Assessing Undiscovered Reserve Potential: Life-Cycle Method, Alternative to a Crystal Ball: ABSTRACT

Abstract

Exploration companies are faced with an unlimited number of drilling opportunities, but are armed with limited capital. This poses the classic resource allocation problem: how to apportion spending in areas of greatest potential and competitive advantage to insure profitability. The ''life-cycle method'' provides an analytical framework for dealing with this question by forecasting undiscovered reserve potential in a particular trend. In the life-cycle method, growth curves are developed for each geologic province of interest (e.g., trend, basin, formation). All fields in a trend are analyzed. Estimated ultimate reserves are calculated for each field with all reserves accrued back to the field's initial discovery date. Graphs of estimated ultimate recovery (for all fields) by year then take on a characteristic shape that can be used for forecasting. An analysis of 13 provinces by this method shows that field discoveries follow a consistent pattern. Whether the life of the play is 10 years (as in the Rocky Mountain Overthrust or the Deep Tuscaloosa), or more than 60 years (as in the Texas Frio and Wilcox), the pattern is generally the same. In the first stage, large fields are found as the play is identified. In the second stage, significant but smaller fieldsmore » are found and the size range of fields can be determined. In stage three, numerous small fields are found as the trend moves toward exhaustion. The life-cycle method can be used to determine the stage of play maturity, to estimate a future field-size distribution, and to combine the two to create a reasonable estimate of undiscovered potential.« less