Technical Evaluation and Management of an Unconventional reservoir System. Conventional reservoirs are those that can be produced at economic flow

rates and that will produce economic volumes of oil and gas without large

stimulation treatments or any special recovery process. A conventional

reservoir is essentially a high- to medium-permeability reservoir in which one

can drill a vertical well, perforate the pay interval, and then produce the well at

commercial flow rates and recover economic volumes of oil and gas.

An unconventional reservoir is one that cannot be produced at economic flow

rates or that does not produce economic volumes of oil and gas without

assistance from massive stimulation treatments or special recovery processes

and technologies, such as steam injection. Typical unconventional reservoirs

are tight-gas sands, coal-bed methane, heavy oil, and gas shales.

Masters and Gray published the concept of the resource triangle,

which says that oil and gas resources are distributed log normally in nature,

just like any other natural resource, such as gold, copper, and uranium. Figure

1 presents the concept of the resource triangle for oil and gas resources.

At the top of the resource triangle are the medium- to high-quality reservoirs.

These conventional reservoirs are normally small and easy to develop, but

difficult to find. Deeper into the resource triangle, one encounters

unconventional reservoirs that have large volumes of oil or gas in place but

are more difficult to develop. To produce these unconventional reservoirs,

increased oil and gas prices and/or improved technology are required. In the

last 20 to 30 years, substantial improvements in technology and increases in

oil and gas prices have allowed many operators to produce low-permeability

oil and gas fields, gas from coal-beds and shales, and heavy-oil deposits.

Because of the log-normal distribution of natural resources, the volumes of oil

and gas that are stored in these unconventional reservoirs are substantially

higher than the volumes of oil and gas found in conventional reservoirs.

Figure 1: The Resource pyramidThe issue is how long can we continue producing oil from conventional

reservoirs?” Figure 2, from the U.S. Dept. of Energy’s Energy Information

Admin. (EIA), shows projections for oil, natural gas, coal, renewables, and

nuclear energy between 2001 and 2025, along with history back to 1970. The

EIA projects that the world will need more oil, natural gas, and coal in the next

20 years. Natural-gas demand increases more rapidly than coal or oil

because most forecasts show that natural gas will be used to generate

electric power in an ever-increasing proportion to coal and other fuels. The

data in Fig. 2 clearly show that the oil and gas industry will need to produce

substantially more oil and natural gas to meet demand in the coming 20

years.

We can examine possible future scenarios in Figure 3, a graph from

MacKenzie that shows world oil production since 1950 and a forecast of

production through 2030. The units are in billion bbl per year. Notice that in

1950, world oil production was slightly less than 5 billion bbl per year.

Demand for oil increased steadily until about 1979, when demand declined.

The oil price in 1978 increased from approximately U.S. $12/bbl to more than

U.S. $30/bbl; as such, world demand and production declined from about 23

billion bbl per year to slightly less than 20 billion bbl per year. However, by the

late 1980s, world oil demand began increasing once again and by the year

2000, oil production was approximately 25 billion bbl per year.

MacKenzie shows three possible future scenarios for global oil production

from conventional reservoirs. The low case forecasts world ultimate recovery

at 1.8 trillion bbl. The medium case shows world cumulative oil production at

2.2 trillion bbl, while the high case indicates world oil ultimate recovery could

reach 2.6 trillion bbl. Notice that the peak in global oil production is predicted

to occur sometime between 2005 and 2020 for all three scenarios.

Figure 2: World forecast of energy need by 2025.

Figure 3: The three different cases of global oil production.

So what does all this mean? Well, after the peak, approximately 50% of

ultimate world oil reserves from conventional reservoirs will have been

produced, and as shown in Fig. 3, the peak is anywhere from 2 to 17 years

away. Assuming that we have produced 930 billion bbl of oil, and know where

another 1 trillion bbl of oil can be produced, then there could be as much as

700 billion bbl of oil left to be discovered. However, as Campbell argues,

essentially all of this oil will come from additional exploration in known basins.

Using conventional oil production in the U.S. as a model, it is clear that once

world oil conventional production begins to decline, it will be very difficult to

arrest that decline. Even with higher oil prices and more rigs, most experts

believe that the decline, once it begins, will be permanent and continuous.

Assuming that demand will continue to increase, it is often speculated that

after world oil production from conventional reservoirs peaks and begins to

decline, oil prices will increase and remain high from that point forward.

So how do unconventional reservoirs fit into the world energy mix? Well,

Campbell and MacKenzie have forecasted only production from conventional

reservoirs and have not included the contributions of heavy oil, natural gas, or

natural-gas liquids. To look at the total energy mix, we need to factor in the

effects of natural gas, unconventional gas reservoirs, and heavy-oil

production.

The EIA published an oil demand forecast in 2001, which has been added to

Figure 3 and is presented as Figure 4. The EIA projected that demand for oil

in 2020 will be as high as 43 billion bbl per year. Because current production

is only 27 billion bbl per year, a substantial increase in production capacity will

be required between now and 2020.

It is clear from Fig. 4 that a gap between supply and demand will occur during

the next 10 to 20 years. To fill this pending gap between world oil demand and

oil production from conventional oil reservoirs, we are going to have to rely on

the following.

• Liquids from conventional natural-gas reservoirs. • Heavy-oil deposits.

• Liquids from unconventional gas, such as tight gas and coal-bed methane.

Renewable resources, such as wind, solar, and hydroelectric.

• Renewable resources, such as wind, solar, and hydroelectric.

Renewable resources are important and will become more important later in

the 21st century. However, for the foreseeable future, renewable resources

will not play a major role in satisfying demand for world energy, especially

liquids to power vehicles.

Figure 4: Show the space between demand and supplyMany individuals may think that unconventional reservoirs are not important

now but may be very important in the future. Actually, unconventional

reservoirs are very important now to many nations. The U.S. currently

produces substantial volumes of natural gas from tight sands, gas shales, and

coal-bed-methane reservoirs. Also, heavy-oil production, especially in

California, is quite important to the national economy. Other countries, such

as Canada, Venezuela, and Russia, produce substantial volumes of heavy oil,

while countries such as Australia, Argentina, Egypt, Canada, and Venezuela

produce gas from low-permeability reservoirs. Fig. 5 illustrates production

from U.S. unconventional gas reservoirs from 1980 through 2000. Notice that

in 1980, production was about 1.5 Tcf/year. By 2000, production reached

almost 5 Tcf/year. The U.S. uses about 22 Tcf/year of natural gas. Thus,

approximately 22% of the natural gas the U.S. uses each year is currently

produced from unconventional gas reservoirs.

Current natural-gas reserves in the U.S. are approximately 160 Tcf. Of that,

approximately 40 Tcf are gas reserves in unconventional reservoirs, and 120

Tcf represent gas reserves in conventional gas reservoirs. It is clear that

unconventional gas reservoirs are very important to the energy mix in the UK,

U.S. But what about the rest of the world? What role will natural gas play in

the future as conventional oil eventually peaks and begins to decline?

Making sound business decisions in one of the hottest domestic exploration

reservoirs, unconventional gas, offers a set of challenges not usually

encountered with more traditional opportunities. Unlike with standard prospect

and conventional reservoirs risk analysis, geologic chance is not a major

issue, and estimates of initial production, decline rates, mechanical efficiency,

and success planning dominate the analysis rather than traditional volumetric

determinations. The valuation and assessment of unconventional or

“continuous resource” opportunities is not feasible using traditional

probabilistic, volumetric-based methods.

A fully stochastic business, value-chain model is the best way to assess the

potential of an unconventional reservoir. Such an evaluation method allows

for multi-disciplinary and cost input that affords decision makers with the

appropriate data to make good decisions and effectively manage the

reservoir.

The boundaries of unconventional reservoirs extend well beyond the limits of

most individual acreage holdings.

The objective of the research is to provide world-class scientific coverage of

recent advances in knowledge and practices in the area of evaluation,

development and management of unconventional resources for researchers

and practicing engineers. An attempt will be make to bridge the gap between

theoretical knowledge and field development of unconventional resources,

such as tight gas, shale gas, liquid rich shales, tight oil, coal-bed methane,

gas hydrate,.

ReferencesCampbell, Colin: The Coming Oil Crisis, Multi- Science Publishing Co. Ltd., Brentwood, Essex, U.K. (1997).MacKenzie, James J.: Oil as a Finite Resource: When is Global Production Likely to Peak?, World Resources Inst., Washington, D.C. (2000).Masters, J.A.: “Deep Basin Gas Trap, Western Canada,” AAPG Bulletin (1979) 63, No. 2, 152.