OIL AND GAS RESERVE ESTIMATION

Prof. T. Kumar
Dept. of Petroleum Engg.
IIT (ISM), Dhanbad-826004

Introduction:
Calculation of hydrocarbon reserves and prediction of future
recoveries are important aspects of the evaluation. Reserves
indicate value of an oil/gas property, while the rate of production
determines the economics. Reserves usually indicate the oil
and/or gas, which may be recovered at economic rates using
only the natural reservoir forces (primary recovery). Reserves
resulting from secondary recovery, usually denoted as
secondary reserves are normally considered separately.

Time of the Evaluation

Reserve is a fluid thing and should be determined
periodically. Their accuracy depends on the quality and quantity
of data available. Since more information necessarily
accumulates during the life of a property, the reserve estimates
become correspondingly more accurate. Different stages of
exploration and exploitation during which reserves are
determined, may be shown as:
1) Prior to drilling and development
2) Just after drilling and completion
3) After at least one year’s production data are available,
the well or lease still producing its allowable.
4) When the property in question cannot produce it’s
allowable and production is declining.
5) At depletion.

Even at depletion, where the maximum production data are

available, the reserves are only relative, for they reflect only
those reserves obtained from the producing methods used.

1
During the production life of the property a change in production
method will often change the reserve picture.

The following basic methods are available for estimation of

reserves:

(A) Volumetric calculation

(B) Material balance
(C) Production decline Curves
(D) Comparison of the reserves with those of similar and
/or offset properties having similar geological and other
reservoir conditions.
(E) Comparison of the data from the same formation in
other fields, usually expressed in barrels per acre foot.
In cubic meters per hectare-meter (India).
Methods (D) and (E) are known as comparative methods.
Methods for Analyzing oil reserves
Time period % of Primary Reasonable
Reserves methods range of
produced of estimate error
Prior to drilling 0 D and E 10-100
percent
After 0 A,D and E 5-50 percent
completion
During 1-10 A,B,D and E 5-30 percent
production
During 10-30 A,B and C 5-20 percent
production
During 30 – 60 B&C 5-10 percent
production 60 & higher C about 5
percent

2
Definitions and classification of Reserves & Ultimate
Recovery
The estimated ultimate recovery or ‘ultimate’ which a given
property is expected to produce during its life time is usually
determined by volumetric methods.
Cumulative Recovery
The cumulative production on a given date is usually
referred to as ‘cumulative’.
Remaining Reserves
Estimates made during the ‘performance period’ usually by
decline curves, yield the estimated remaining reserves or
‘reserves’ for a given date. Before performance data or decline
curves are available the remaining reserves for a given date may
be obtained by subtracting the cumulative production on that date
from the ultimate recovery estimated by volumetric methods.
‘Reserves’ = ‘Ultimate’ – ‘Cumulative’.
Classification of Reserves:

SPE APPROVED RESERVE DEFINITIONS

3
RESERVES:
Reserves are estimated volumes of crude oil, condensate,
natural gas, natural gas liquids, and associated substances
anticipated to be commercially recoverable from known
accumulations from a given date forward, under existing
economic conditions, by established operating practices, and
under current government regulations. Reserve estimates are
based on interpretation of geologic and/or engineering data
available at the time of the estimate.

PROVED RESERVES:
Proved reserves can be estimated with reasonable certainty
to be recoverable under current economic conditions. Current
economic conditions include prices and costs prevailing at the
time of the estimate. Proved reserves may be developed or
undeveloped.
In general, reserves are considered proved if commercial
producibility of the reservoir is supported by actual production or
formation tests.

UNPROVED RESERVES:
Unproved reserves are based on geologic and/or
engineering data similar to that used in estimates of proved
reserves. But technical, contractual, economic or regulatory
uncertainties preclude such reserves being classified as proved.
They may be estimated assuming future economic conditions
different from those prevailing at the time of the estimate.
UNPROVED RESERVES DEFINITIONS
Unproved reserves may be divided into two sub
classifications: probable and possible.

4
PROBABLE RESERVES:
Probable reserves are less certain than proved reserves
and can be estimated with a degree of certainty sufficient to
indicate that they are more likely to be recovered than not.
POSSIBLE RESEARVES:
Possible reserves are less certain than probable reserves
and can be estimated with a low degree of certainty, insufficient
to indicate whether they are more likely to be recovered than not.

RESERVE STATUS CATEGORIES

Reserve status categories define the development and
producing status of wells and/or reservoirs.

DEVELOPED:
Developed reserves are expected to be recovered from
existing wells. Improved recovery reserves are considered
developed only after the necessary equipment has been
installed, or when the costs to do so are relatively minor.
Developed reserves may be subcategorized as producing or
nonproducing.

PRODUCING:
Producing reserves are expected to be recovered from
completion intervals open at the time of the estimate and
producing. Improved recovery reserves are considered to be
producing only after an improved recovery project is in operation.
NON-PRODUCING:
Non producing reserves include shut -in & behind-pipe
reserves. Shut-in reserves are expected to be recovered from
5
completion intervals open at the time of the estimate, but which
had not started producing, or were shut-in for market conditions
or pipeline connection, or were not capable of production for
mechanical reasons, and the time when sales will start is
uncertain.
Behind-pipe reserves are expected to be recovered from
zones behind casing in existing wells, which will require
additional completion work or a future recompletion prior to the
start of production.
UNDEVELOPED:
Undeveloped reserves are expected to be recovered : (1)
from new wells on undrilled acreage, (2) from deepening existing
wells to a different reservoir, or (3) where a relatively large
expenditure is required to (a) recomplete an existing well or (b)
install production or transportation facilities for primary or
improved recovery projects.

Note: SPE/WPC approved reserve definitions published in JPT,

May 1997 are given in enclosed sheets.
Types of Reservoir Fluids:
Reservoirs may be generally subdivided in accordance with
the type of fluid produced. There are three common categories:
(1) oil, (2) gas and gas-condensate, and (3) volatile oil. Several
such reservoirs may be encountered and produced by a given
well.

Volatile oil is normally referred for the oil produced from

deep reservoirs, which occur in the reservoir as liquid and exhibit
a large degree of shrinkage when brought to the surface. It is
usually characterized by gravities greater than 45oAPI, formation
volume factors above 2 and high solution gas-oil ratios.
Condensate is normally the light fluid produced primarily by
retrograde condensation, from a reservoir consisting of a

6
gaseous fluid at or above the critical. The word condensate (or
distillate) is also sometimes used for any fluid of high API gravity
having no appreciable color.
Black oil might best be described as any liquid other than
those listed above. The distinction between oil and volatile oil is
particularly important, since some of the estimation methods
which are applied to the former are very unsatisfactory for the
later. The volumetric method, for example, is less satisfactory in
the estimation of volatile oil reserves than with black oil.

COMPUTATION OF RESERVOIR VOLUME BY VOLUMETRIC

METHOD:
One of the necessary steps in solving the volumetric
equations is the determination of the number of acre-feet
(hectare-meter in India) of reservoir containing hydrocarbons.
When sufficient subsurface control is available, the oil or gas-
bearing net pay volume for a reservoir may be computed in
several different ways.
From subsurface data a geological map is prepared,
(Appendix Fig. 1) contoured on the subsea depth of the top of the
sand (solid lines), and on the subsea depth of the base of the
sand (dashed lines). The total area enclosed by each contour is
then planimetered and plotted as abscissa on an acre-feet
diagram against the corresponding subsea depth as the ordinate.
Gas-oil and oil-water contacts as determined from core, log, or
test data are shown as horizontal lines. After connecting the
observed points the combined gross volume of oil and gas-
bearing sand may be:

7
A. Planimeterd from the acre-feet diagram

B. If the number of contour intervals is even, computed by

Simpson’s rule.
Volume = 1/3h (ao + 4a1 + 2a2 + 4a3 + …… +2an-2 + an) + tn an
Where
h=contour intervals (feet)
ao= area enclosed by zero contour (at oil-water contact - acres).
a1= area enclosed by first contour (acres)
a2= area enclosed by second contour (acres)
an= area enclosed by nth contour
tn= average formation thickness above the top contour.
Note:Simpson’s rule is accurate for irregular curves

8
C. With somewhat less accuracy, volume calculated by the
trapezoidal rule.
Volume = ½ h (ao + 2a1 + 2a2 + …. + 2an-1 + an) + tnan

D. Computed by means of the somewhat more complicated

pyramidal rule.
V0- n = (1/3) h (Ao + An + √ Ao An)

For best accuracy the pyramidal formula should be used.

However, because of its simpler form, the trapezoidal formula is
commonly used which introduces an error of < 2% when the ratio
of successive area of contours is 0.5. If the ratio of areas of any
two successive isopach lines is less than 0.5, the pyramidal
formula is applied.
Form a study of the individual well logs or core data it is then
determined what fraction of the gross sand section is expected
to carry and produce hydrocarbons. Estimating this net-pet
fraction is often aided greatly when micro-or contact logs are
available. In shaly sand sections, the area under the SP curve
above the shale line is sometimes used as a yardstick for the net-
pay fraction. Multiplication of this net-pay factor with the gross
sand volume yields the net pay volume.

Volumetric Method of Reserve Estimation

The volumetric calculation of oil or gas reserve consists
primarily of determining the volume of rock holding
hydrocarbons, the total voids in such rock, the volume
percentage of the voids containing hydrocarbons, and
percentage of these hydrocarbons economically recoverable in
the stock tank. Reserves are normally expressed in stock tank
barrels (STB) or stock tank cubic meter for liquid, or MMCF
(million standard cubic feet) or MMSCM (million standard cubic
meters) for gas,

9
(a) Oil in Reservoir (no free gas present in oil-saturated
portion)

7,758 VoØ (1-Sw)

N = ------------------------- bbls/STD
Bo

7758 is the number of barrels per acre-foot & Ø is the porosity,

Sw is the interstitial water saturation, Bo is the formation
volume factor, Vo is net pay volume of the oil bearing portion of
reservoir, acre-foot.

(b) Free Gas in Gas Reservoir or Gas Cap (no residual oil
present)

43,560 Vg Ø (1-Sw)
G = ------------------------- SCF free gas
Bg

43,560 is the number of cubic feet per acre-foot and Vg = net

pay volume of the free-gas bearing portion of a reservoir, acre-
foot, Bg = gas formation volume factor.

(c) Solution Gas in Oil Reservoir (no free gas present)

7,758 VoØ (1-Sw) Rs

Gg = ------------------------- of solution gas
Bo
Rs = gas solubility factor

10
MATERIAL-BALANCE METHOD:
The material balance is one of the basic means of predicting
reserves, as well as future reservoir performance. Theoretically,
it contains no errors, practically speaking, though, it is never
exact because of errors in the data used and the assumptions
necessary to express it in terms of measurable properties.
Because of this latitude, many forms of balances have been
proposed.
Original oil in place, N is estimated from the following
generalized Material Balance Equation in which production data,
PVT data and other relevant data are required to be input. The
numerator in the MBE represents the underground withdrawal
term, whereas the denominator represents the sum of oil & gas
expansion, gas cap expansion, pore volume reduction and
connate water expansion.

Symbols and units of the above equations:

N = reservoir oil in place, STB
Np = cumulative oil produced, STB
m = ratio between initial reservoir free gas volume and
initial reservoir oil volume
Bt = two-phase formation volume factor for oil
Bg = gas formation volume factor
Bo = oil formation volume factor
Rp = cumulative gas-oil ratio, SCF/STB
Rs = gas-solubility factor
We = cumulative water influx, bbl.
Wp = cumulative water produced, bbl.
Cf =compressibility factor for reservoir rock (Vol)/(Vol)(psi)

11
Co = compressibility factor for reservoir oil
Cw = compressibility factor for interstitial water
Sw = interstitial water saturation

Equations (2) and (3) are solved for the constants C and C’ using
existing production data, m has to be found by other means. The
procedure involves writing equation (1) substituted for We. The
balance then has only Np and the integral has unknowns.
Substitution of production and pressure data for successive
intervals enables us to calculate N and C (or C’) by the method
of average least square.
12
Determination of N
The calculation of N is one of the basic uses of balances.
The simplest, rough approach is to assume that m and We are
zero. A more realistic approach is to determine m volumetrically.
The assumption that We equals zero initially is not bad, for
no large amount of water influx should be expected, during the
early stages of depletion. The validity of this assumption may be
checked in two ways. One is to compare the N thus found with
the volumetric value of N. Another is to calculate N over
successive intervals. If N remains substantially constant, we may
reasonably deduce that no water drive exists. Where a water
drive does exist, values of N determined may be plotted against
some time function such as Np. Extrapolation back to Np = 0 then
yields a good probable value.
Regardless of the method used the final value of N chosen
should be one that is consistent with all date. In the very early
stages of depletion, the volumetric method is usually the most
accurate, whereas the material balance gains performance in the
later stages of depletion.

Unit-Recovery Formula:
The unit recovery factor is the theoretically possible ultimate
recovery in stock-tank barrels from a homogeneous unit volume
of 1 acre-foot of pay produced by a given mechanism under ideal
conditions.
The unit-recovery factor for a saturated depletion type
reservoir is equal to the stock-tank oil initially in place in barrels
per acre-foot at pressure Pi - the residual stock-tank oil under
abandonment pressure Pa.

13
Oil Reservoirs with Water Drive (Volumetric Method)
Natural –water influx into oil reservoirs is usually from the
edge inward parallel to the bedding planes (edge-water drive) or
upward from below (bottom-water drive). Bottom-water drive
occurs only when the reservoir thickness exceeds thickness of
the oil column, so that the oil-water interface underlies the entire
oil reservoir.
Units Recovery for a water drive reservoir is equal to the
stock-tank oil originally in place in barrels per acre-foot minus the
residual stock-tank oil at abandonment time.

PRODUCTION-DECLINE CURVES
Estimates of ultimate recovery by extrapolation of a
performance trend fundamentally all follow the same platform.
The two quantities one usually wishes to determine are either
remaining oil reserves or remaining productive life. Cumulative
production and time are therefore normally selected as
independent variables and are plotted as abscissas. A varying
characteristic of the well performance which can be easily
measured and recorded is then selected as a variable to produce
a trend curve.
By plotting values of this continuously changing dependent
variable as ordinates against the values of the independent
variable (cumulative production or time) as abscissas, and
graphically extrapolating the apparent trend until the known end
14
point is reached, an estimate of the remaining reserves can be
obtained.
Amongst the many dependent variables which can be used
in estimates based on performance trends, the rate of production
is by far the most popular when production is not restricted. In
that case one commonly refers to production decline curves.
The two main types are rate-time and rate-cumulative
curves for each of the two independent variables. Rate of oil
production as the dependent variable has the advantage always
being readily available and accurately recorded.
Gradual changes in the production rate of a well may be caused
by:
1. Decreasing efficiency or effectiveness of the lifting
equipment.
2. Reduction of productivity index, or completion factor, or
increase in the skin effect due to physical changes in an
around the wellbore such as deposition of wax, salt or
asphaltenes from the produced fluids or the accumulation
of loose sand, silt, mud, or caving.
3. Changes in bottom-hole pressure, gas-oil ratio, water
percentage, or other reservoir conditions.

Unless defective conditions of the wellbore are detected or

cured, the reserve estimates obtained by decline-curve analysis
will be limited to those recoverable under existing and sometimes
only partially effective wellbore conditions.
Normal and Effective Decline:
There are two types of decline:
The nominal decline rate D is defined as the negative slope
of the curve representing the natural logarithm of the production
rate q vs time t, or

15
Normal decline, being a continuous function, is used mainly to
facilitate the derivation of the various mathematical relationships.
The effective decline rate De, being a stepwise function and
therefore is better agreement with actual productive recording
practices, is the rate more commonly used in practice. It is the
drop in production rate from qi to q1 over a period of time equal
to unit (1 month of 1 year) divided by the production rate at the
beginning of the period.

The time period may be 1 month or 1 year for effective monthly

or annual decline, respectively.

Different types of Production-decline curves:

Three types of production – decline curves are commonly
recognized.
(i) Constant-percentage decline (Exponential decline) with
constant percentage decline, the nominal decline rate,

which after integration leads to the rate-time relationship

16
After integrating a second time, the cumulative production at time
t is obtained as expressed by the rate-cumulative relationship

From Eq. (2), the remaining life to abandonment time may be

obtained as

Or by elimination of decline D with equation (4)

In other words the future life under constant-percentage

decline will be (r ln r)/(r-1) times as long as the life required to
produce the same ultimate Npa at constant rate qi

(ii)Hyperbolic Decline :
With hyperbolic decline the nominal decline rate D is
proportional to a fractional power n of the production rate, this
power being between zero and 1

17
After a second integration the cumulative production at time t is
obtained as expressed by the rate-cumulative equation

For production obtained by gravity drainage, where the type of

decline is such that the exponent n = ½ the remaining life to
abandonment time for this special case of hyperbolic decline,

Or after elimination of initial decline Di by equation (5) is

In other words, the future life under hyperbolic decline (n = ½) will

be √r time as long as the life required to produce the same
ultimate Npa at constant rate qi.

(iii) Harmonic decline (n = 1)

Relationship between Effective and Nominal Decline

The effective decline rate is De (Del for initial conditions) for
the three types of production-decline curves is related to the
nominal decline rate D (Di for initial conditions) as follows:
For constant – percentage decline,

18
An analysis of a large number of actual production-decline curves
by W. W. Cutler (USBM report 1924), indicates that most decline
curves normally encountered are of the hyperbolic type, values
of the exponent, n varying between 0 and 0.7, while the majority
fall between 0.2 and 0.4. Gravity Drainage production under
certain conditions have an exponent n = 0.5. The occurrence of
harmonic decline (n=1) is rather rare.
Less-Ratio Method
The inverse of the nominal decline rate q/ (dq/dt) is called
the ‘loss ratio’ and may be used for extrapolation purposes and
for identification of the type of decline. In constant-percentage
decline, the loss ratio is constant, while in hyperbolic decline, the
first derivative of the loss ratio is constant equal to n. In harmonic
decline the first derivative of the ‘loss ratio’ is constant and equal
to 1.
Other performance curves:
Another variable which is often substituted for the
production rate in water drive fields, particularly when the
production rate in water drive fields, particularly when the
production of oil is restricted is the oil percentage of the total fluid
produced. Since projections of this oil percentage vs time are not
often requires, the oil-percentage vs cumulative is plotted. The
end point in this case is the lowest oil percentage which,
combined with the total fluid-producing capacity of the lease, will
just cover operating expenses.

19
Cumulative Gas vs Cumulative Oil:
It is a characteristic of most depletion-type oil reservoirs that
only a fraction of the oil in place is recoverable by primary
production methods. Gas on the other hand, moves much more
freely through the reservoir, and it can generally be assumed that
at abandonment time only the solution gas in the remaining oil at
the then prevailing pressure, plus the free gas at that same
pressure are left in the reservoir.
In other words, even though it is not known exactly how
much oil may be recovered, a much firmer idea is generally
available of the amount of gas that will be produced during the
primary production period.
This provides us with the possibility of an end point to a
performance curve. Cumulative oil production is plotted on the
horizontal scale, while the cumulative gas production is plotted
on the vertical scale. As in normal depletion type fields, the trend
of the curve appears to steepen with increasing gas-oil ratios.
For depletion-type reservoirs, the gas-oil ratio is sometimes
plotted on semi log paper against cumulative oil. Such a curve
often shows a fairly good straight-line relation-ship, which may
be needed to predict the trend of the cumulative gas-cumulative
oil curve.
Material-Balance Method for Non-Associated Gas
Reservoirs:
The best performance variable in the case of free-gas
reservoirs is the static formation pressure. This pressure is
usually measured periodically by bottom-hole pressure bomb, or
if there are no liquids present in the tubing, it may be calculated
from observed shut-in tubing pressures.

SCF gas originally = SCF gas produced + SCF gas remaining

Where, Original reservoir volume, cu. ft = V

20
SCF gas originally = V/Bgi = G, SCF gas produced = Gp

SCF gas remaining

= [Original reservoir volume – Remaining liquid volume)]/Bg
= [V – (We-Wp)]/Bg

Therefore, V/Bgi = Gp + [V – (We-Wp)]/Bg

If there is no active water drive, then We-Wp =0 and the

material balance equation reduces to V/Bgi = Gp + V/Bg and the
same equation for a gas reservoir without active water drive (We
= 0) and without significant water production (Wp = 0) read as:

Writing Bgi and Bg in terms of 0.00504 ZT/P from gas law, we

have,

P/Z = Pi/Zi - Gp (0.00504Ti)/V

It is convenient to plot P/Z on the vertical axis and Gp on

horizontal axis. The ultimate gas recovery at the abandonment
pressure Pa is then found by the intersection of the curve with the
value Pa/Za at abandonment time where Za is the gas
compressibility factor at abandonment time and pressure.

21
Types of decline Curve (Summary)
The 6 most common types of graphically showing
production data are:
1. production rate vs time
2. production rate vs cumulative production
3. percentage water cut in production vs cumulative
production
4. water level vs cumulative production
5. cumulative gas produced vs cumulative oil
6. pressure vs cumulative production.

The first two types are most common and it is these that
give the graphical approach its decline curve label. Type (6) is
suitable for estimating gas reserves.
The third (3) approach is used on leases where the ultimate
production is limited by the percentage of water in oil rather than
the more decline in the oil production itself. The actual cut off
point at which the percentage water becomes uneconomic

22
depends on the water disposal cost and the actual barrels of oil
produced, but it usually occurs between 90 and 95 percent water.
The fourth type, utilizing water level, is applicable in water
drive fields. A line is drawn parallel to the abscissa representing
the subsea elevation at the top of the producing sand. Periodic
determinations of water level allow one to plot water level versus
cumulative oil production. Extrapolation of this data to the
horizontal line yields the ultimate reserves.

23