Impact of Investment Criteria, and Reservoir Characteristics, Taxes, Royalty, and Price on Optimal Field Development Plans

Abstract

ABSTRACT A system which combines a gas reservoir simulation model with optimal development and production scheduling models has been used succssfully for some time to develop long range plans for an oil and gas/NGL producing complex. The system determines how to integrate gas production from more than 40 reservoirs over a 25-year horizon to maximize net present value (NPV) while meeting sales requirements. The timing of drilling wells and installing compressors, as well as the number of each such facility, is affected by economic factors (taxes, royalty, price of products, cost of development and production), reservoir characteristics (permeability of producing layers, heterogeneity, conductivity of induced fractures, gas composition, gas in place) and investment criteria. The criterion determining investments to add to the development schedule is PWPI; the incremental PWPI of each facility added to the optimal schedule must exceed a cutoff value of PWPI. The sensitivity of the optimal development schedule and desired depletion rate to various parameter changes are presented for (a) a single reservoir with an unlimited market, (b) a single reservoir with a limited market, and (3) two reservoirs with a shared market. For (a) the results reveal considerable variation in the sensitivity to the parameters considered. For (b) the results illustrate the danger of oversaturating investment in a producing reservoir. For (c) the findings show that in some instances the complex interactions between economic and reservoir parameters and market specifications give rise to an optimal strategy which does not agree with intuitive expectations; sometimes, using negative cutoff values of PWPI results in larger values of PWPI.