Some Aspects Of Production Forecasting

Abstract

Mannon, Robert W., Member AIME, Montana School of Mines, Butte, Mont. Publication Rights Reserved This paper is to be presented at the Rocky Mountain Petroleum Section Regional Meeting in Casper, Wyo., on May 25 and 26, 1964, and is considered the property of the Society of Petroleum Engineers. Permission to publish is hereby restricted to an abstract of not more than 300 words, with no illustrations, unless the paper is specifically released to the press by the Editor of the Journal of Petroleum Technology or the Executive Secretary. Such abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in JOURNAL OF PETROLEUM TECHNOLOGY or SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon request providing proper credit is given that publication and the original presentation of the paper. Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers office. Such discussion may be presented at the above meeting and, with the paper, may be considered for publication in one of the two SPE magazines. Abstract An integral and vital part of the economic analysis of an oil or gas property, is the yearly projection of future hydrocarbon production. Due to its importance, the petroleum engineer should devote the necessary time and effort to formulate a basis for a reliable production forecast. The task of preparing trustworthy forecasts is indeed formidable and is beset with numerous difficulties. The paper points out some of the uncertainties inherent in the forecasting of production and outlines possible solutions in specific cases. Two field examples illustrating some of the hazards in estimating future production rates are given. The need for careful scrutiny of all geological and engineering data is brought out. A technique is presented which may be employed to obtain reliable forecasts in some cases. Introduction The petroleum engineer, in addition to his other somewhat diversified company responsibilities, is often called upon by management to predict future hydrocarbon production and corresponding net profit of specified oil and gas properties. While he is not expected to make precise estimates of future production rates and income, the petroleum engineer's value to his company is greatly enhanced if he is able to forecast with a high degree of reliability. In the present era of reduced profit margins, the forecasting of oil, gas and gas liquids production, gross revenue, costs of production and resulting net profit, are of the utmost concern to the management of oil companies big and small, to lending institutions and to independent oil men alike. It is difficult to over-emphasize the importance of these predictions for capital budget work, profitability studies, loan work and general fair market value determinations. Management and other interested parties must rely very heavily on the petroleum engineer's calculations, and the success or failure of many projects can be traced back to the quality of the original or subsequent engineering estimates. Preparing reliable forecasts of production is indeed a formidable task and there are many uncertainties.* This paper attempts to pinpoint some of the difficulties through the use of field examples. A technique is presented to aid in the preparation of reliable forecasts under certain conditions. In order to make reliable predictions, the petroleum engineer must have in his portfolio a variety of methods and techniques to cover the wide range of conditions that are encountered in appraisal work. At the same time, he must be alert to ways in which a given procedure might be changed to yield the most reasonable results in a particular circumstance. Correspondingly, he should not necessarily commit himself to the results obtained by any particular method and the all important factor of judgment cannot be over-emphasized.