PRACTICALLY ESTIMATING FIELD SIZE, CHANCE OF SUCCESS VITAL IN U.S.

Dan L. Wilson
ARCO Oil & Gas Co.
Houston

U.S. basins provide many challenges and opportunities to be successful. By better understanding the exploration risks that are against them, explorers can design exploration programs to be more successful.

The uncertainties that must be addressed for a play are its chance of success and reserve potential.

What follows is a discussion of the estimation of chance from a practical viewpoint. A reasonably accurate estimate of chance is necessary for any economic analysis of a prospect or play type.

CHANCE ASSESSMENT METHODS

Two methods are used to determine chance factors.

One is an historical exploratory success method, and the other is a method based on the technical analysis of the geologic components of chance.

The author prefers to use the historical method. This involves an analysis of regional exploratory well completion statistics for a play of interest.

It is most useful in determining the economics of a play type over a period of time and can also be used as a guide in assigning chance to a prospect.

There are several pitfalls to avoid with the historical type of analysis. People have a tendency to make basin-wide generalizations concerning success statistics that are of little use to the explorationist.

Exploratory well completion ratios must be calculated on a play specific basis. Some plays are much better than the basin average of all plays.

In addition, many plays may appear to have low success ratios basin-wide but have very high success ratios in select portions of a basin.

As an example, the Blanding basin portion of the Paradox basin has a much higher success ratio than the Paradox basin as a whole (Fig. 1).

As this example shows, very attractive play areas are often hidden by basin-wide statistics. The comparison of basins based on basin-wide statistics should be viewed with caution.

Additionally, historical success ratio data should be gathered with care. It might be desirable to consider a success rate over a recent period of time.

For example, one might choose a period representative of recent technology, such as since the end of the oil industry boom. Whatever period is chosen, it must be long enough that a significant number of wells have been drilled.

In exploratory work the most useful figure is the ratio of completed new field wildcat wells to new field wildcat dry holes. In some plays extension well statistics are also important.

When comparing basins or plays it is important that the comparisons are on an equivalent basis.

After determining the ratio of success for its play type and area of interest, an exploration company needs to compare that number to its prospect and ask whether the prospect is typical of the play.

If it is, then the prospect's chance of success is represented by the regional success rate. Has all the well control been included? Is the seismic coverage similar to that of other prospects? These are the types of questions to ask.

If the prospect differs from the typical prospect, then the operator should adjust its chance of success accordingly.

The second method of chance determination is the technical components method. In this method one estimates the independent probabilities of occurrence of reservoir, trap, seal, source rock, maturation and migration, and such things as the probabilities of locating the operator's well favorably, and drilling it successfully.

The chance of success is the product of these probabilities.

In this type of analysis many of the chance components can be determined through analogy to regional geology. For example, a prospect may be located where there is always good source rock and seal, but the probabilities of a favorable trap and reservoir must be estimated based upon geologic and geophysical arguments.

This kind of analysis is most useful in frontier basins and plays where the well control is limited. The author's experience indicates that this method of analysis often leads to an optimistic assessment of chance. For this reason calculated chance factors should be compared to historical success ratios.

ECONOMIC AND GEOLOGIC CHANCE

Economic chance is the probability of finding commercial production.

This is equivalent to the chance determined from historical success ratios.

Geologic chance is the probability of finding reasonable flow rates of hydrocarbons. This is determined by the analysis of the geologic chance components.

The geologic chance is generally equivalent to economic chance in areas where completion costs are low. In areas where the completion costs are high the two chance numbers can be quite different.

In an offshore play, the chance of finding hydrocarbons may be large, but the chance of finding enough hydrocarbons to set an offshore platform may be small.

The economic chance should be used in economic analysis.

CHANCE, FIELD SIZE DISTRIBUTION

Field size distribution should always be considered when estimating chance for a series of prospects in a given play.

If, for example, a play has a 20% success ratio and an average field size of 1 million bbl, no one could expect a 20% average success ratio for a series of prospects modeled at 5 million bbl each. The success ratio may be accurate, but the reserves discovered will more closely match the historical average. This is the most common error exploration organizations make in designing exploration programs.

SUCCESS RATES AND TECHNOLOGY

Advances in technology seem to have very little effect on the exploratory success rate for a mature play.

For example, 3D seismic gives much more precise information than 2D data does. This might appear to raise the success rate. However, by detecting more subtle geology, 3D data also yield many more prospects than 2D data, and therefore the success ratio does not significantly change.

The development of new technology encourages corporations to accept risks that they would not have taken prior to the new technology.

The overall economics of a play determines what the play's success ratio will be.

There appears to be a relationship between the success ratio and oil price (Fig. 2) but little relationship between the success ratio and technological developments.

The development of new technologies extends the life of an existing play by allowing explorers to look at more subtle targets, but in our competitive world new technologies do not change the overall economics of a mature play.

New technology does, however, help develop new types of plays, and new technology also can have a large effect on development and extension well success ratios.

What this means to the explorer is that historical success ratios for an existing play are representative of what can be expected in the future for that play.

SUMMARY

Reasonable estimates of the chance of success in an exploration play can be made quite easily from historical well data and regional geology-Historical success ratios for a play type are representative of future success ratios.

Through the understanding of regional success ratios it is possible to better assess the economic potential of an exploration program.

Copyright 1991 Oil & Gas Journal. All Rights Reserved.