Integrated Reservoir Management

The management of oil and gas assets on a global basis currently takes place against a background of four business drivers, which must be appreciated by all stakeholders, as well as by the reservoir management team:

1. Volatile oil prices
2. Changes in geographical emphasis
3. Rapid changes in technology
4. Environmental and safety requirements

Over the medium term, the current volatility in oil price seems likely to continue. Even moderate prices cannot be relied on, demanding an increasing emphasis on low-cost production. Therefore the focus of oil and gas asset management is currently on reducing production costs. This impacts both the geographical aspect of new exploration and development, and the cost structure of existing production activities. Costs are being cut by the application of new technology and new business models. Increasingly, oil and gas fields are being regarded as factories, where personnel and plant productivity increases are essential to maintain or increase margins. Environmental and safety pressures now require an increased awareness of overall technical and commercial integrity, and are also directing the industry towards activities such as gas field development and production optimization.

Objectives of Integrated Reservoir Management

Reservoir management is concerned with the geoscience and reservoir/production engineering required to plan and optimize the development of discovered or producing oil and gas assets. Reservoir management must work in conjunction with the financial management of the asset, and also must work alongside the disciplines responsible for all types of field operations so as to deliver what is operationally optimal.

The purpose of reservoir management is:

• Manage the development of oil and gas assets so as to maximize the benefit to the legitimate stakeholders, while keeping high standards of safety, environmental, technical, and commercial integrity.

There are several strategies within this overall purpose, which are described below. The relative importance of different strategies will vary from asset to asset and from time to time within the development life-cycle.

Financial of Integrated Reservoir Management

The principal financial strategy of reservoir management is:

• Maximize cash flow, subject to capital and operating budgets, by protecting funds flow from existing investments, while delivering new high quality investment opportunities to management. This must be achieved from a minimal cost base.

The first key output of reservoir management is the protection of funds flow from existing investments. These are usually in terms of wells and infrastructure. The second key output is the generation of strategies and options for production optimization. These cover both the short term (maximize production) and the long term (increase reserves and defer and manage abandonment).

The asset's management can predict funds generation and decide allocation of funds to new strategies and options for implementation based on economic considerations such as available capital, requirement for cash generation, attitude to risk, etc. The reservoir management team is therefore a major technical advisor to the overall business management team. Equally, the reservoir management team must work closely with operational groups (e.g. well services, drilling) to ensure that the most cost-effective strategies are followed.

The cost base can be kept to a minimum by a two-pronged approach: cost reduction and increasing personnel productivity. Cost reduction is achieved through lowering costs of both manpower and IT (information technology, including data management). Informed management recognizes that cost cutting alone will not provide a sustainable growing business, and therefore the second prong is essential. Personnel productivity is enhanced by adopting staffing practices which improve manpower efficiency and by the provision of appropriate tools. This is the route by which, within a low cost base, significant leverage on profitability is accessed. Increasing the efficiency of day-to-day reservoir management allows significantly more resources to be dedicated to identifying investment opportunities.

Integrated Reservoir Management Implementation

To achieve the required re-engineering of the reservoir management process, the following strategy is applicable:

• Develop the learning culture. Focus on technology appropriate to the asset's aims. Establish performance measures aimed at continuous improvement.

In the current environment, the basis of successful asset management is the development of an integrated multi-skilled engineering team. This requires that specialists broaden their knowledge to encompass other disciplines and skills. This process itself promotes a learning culture. The whole team must understand the high-level objectives of the business, and must have a wide knowledge of available resources. This leads to the selection of the most appropriate solutions, which may include state-of-the-art production systems, or alternatively, cost-effective re-assignment of existing resources. Commitment is needed from senior management to share business objectives and results, allowing an environment of continuous improvement to develop.

Operational Integrity of Integrated Reservoir Management

The strategy for operational integrity covers environment and safety (E&S) and commercial issues is:

• Promote E&S as an integral part of improved business performance, recognizing that poor policy on E&S costs money. Maintain high commercial standards.

Commercial success is better achieved within a healthy and safe environment. Damaging the environment leads to long-term disadvantage to the business, beyond even the substantial financial cost of environmental repair. Measurable E&S targets must be established and incorporated into the overall business goals.

Integrated Reservoir Management Emphasis on Best Practice

To achieve outstanding field performance, the techniques and tools used by the reservoir management team have to be of the highest standard. To achieve this eP constantly identified, challenged, and extended "best practices" as applied to the fields that we were responsible for. Regular internal workshops, training schools, and self-teaching modules are used to keep staff at the required level of understanding. Key technology areas eP provides are:

1. Well and network modeling and simulation using our ReO and WellFlo software.
2. Well problem diagnostics using WellFlo and other methods.
3. Production data gathering, transmission, display, and analysis via Production and Loss Management System.
4. Rigorous water management strategy for injection supported fields.
5. Fully optimized artificial lift systems using WellFlo and DynaLift.
6. Subsurface team tailored PC and workstation network set-up and support
7. Forecasting methodologies developed via different methods of decline curve analysis and well and reservoir simulation analysis.
8. Fit for purpose reservoir simulation modeling linked to material balance analysis using our MatBal program.

Integrated Reservoir Management Expertise

eP has a proven track record in reservoir and production consultancy, software development, and training. It is a long-established international developer of high-value software in the areas of well testing, well performance, and field optimization. Particular expertise in consulting lies in the areas of production optimization, data gathering and analysis, and reservoir modeling. The company is a major provider of training to the international oil and gas industry. eP has been instrumental in building operating alliances covering expertise in exploration, production, asset management, and operations.

eP was lead partner in the first major long-term reservoir management contract to be awarded in the North Sea, covering four large offshore oil fields and additional satellites. The primary objectives were to reduce costs and to slow the rate of production decline while maintaining first class E&S standards. The results brought by eP and its partners included:

• Substantial reduction in total costs of reservoir management. Achieved by new staffing model and implementation of new cost-effective data storage and IT system.
• Added more than $100 million to asset value during project life, allowing asset owner to successfully divest three fields to smaller independent operator.
• Safety standards were maintained.
• Identified investment opportunities at low costs, implemented opportunities increasing reserves, and deferring abandonment costs.
• Solved several new technical challenges associated with mature field behavior during implementation of above.
• Developed training program for new and existing staff, concentrating on multi-disciplinary team building. Numerous existing staff were re-trained rather than made redundant.