Reservoir Simulation: A Reliable Technology?

AbstractUnder pre-2009 SEC reserves reporting guidance, filers with the SEC had difficulty in persuading the SEC staff that reservoir simulation met the ‘reasonable certainty’ standards required to classify resources as proved reserves. With the modernization of the SEC's reserves reporting rules, ‘reliable technology,’ including computational methods, is allowed to establish the certainty level required for reporting reserves of any category. However, important questions arise: can we consider reservoir simulation to be a reliable technology? If so, what conditions must be satisfied to establish reliability? This paper concludes that simulation is indeed a potential reliable technology when we can demonstrate that it satisfies the criteria of consistency and repeatability, difficult criteria to satisfy for a computational method. The paper also concludes that the reserves analyst can demonstrate when simulation is reliable by proceeding through the steps in the scientific method outlined by Sidle and Lee (2010a) which provide guidelines to establish that a particular technology in question is consistent with the definition of a reliable technology.At the reasonable certainty level required for proved reserves, we must demonstrate with empirical evidence that estimates of EUR based on simulation are much more likely than not to increase or remain constant as more historical data become available. For 2P (proved plus probable) reserves, we must demonstrate that EUR forecasts are as likely as not as more reservoir performance data become available, and for 3P reserves, EUR forecasts must remain possible though not likely. Empirical evidence that the required level of certainty has been achieved can come from either ‘hind-casting’ (successfully predicting the future based on only a portion of historical data) or from demonstrated success from applying the same simulation technology in analogous reservoirs, in which the same level of rigor was applied to ensure that the geological model or models used as the basis for simulation is appropriate and that it honors all available information.When the industry broadly accepts reservoir simulation as a reliable technology (when applied appropriately) suitable for use in reserves disclosures and when it provides persuasive arguments about reliability to regulatory agencies, the interests of all stakeholders in reserves disclosure efforts will be enhanced.