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Front-End-Loading (FEL) Process Supporting Optimum Field Development

Decision Making

Article · October 2013

DOI: 10.2118/167655-MS

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SPE 167655

Front-End-Loading (FEL) Process Supporting Optimum Field Development

Decision Making
Luigi Saputelli and Alan Black, Frontender Corporation; Herminio Passalacqua, Kuwait Oil Company; Kevin Barry,
People Side

Copyright 2013, Society of Petroleum Engineers

This paper was prepared for presentation at the SPE Kuwait Oil and Gas Show and Conference held in Mishref, Kuwait, 7-10 October 2013.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents of the paper have not been
reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material does not necessar ily reflect any position of the Society of Petroleum Engineers, its
officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written consent of the Society of Petroleum Engineers is prohi bited. Permission to
reproduce in print is restricted to an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of SPE copyright.

Abstract

In the decision making process for investing large capital sums the Oil & Gas majors adopt an aged and proven methodology:
FEL or Front End Loading to both mitigate project risk and also to enhance Return on Investment (ROI). This somewhat
dated approach to large project investment methodology is seen by all as the standard norm and as such has being used by all
over the last decades. However within this said process of risk mitigation, the FEL process remains open to challenge as to its
actual viability in today’s forever challenging performance environment.
This paper in its essence does support the FEL process and definition and does however openly challenge the outdated
approach and puts forward a well-structured alternative which offers increased RISK mitigation and in turn reduces ROI,
addressing at the same time the important question of how to allocate important asset resources (People) to maximize profit,.
“Front-end-loading should be considered as a sound field development practice that allows the optimum allocation of
capital and human resources, reduces the uncertainty of key information and ensures a holistic view to all field development
plan decisions.
We present an uncommon approach to addresses the important question of how to allocate asset resources to maximize
profit. Although there is no fixed method to control and maximize the optimal decision making process in a capital projects,
FEL (front-end-loading) methodology measures and increases the level of project definition, thereby increasing the
probability of project success at any stage of the life of the oil field. Traditionally, economic resources have been the
principal metrics for analysis. However, the term resources encompasses many potential inputs to the system, e.g. drilling,
facilities, enhanced recovery, and allocations and in particular and most importantly People!

Background
If the image of Oil & Gas major’s mega project management skills that is sketched in the minds and beliefs of the media
and general public would be true, mega projects would be very likely to ‘fail’: cost estimates, schedules, and desired quality
requirements are not met on a frequent basis.
Although this image might seem somewhat biased, it is shared by the academic and the research consultancy
communities, also supported by succinct and tangible numbers that offer to both the writer and the reader a clear challenge in
its magnitude, as the below supports:
 Mega projects are often surrounded by mistrust: cost estimates and other data generated by analysts cannot be relied
upon, project promoters often avoid and violate established practices of good governance, transparency and participation
decision making, etc. [Flyvbjerg, Bruzelius and Rothengatter (2003)].
 This all can lead to a flawed decision making process, and subsequently to severe cost overruns (> 50%).
 It is estimated that about 30% (for projects with capital expenditure < $ 1billion) to 40% (for projects with capital
expenditure > $ 1 billion) of projects in the oil and gas industry suffer from a budget and/or schedule overrun larger than
10%,dissatisfying the leaders of both owner companies and contractors (McKenna and Wilczynski, 2006).
 That cost overruns can be much larger than 10% is shown in the Sakhalin-II project, which faced a cost overrun of 150%
($15 billion; Neleman, 2006).
2 SPE 167655

 A detailed and comprensive research report published in July 2012 in the (World Energy Outlook 2011©
OECD/International Energy Agency 2011) continues to challenge indeed the process of methodology currently used.
Stating the following: Delays and budget overruns on much-needed capital projects for the oil and gas industries could
cost trillions of dollars in lost investments through 2035! The International Energy Agency (IEA) forecasts that the energy
industry predominately Oil & Gas, will spend nearly US$38 trillion globally on investments for global energy projects
through 2035, chiefly to maintain existing assets such as pipelines and to build new assets. A leading consultancy group for
Oil & Gas, Energy and Utilities conducted research to understand how much oil and gas companies and utilities worldwide
might overspend if they do not improve the implementation, in terms of delivering on time and on budget, of these large
capital projects (FEL Process).
As part of the research: A survey of 6 executives from 21 countries who have responsibility for capital projects of at least
US$1 billion, and using conservative assumptions!
 Estimated that the potential overspend across the whole capital budget of the energy industries could be approximately
13% percent, which translates to US$5 trillion overspend on the US$38 trillion IEA forecast for global investments.
Among the findings that helped shape assumptions:
 Only 34% percent of respondents said they had delivered to within 25% percent of their approved budget for all projects,
and less than a third (32% percent) said they delivered to the approved schedule.
 When asked to identify challenges to getting projects launched on time, respondents most often cited regulatory
requirements (cited by 49 percent) and workforce/skills availability (25 percent).

The increasing size and complexity of today’s mega projects has added to the scale of challenges for Oil & Gas
companies globally. Oil & Gas majors need to to work diligently to develop the talent pool, project initation methodology
(FEL), increase the technical labor pool and build skills in project management and leadership, construction and managing
assets in order to overcome some of the key challenges that arise when launching and undertaking large capital projects, in
particular they will need to understand the process of change when project completion occurs and day to day operations
commence, this is a key and often overlooked area, seen as a somewhat intangible it continues to cause overspends and high
risk in project completion, within the project managers and finance control mindset they see the operations involvement as a
unnecessary expense, this overtime has proven to be a somewhat misconstrued opinion.
Once all of the above is understood it represents both a large opportunity to improve, and also present’s a major challenge
to the thoughts processs and indeed diligence that lies behind the current FEL process, this paper is seen by the prime writer
as an effort in meeting that challenge, the paper is clear in its intent, a radical review / improvement must be made to the
current process to allow the Oil & Gas Majors to continue to open and develop new project frontiers! A 1% to 5%
improvement / reduction in financial costs in the above forecasted numbers is indeed significant, coupling this improvement
with a 1% to 5% in maximizing resevoir capacity does add far more substance to the overall project case, whilst at the same
time reduces the project RISK considerable !
The Opportunity & Challenge: Whilst addressing both the Opportunity & Challenge identified in the above, we need to
have singular point of reference, in this paper we will establish a generic FEL process as said singular reference.

Front-End-Loading (FEL)
Front-end-loading methodology is a 3-step capital project planning process whose purpose is to measure and increase the
level of project definition, thereby increasing the probability of project success in terms of cost, schedule and operability
(Figure 1). According to literature, FEL is the process by which a company develops a detailed definition of the scope of a
capital project meeting business objectives (IPA, 2007; PMI, 2007; Batavia, 1999; Walkup and Ligon, 2006). A FEL index
measures the level of definition and completeness of the FEL phases (see appendix).

Figure 1 – Front-end-loading (FEL) for project execution - from Pre-FEL to Operation

SPE 167655 3

FEL process considers all financial resources, facilities, people, and organizations in order to convert the technical
resources into capital projects. The primary objective of FEL is to achieve an understanding of the proposed project that is
sufficiently detailed such that changes in the production engineering, construction, and startup phases will be minimized.

Exploration and Production value chain

The Exploration and Production (E&P) value chain can be segmented into a series of projects, each representing a scope of
work that can be managed separately, with increasing risk exposure and each offering to the process a higher degree of
specificity and certainty. Figure 2 shows the sequence of operations and decision-making processes that some of the best
upstream petroleum practices entail today. The diamonds on the illustration denote junctures that are considered as crucial
go/no-go decisions. For these points there is a need for key information and knowledge to support the decision.
Today, while most of these activities or fragments of these activities are found throughout the petroleum industry, they
are often disjointed, done sequentially and without regard to their inter-connectivity. Current practices are thus almost always
inefficient, with some project design cycle times extending to a decade or more with substantial associated costs. This is the
result of the disintegration of many independent micro-processes.

Figure 2 – E&P value chain from exploration to operations

From Exploration to Development

For a given specific area, the Exploration cycle can be divided into four phases, each aimed at determining with increasing
confidence the commercial potential of a given opportunity (Figure 3). Each project will follow the FEL approach. This
process can be stopped at any time during the cycle as the true commercial value of an opportunity can change due to the
changing of the internal or external economic conditions of the market or it may result in the opportunity being successfully
passed into Production (Figure 4).

Figure 3 - Exploration project phases

The definition of each phase is as follows:

Project for Generation of Leads (PGO)

These projects types are the first step in the exploration cycle. Main purpose is the preliminary scientific documentation
of potential reserves and narrows the focus of Exploration’s efforts to specific leads.

Project for Generation of Prospects (PGP)

4 SPE 167655

This type of project will start from where the PGL ended. The objective will be to evaluate a specific area and delivering
further technical evidence of potential petroleum reserves. The primary output of PGPs is the recommendation of drilling
prospects.

Project for Evaluation of Prospects (PEP)

If the PGP indicates a valid opportunity a PEP project is launched to begin the exploration of the opportunity (drilling of
wells) and more precise determination of potential economic values of the opportunity.

Project for Delineation and Development (PDD)

PDD is launched when the economic value of a potential opportunity has been confirmed. Delineation is the main
objective. When this project is completed, the reservoir is handed to the asset (Production) for commercial exploitation.

The PDD process includes: development of play (reservoir delineation and reservoir development plan), risk analysis,
hydrocarbon’s volume estimations, conceptual engineering and postmortem (post appraisal drill feedback) economical
analysis.

Exploration to Development Plan stage-gate decision process

Two instances are necesary in order to allow for quick and smooth decisions: Steering Committee and a Technical
Committee. The first has the authority to modify the objectives and scope of the project, recommend changes in how the
propject will be executed or managed, and ultimately ask the project leader to revise the proposal and seek for the advice of
the Technical Committee and in second instance the approval of the same Steering Committee (Figure 3).
The decision to proceed with a particular project proposal is ultimately the discretion of the project leader. However,
his/her ability to build an innovative proposal in harmony with suggestions from the Technical Committee will give him/her
an advantage when seeking the approval from the steering committee.
If a project does not receive the approval from the steering committee and its decision is to close it down this will be
effectively closed-out. This involves three main activities: resource reallocation, materials and documentation closure and
storage, and the preparation of a final report, which will serve as a future proposal in the event that the project can be
resumed at some point in the future due to economical or strategic changes.

Figure 4 - From Exploration to Development project types and products

Exploration Project deliverables

Every project must produce specific deliverables which at the end of the project must be submitted to the resource base for
use in the next phase of the opportunity's delineation. Deliverables vary by project type, with the exeption of the final project
report, which includes a conceptual plan for the development of the opportunity (Figure 4).
In the project final report is a next-phase plan, or next-phase proposal, which is intended to provide the next-phase project
leader with insight and thinking about how to approach the opportunity.
Further, whereas project deliverables will also vary within project types, several common project deliverables exist in all
projects within PGO, PGP, PEP and PDD project. TABLE 1 summarizes the main characteristics of each project type.
TABLE 2 shows the main product of each phase: from plays at the basin scale to a field.
SPE 167655 5

TABLE 1 - CHARACTERISTICS OF EXPLORATION PROJECTS

TABLE 2 - DELIVERABLES OF EXPLORATION PROJECTS

Decisions in PDD phase for Field Development Planning

Field development planning is the preparation to ensure that subsurface reserves are exploited in the most technical and
economic efficient way without causing stress to social and environmental resources. Figure 2 shows the interfaces of field
development processes from Exploration to Operations. Field development planning will follow the FEL approach. This
process may be stopped or delayed at anytime, however it has a series of gates before it can move to the next stage. For that
reason some of the more risky project may take up to 10 years from exploration to first oil.
A fully integrated design addressing planning, construction, and operation must encompass economics, reservoir
management, surface and underground facilities, well construction, and drilling (See Appendix - Decision Scenario
Optimization). The obvious goal is to reduce cycle time and number of iterations while minimizing uncertainty and
mitigating risk
Optimal field development planning may involve identifying opportunities for developing reserves or increasing
production from reservoirs, wells, and surface equipment, with the minimum effort. Technology selection must also be
6 SPE 167655

considered as a very critical element in the decisions for filed development. In many cases tehcnologies are chosen based on
simple practical considerations and are not included as part of the measures in the FEL.
Field development decisions must be made despite uncertainties in well performance, subsurface response, equipment
failure rate, and downstream demands. The heterogeneity of information and complexity of current hydrocarbon assets
requires an iterative approach to identify the best opportunities.
Changes in well productivity, water-front advance, free-gas production, and fluid composition will affect both reservoir
and surface response. Because of these fluctuations, surface facilities may remain sub-utilized, a reservoir’s full potential may
not be obtained, and field economics may not reach peak performance.
Field development planning is a complex “design” process because it consists of (1) making a set of decisions under the
presence of multidisciplinary uncertainties (FEL and uncertainty management
Each element of the Field Development has associated a relevant uncertainty which needs to be treated in probabilistic terms.
Uncertainties are carried over from early stages of the Field Development. In many cases uncertainty can decrease along the
FEL process but this is not always necessarily the case. Scenarios built from different options will have to consider the
associated uncertainties so that scenarios will be described as probability functions.
Metrics must be defined for each stage of the Field Development process in order to standardize as much as possible the
quantification of the uncertainties.
Uncertainties are usually also associated or derived from other uncertainties. Influence diagrams are extremely important
in order to understand these relationships. Influence diagram will also clarify the dependence or independence of each
variable in terms of probabilities.
In certain cases uncertainty is mostly due to the lack of proper information. Data acquisition campaigns should be
included in the FEL process in order to decrease the uncertainties.

TABLE 3 in Appendix) and answering a series of key questions (Figure 5).

Figure 5 – Typical questions to be answered during the decision-making process in field development

Typically not all subsurface uncertainties are considered when evaluating all feasible surface scenarios, and relationships
between them are often disregarded (SeeFEL and uncertainty management
SPE 167655 7

Each element of the Field Development has associated a relevant uncertainty which needs to be treated in probabilistic terms.
Uncertainties are carried over from early stages of the Field Development. In many cases uncertainty can decrease along the
FEL process but this is not always necessarily the case. Scenarios built from different options will have to consider the
associated uncertainties so that scenarios will be described as probability functions.
Metrics must be defined for each stage of the Field Development process in order to standardize as much as possible the
quantification of the uncertainties.
Uncertainties are usually also associated or derived from other uncertainties. Influence diagrams are extremely important
in order to understand these relationships. Influence diagram will also clarify the dependence or independence of each
variable in terms of probabilities.
In certain cases uncertainty is mostly due to the lack of proper information. Data acquisition campaigns should be
included in the FEL process in order to decrease the uncertainties.

TABLE 3 in Appendix). For this reason, developing an exploitation plan for an oil or gas field has always been
challenging. To succeed, field development planning requires risk and uncertainty management.

Advantages of the FEL approach applied to Field Development Planning

The FEL approach has several advantages compared to the conventional approach:
Cycle time. The primary advantage is the reduction of project cycle time, which of course has direct impact on costs and
value for the all organization. Best practices can be established to reduce overlap and reduce unnecessary work, and improve
the transfer of opportunity-specific data through the project process and ultimately to Production.
Value generation. The reduction of costs and cycle time, improvement of quality, and improvement of communication
with other teams, creates a better value proposition.
Human resources utilization. Human resources can be shared between projects making a more effective use of staff of
critical disciplines.
Resource allocations and results. Results are directly tied to resource allocation of all types, because these are
proportional to expected results.
Decision making. This kind of approach enables for a sound, fast decision making at all levels.
Accountability. People are held accountable for their work.
Technical innovation and work quality. The division of work by projects allows for increased competitive capabilities
based on technical innovation and project quality.
Early production team participation. It allows the early participation of production staff that allows for a better
familiarization with the asset they will be handling for exploitation.
Economical value: The same play (opportunity) is tested for economical value at every phase allowing for a much precise
valuation of the asset. This will also allow for the opportunity to stop the project if the economical conditions are adverse at
any of the stages. The opportunity could be reexamined in the future if economical conditions or technology availability
change.

The Reservoir at the heart of the field development planning process

In the Exploitation Macro Process four processes stand aligned directly with the Value Creation of the Production Business:
(1) Reservoir Modeling, (2) Well Construction, (3) Facilities construction and (4) Production Operations. The Reservoir
conditions the downstream processes of the Production Macro process. Integrated reservoir studies is the formal and
continuous process that supports the builing and maintainance of an adequate image of the reservoir and the resources
required to exploit it.
Objectives and Phases of an Integrated Reservoir Study
The integrated studies enable a business plan to ensure maximum economic recovery of reserves. In order to maximize
the value creation of the asset the following objectives for an integrated reservoir study must be taken in account:

• To reduce uncertainty for the production plans

• Increase reserves
• Maximize ultimate recovery
• Minimize reservoir decline
• Maximize Production Potential

Integrated reservoir study phases are shown in Figure 6. Collaborative multidisciplinary work is essential to ensure the
robustness of a reservoir model and the associated field development planning process. The model should be validated and
structured by technical consensus. Each phase validates and reconciles the previous one. This is not a linear process.
8 SPE 167655

Figure 6 – Integrated Reservoir Study Phases

Integrated reservoir models are an approximation to the truth. An inferred model of the subsurface. Uncertainty is its main
characteristics and therefore there must be a policy of maintaining and updating, associated with the process of "monitoring"
and control sites.
These studies are repeated periodically in order to assure that new information produced during the production process is
incorporated into this model so this can be updated in order to improve the recovery factor. Statistics indicate that Reservoir
models must be updated periodically depending on: (a) level of well activity, (b) percentage of uncertainty from previous
model, (c) complexity of the reservoir, (d) reservoir depletion level, (e) new technologies, and (f) re-engineering.
If a policy of maintaining is used the updating of existing models should take less time and be cheaper every time is
repeated. This process triggers the reservoir monitoring process. With the rise of digital oil field technologies reservoir
monitoring is becoming more common enabling faster loops of reservoir and production surveillance.

FEL Challenges and Impact to project sucess

The application of FEL suffers from many shared challenges among all elements of the value chain in the upstream industry:
(1) demonstratin value, (2) not having enough resources to evaluate different scenarios, (3) team roles and responsibilities not
clear, (4) lack of proper modeling and simulation resources, and (5) siloed organizations are five key elements of success
(Figure 7).
Having the above challenges would absolutely impact project results in various negative ways. Not having enough
resources to evaluate different scenarios means that not all opportunities are considered and good ones may be left out, which
will ultimately yield to not realizing maximum asset potential and business success. Lack of proper modeling and simulation
resources and siloed organizations woul impact having lots of scope changes during engineering and construction, which
would ultimately generate innefficent project cost and time overruns. In the end, all these challenges will turn in project
stakeholders and key metrics not been satisfied.
The real success of FEL methodology is directly linked to the achieved level of integration between participants in the
client-consultant team group, and the effective continuous support (technology, space, and resources) and leadership from the
client side during the whole projects life span.

Mitigating strategies and FEL best practices

Clarifying objectives and expectations in pre-FEL phase

This ensures that corporate guidelines, sponsors’ expectations and all available project information are effectively
conveyed to the project team. Scope management is critical in maintaining project delivery with high quality standards and
time constraints.

Assemblying of a real multidisciplinary and experienced team for the preparation of scenarios.
Experience is also key element for the composition of this team. The success of a FEL depends mostly on selecting the
right team for this task. Scenarios are usually derived from previous experiences, so an experienced miltidisciplinary team is
a priority. Many project succeed because adequate resources are assigned and secured by management.

Dedicating time to understand uncertainties and influences of decisions.

SPE 167655 9

Clear evaluation and quantification of uncertainties and decisions require appropriate integrated modeling and
optimization approach metrics and will play an important role in this phase. The use of influence diagrams can help
understanding relationships between different uncertainties. A consistent methodology for multiscenario analysis, uncertainty
management, risk assessment, and optimization can lead to non-intuitive answers, which are not clear when onle few
deterministic scenarios are considered (Saputelli et al., 2008). The integrated optimization approach not only rank the best
options but also the interactions among those options, e.g. the number of wells per field as a function of the decisions from
other fields.

Securing technical resources such as hardware and software.

The evaluation of uncertainties and decisions usually require high-performance computational power for modeling and
simulation. Time to obtain multiple reservoir simulation profiles is usually under-estimated. Automatic workflows for
evaluation of uncertainties and optimizing decision scenarios are required to reduce the large amount of people and computer
power required, so that it is possible to identify and visualize a large number of feasible scenarios in a short period of time,
and still point to the best scenarios that generate optimum portfolios. Therefore, in addition to good people, process and
technology are very important elements for the preparation of scenarios.

Providing process awareness to all stakeholders.

Team members, external peers and decision makers need to understand the process of decision framing, visualization and
conceptualization of scenarios. At the required moment, the core team may be supported by and extended team of reviewers
who may add value with alternate points of view.
In addition, some best practices in the application of FEL have been captured:
 Needs assessment workflows and value identifications must be implemented and sized adequately for the work team.
 Project success factors include project management techniques and adequate opportunity visualization.
 Field exploitation scenarios and project performance must be evaluated using a probabilistic approach which ensures
informed decision-making in any given moment. In such an approach, project outcome considers confident ranges of
input variables for various investment and risk levels.

Figure 7 - Challenges, impact on results and mitigation strategies for FEL projects

Conclusions
1.- The FEL methodologies presented in this paper allow the Oil & Gas companies to take better decisions during field
development planning process to improve the value of subsurface resources while minimizing risk during field development
execution phase. The key advantages are:
 Ensure that the business objectives are aligned with the technical objectives
 Human resources are better utilized
 Early production team participation
 Evaluate a large number of scenarios implies that some opportunities
 Standard process for a well-defined decision making

2.- Some lessons learned during the FEL process:

10 SPE 167655

 Not having enough resources to evaluate a large number of scenarios implies that some opportunities may be left out,
which will ultimately yield to not realizing maximum asset potential and business success.
 Integration of the multi-disciplinary team members, adequate support (technology, space, resources, and leadership) will
surely ensure optimum the final results

References
Acosta, L., et al., “Integrated Modeling of the El Furrial Field Asset applying Risk and Uncertainty Analysis for the Decision Making”,
SPE Paper No. 94093, presented at the 2005 SPE Europec/EAGE Annual Conference, Madrid, Spain, 13 – 16 June
Batavia, R., “Front-end Loading - A Path to a Successful Project”, Project Management Institute. Newtown Square, PA., 1999
Flyvbjerg, Bruzelius and Rothengatter (2003): “Megaprojects and Risks – An Anatomy of Ambition”, Cambridge University Press,
Cambridge, UK.
International Energy Agency (2011): World Energy Outlook 2011OECD, http://www.worldenergyoutlook.org
Khan, K., et al. “Optimized Field Development Strategy under Uncertainty in ‘El Carito’ Field – North of Monagas, Venezuela”, Paper No.
IBP1786_06, presented at the 2006 Rio Oil & Gas Expo and Conference, Rio de Janeiro, September 11-14
IPA – Independent Project Analysis (2013), http://www.ipaglobal.com/ ; last accessed 20 August 2013.
PMI – Project Management Institute, http://www.pmi.org/
Portigal, M., “The Scalable Front-end Loading Index Tool (S-FELIX): A Tool for Implementing Scalable Project Management”, Project
Management Institute. Newtown Square, PA., 2006.
McKenna M., and Wilczynski H., (2006) “Capital Project Execution in the Oil and Gas Industry Increased Challenges, Increased
Opportunities” White Paper, http://www.booz.com/
Neleman, 2006. Shell gaat diep. FEM Business 9 (4), 30 – 34.
Saputelli, L., Lujan L., Garibaldi, L., Smyth J., Ungredda, A., Rodriguez J. and Cullick A. S.: “How Integrated Field Studies Help Asset
Teams Make Optimal Field Development Decisions”, SPE Paper No. 111250 presented at the 2008 SPE Western Regional and
Pacific Section AAPG Joint Meeting held in Bakersfield, California, U.S.A., 31 March–2 April 2008
Rodríguez, R., et al. “Integration of Subsurface, Surface and Economics under Uncertainty in Orocual Field,” SPE 107259, presented at the
2007 SPE Latin American and Caribbean Petroleum Engineering Conference held in Buenos Aires, Argentina, 15–18 April 2007.
Walkup, G.W., and Ligon, J.R.: “The Good, the Bad and the Ugly of the Stage-Gate Project-Management Process in the Oil and Gas
Industry,” SPE 102926, presented at the 2006 SPE Annual Technical Conference and Exhibition held in San Antonio, TX, U.S.A.,
24–27 September 2006.
Appendix

FEL and uncertainty management

Each element of the Field Development has associated a relevant uncertainty which needs to be treated in probabilistic terms.
Uncertainties are carried over from early stages of the Field Development. In many cases uncertainty can decrease along the
FEL process but this is not always necessarily the case. Scenarios built from different options will have to consider the
associated uncertainties so that scenarios will be described as probability functions.
Metrics must be defined for each stage of the Field Development process in order to standardize as much as possible the
quantification of the uncertainties.
Uncertainties are usually also associated or derived from other uncertainties. Influence diagrams are extremely important
in order to understand these relationships. Influence diagram will also clarify the dependence or independence of each
variable in terms of probabilities.
In certain cases uncertainty is mostly due to the lack of proper information. Data acquisition campaigns should be
included in the FEL process in order to decrease the uncertainties.

TABLE 3 –OIL AND GAS FIELD UNCERTAINTIES

RESERVOIR STATIC UNCERTAINTIES RESERVOIR AND WELLS UNCERTAINTIES SURFACE UNCERTAINTIES

 Vertical and area limits
 Vertical and area communication
 Normal and abnormal pore pressure
distribution
 Rock wettability
 Pore throat radius distribution
 Initial reservoir fluid characterization
and distribution
 Rock property distribution (composition,
porosity, permeability, clay content)
 Well productivity and injectivity distribution  Facilities uptime and availability
 Dynamic reservoir fluid behavior and distribution  Drilling rig availability
 Secondary and tertiary recovery performance  Project execution time
 Pressure envelope to avoid solid precipitation  Actual well start date
 Maximum watercut for natural flow  Alternate uses of gas
 Induced fracture characterization  Gas and water availability
 Wellhead pressure and flow rates
 Micro- and macroscopic recovery efficiency
 Aquifer support
 Well intervention success
 New wells potential

Front-End Loading (FEL) Index

SPE 167655 11

The FEL Index is a mean to measure the level of detailed achieved in the FEL phases (Portigal M., 2006, IPA 2013). The
FEL index is conformed of (1) Engineering Status, (2) Project Execution Planning and (3) Site Definition. Key products of
the FEL phase include the following:
1. engineering documents such as process flow diagrams (PFDs), piping and instrumentation diagrams (P&IDs), plot plans
and equipment arrangements, heat and material balances, single-line electrical diagrams, and major equipment
specifications
2. a strategy for executing the project;
3. a cost estimate accurate to within plus or minus 10 percent; and
4. Agreement by all corporate functions regarding the project’s objectives and scope.

Engineering Status.
A component of the IPA FEL Index that measures the following: (1) the degree to which a set of key engineering tasks
(e.g., process flow diagrams [PFDs], piping and instrumentation diagrams [P&IDs], heat and material balances [H&MBs],
etc.) has been completed and (2) the participation/buy-in of the business group as well as plant operations and maintenance.

Project Execution Planning

A component of the IPA FEL Index that measures the extent to which the following project execution plan items have
been established: project objectives and priorities; contracting strategy and plans; team participants and roles; a detailed,
resource-loaded network schedule; and cost and schedule controls.

Site Definition
A component of the IPA FEL Index that measures the level of completeness with respect to four site-related factors: (1)
soils and hydrology data, (2) environmental, health and safety requirements (3) plot plans and equipment arrangements

FEL and Optimum decision making

Different scenarios are built considering uncertainties of each parameter of the reservoir, possible technologies to be applied
and of course associated costs and time frames.
Decision making can then be reduced to the solution of a typical mathematical optimization problem if uncertainties are
clearly defined.

Decision Scenario Optimization (DSO)

Decision Scenario Optimization (DSO) is a FEL-based methodology for framing, screening, evaluating, analyzing and
selecting field exploitation, drilling and/or production scenarios. This approach promotes better decision-making because of
the exhaustive identification, screening and optimization of all possible scenarios (Figure 8), where each scenario is a
combination of possible and feasible alternatives within the value chain.

Visualization Conceptualization Definition

Decision Categories Decision Categories Decision Categories

D1 D2 D3 D n D1 D2 D3 Dn D1 D2 D3 Dn
O1 S1 O1 S1 O1
Options

Options
Options

O2 S2 O2 S2 O2 S2
O3 S3 O3 S3 O3
Om Sk Om Om

Figure 8 – Decision Scenario Optimization (DSO) in different project phases

DSO is a structured and consistent methodology used to consider all feasible scenarios, and then select the optimal
scenario. The number of decision categories (D 1, D2, D3 and Dn) and decision options (O 1, O2, O3 and On) remains constant
along the phases of visualization, conceptualization and definition. A scenario is the lineal combination of all options for all
decision categories. The number of identified feasible scenarios (S 1, S2, S3, and Sn) is large in the visualization stage, and then
the number of scenarios is progressively reduced in conceptualization (S 1, S2 and S3) phase until finally, one is selected (S2).
In the definition stage, only one scenario is analyzed and evaluated. DSO identifies early risk and uncertainties, focusing on
all technical work in value actions to minimize redesign and project life cycle.
An example of DSO methodology is shown in Figure 9, showing the identification and values of 3 possible scenarios (S 1,
S2 and Sn). Each scenario is created by combining various independent decisions (reservoir exploitation, well spacing, well
architecture, production method, surface facility strategy and export market strategy).
12 SPE 167655

Reservoir Well Well Production Surface Export Market

Exploitation Spacing Architecture Method Facilities Strategy

Cold Depletion None

500 m Vertical Centralized Sell as one fluid
S1 Cyclic Steam Injection Progressive
Operations mix
(Huff & Puff) 300 m Horizontal Cavity Pump
Various multiphase Segregate
S2 Steam flooding 100 m Slanted Beam Pump
separation batteries different fluids
H&P + Steam flood Gas Lift
Sn

20% 1.0

NPV Mean (MM$)

0.8

Probability
15% S1
0.6 Sn
10%
S2 0.4 S2
5% Sn 0.2 S1
0% 0.0
-2 0 2 4 0% 200% 400%
Net Present Value (MM$) NPV StDev (MM$)

Figure 9 – Decision Scenario Optimization (DSO) Example

In Figure 9, each scenario’s (S1, S2 and Sn) value is compared to its risks. Figure 9 shows the probability distribution of
Net Present Value for each scenario. Figure 9 also shows a plot of the average Net Present Value versus the standard
deviation of Net Present Value for each scenario. This plot is the key to ranking the scenarios and identifying the optimal
balance between economic benefit and risk. The example shows that the red scenario would bring greatest value but also
greatest risk.
The expected cash flows used to value risky assets can be estimated in two ways. They can represent a probability-
weighted average of cash flows under all possible scenarios, or they can represent the cash flows under the most likely
scenario. While the former is more precise, it is seldom used simply because it requires far more information to compile. In
both cases, there are other scenarios where the cash flows will differ from expectations: higher than expected in some and
lower than expected in others. In scenario analysis, one can estimate expected cash flows and asset value under various
scenarios, with the intent of getting a better sense of the effect of risk on value.
 SPE 167655 13

Integrated Asset Modeling (IAM)

The primary objective of the IAM-type projects is to ensure well-informed decision-making for optimal field
development based on front-end-loading (FEL) methodology and decision scenario optimization (DSO). Optimal field
development implies that the effects of all uncertainties on all of the decision criteria are understood [Acosta et al., 2005;
Khan et al., 2006, Rodriguez et al., 2007]. Figure 10 shows the process for generating the decision framework, uncertainty
assessment and scenario evaluation. The main philosophy around IAM is to focus on speed and certainty, not on precision;
precision is enhanced in the definition stage.
Integrated & aligned vision
1) Brainstorm potential Strength, weakness, opportunity & threads
scenarios Contributing factors diagrams
Growth expectation or
Decision Framework
resource optimization

Review, approve,
optimize, continue Review & validate
objectives
Focus on speed and
certainty not on
precision Multi-disciplinary
Integrated Asset Model
- Reservoir
Dynamic Economic model 3) Scenario 2) Assess
Economic - Productivity
Multi-scenario uncertainties
Evaluation - Drilling
Frontier Analysis
- Infrastructure

Peer Review

Figure 10 - IAM recurrent visualization and conceptualization cycle

IAM projects require a formal basis for quantification of the uncertainties associated with subsurface geology, with wells,
and with surface facilities. The projects also require an evaluation of the effect of these uncertainties on the possible values of
the project outcome (Figure 11).

Decisions CAPEX
Integrated Asset Model
Facility Type

Pipeline Diameter Export Sales

Production Target
Economics
Injection Target
NPV, ROCE
Number of Wells
Oil & Gas
Prices
Subsurface
Uncertainties Drilling Day
Rates
Well Performance
OPEX
Recoverable
Reserves

Reservoir
Heterogeneities Optimization
Under
Uncertainty

Figure 11 – Integrated Asset Model (IAM) components

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