+ecti e'!


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So t#e Deter"inistic Met#od isunaccounta*'e toB

Pro$essiona's

9'ients and E" 'o!ers

In estors

Genera' Pu*'ic


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PRO


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Resistance to c1ange Resistance to c1ange

5ropped up by =EC 5ropped up by =EC

Accountants canJt deal wit1 uncertainty Accountants canJt deal wit1 uncertainty

Encourages false confidence Encourages false confidence

&esire to remain unaccountable &esire to remain unaccountable


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DETERMINISM EN9O7RAGES7NREALISTI9 T8IN ING A


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One Si" 'e Re"ed! to Start ixin6 t#e Pro*'e"

A uni$ied state"ent $ro" t#e E&P ro$essiona'

co""unit! t#at CPro ed H 34 con$idence.' I" osed De$inition on SE9

' Su ort o$ Pro$essiona' Societies>

' Su ort o$ In$'uentia' 9o" anies>Industr! ro$essiona's created t#is ro*'e" //Industr! ro$essiona's created t#is ro*'e" //

#! don t (e, as res onsi*'e Pro$essiona's, c#an6e it>#! don t (e, as res onsi*'e Pro$essiona's, c#an6e it>

a't e''!, POGOF


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OIL AND GAS RESERVESESTIMATING

WE HAVE MET THE ENEMY,

AND HE IS US

Peter R. Rose

Senior Associate, Rose & Associates, LLP.,and President AAPG

Austin, Texas

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07 Oil and Gas Reserves Estimating - We Have Met the Enemy A