Management of Reserves in Mature Oil and Gas Fields

Many basins throughout the world are experiencing decline in hydrocarbon production with fields maturing and approaching abandonment. Growth in production is coming either from unconventional reservoirs or from relatively immature and emerging basins. As fields (or clusters of fields) approach abandonment, several issues need consideration. There are several ways in which production decline can be mitigated including: infield drilling, workovers, optimised reservoir & facility management, field rejuvenation. Cost management, increased production and operational improvement are some of the strategies employed to maintain profitable operations. Abandonment of a platform with a large number of wells can be a lengthy process with production continuing throughout that process. As production declines, revenues will eventually no longer cover costs. Within the Petroleum Resources Management System (PRMS), Reserves are limited by "the earliest truncation of either technical, license, or economic limit". If there are no technical or licence restrictions, the economic limit, defined as the the time when the maximum cumulative net cash flow occurs for a project, defines the date up to which Reserves may be booked. Several issues related to the determination of the economic limit by an Economic Limit Test (ELT) in late field life will be discussed. Short periods of negative cash flow may be accommodated, and therefore qualify as Reserves, under certain circumstances provided that the longer term cumulative net cash flow forecast shows that the following positive periods more than offset the negative. The use of maximum cumulative cash flow as the basis for the ELT means that incremental projects with negative cash flow are not included as Reserves. However, once the costs are sunk and a forward-looking assessment is performed, the cash flow is once again positive and Reserves can be assigned. Volumes being produced beyond the economic limit, accompanied by a negative cash flow, should not be classified as Reserves as they are not economic to produce. The assumption within the PRMS is that this is point at which a project will cease production. In some PSC environments, there may be little incentive for operators to make long term investments close to PSC expiry. Even after fields reach their economic limit, they may be reactivated e.g.by infill drilling, IOR, EOR. This may be done by different operators, including National Oil Companies or service companies and/or under different commercial arrangements. However, in practice, there may be several reasons why fields continue to produce when production is sub-economic. Management of Reserves in mature fields is important for many reasons including: providing a financing base for the operator, signalling investment opportunities for field re-activation, improved recovery methods or to justify licence extension. This paper will outline some of the challenges involved in late life field management and how it impacts Reserves assessment.