Forecasting the Development of Heavy-Oil Reserves in Ultra-Deep Waters Using Technological Risk Models

Abstract

Abstract The largest remaining reserves of heavy oil can be considered an important energy source for future supply. Recent discoveries of heavy-oil in ultra-deep environments have stimulated several companies in investing in these new assets for future revenues despite the uncertainties about technology development for future field exploitation. This paper presents a forecast model for assessing future technology achievements - necessary for the development of heavy oil fields in ultra-deep water - through logistic utility models. Using simulation results of three hypothetical fields with similar characteristics to some recent discoveries in Campos Basin in Brazil, a scenario for the next ten years was developed based on the decision to go ahead with the projects. A time-trend curve was employed to estimate the necessary period to achieve suitable technologies for field development (costs reduction) using a technological risk-aversion coefficient. The forecast model executes an economic sensitivity analysis on key input variables such as oil prices, oil characteristics (viscosity, API gravity), production profile, capital expenditures and operational costs. These uncertain parameters are important because production technologies for heavy oil in ultra-deep waters are not completely dominated by the industry. Simulations from three selected models indicated that under the worst CAPEX and OPEX scenario for heavy oil, a value reduction of 50% would be necessary for both parameters and the logistic model estimates that the technology would only be available after 10 years. Introduction The search for new oil reserves has directed the efforts of the petroleum industry beyond the conventional exploration and production strategies. This new frontier is defined by the level of embodied technology employ by the oil industry to transform potential oil resources in commercial reserves as well as by the knowledge of geological process in discovering new opportunities. As the traditional exploratory prospects become more difficult to find and new discoveries more scarce, the development of new technologies for economic production of unconventional resources such as heavy and extra-heavy crude is crucial for the oil industry. Large supplies of heavy-oil will be needed in the next decades to replace the production decline of medium and light crude. Heavy-oil is often produced conventionally; however it is important to define some characteristics of these oils. Heavy and light oil differ in viscosity and density. Heavy-oil is defined here in this paper as oil with °API gravity of 15° to 19° and extra-heavy-oil with 11° to 15°API gravity. Recent results from oil companies operating in offshore areas rank viscous oil with viscosity between 10 and 50 cP @20 °C; extra-viscous oil between 50 and 400 cP; dead viscous oil ranging from 400 to 5000 cP @20 °C; and dead extra-viscous oil varying from 5000 and 50,000 cP @ 20°C. Some other classifications of heavy oil can be found in Speight1, Ehlig-Economides et al2 and Thakur3 Recently, significant offshore heavy oil discoveries were made in ultra-deep-water of Brazil and West Africa. Among the new technologies required for commercial production of these heavy oil reservoirs in deep water, new artificial lift devices and long horizontal wells length can be detached, completed with efficient sand control mechanisms (Pinto el al4). Besides providing commercial value for the heavy oil wells, it is expected that these new technologies will create a new value for such resources. Indeed, heavy oil reserves can become more available over time in these environments if the cost-reducing effects of new technologies (reduction of CAPEX and OPEX) more than offset the cost-increasing effects of depletion.