_________

OCS Study 

 MMS 2004-018 

Modeling Exploration, Development and 

Production in the Gulf of Mexico 

Volume II: IIC EDP Model 1.0 User’s Guide 

 U.S. Department of the Interior 

 Minerals Management Service 

 Environmental Studies Program 
Photo credit: © Harald Sund, 2002. Brand X Pictures/PictureQuest. 
 OCS Study 

 MMS 2004-018 

Modeling Exploration, Development and 

Production in the Gulf of Mexico 

Volume II: IIC EDP Model 1.0 User’s Guide 

Authors 

Peter K. Ashton 

Robert A. Speir 

Lee O. Upton III 

Innovation & Information Consultants, Inc. 

Concord, Massachusetts 

This study was funded by the U.S. Department of the Interior, 

Minerals Management Service (MMS), Environmental Studies Program 

Contract No. 0102CT85138

Published by 

U.S. Department of the Interior 

Minerals Management Service 

Environmental Studies Program 

DISCLAIMER 

The opinions, findings, conclusions, or recommendations expressed in this report or product are those of 

the authors and do not necessarily reflect the views of the U.S. Department of the Interior, nor does 

mention of trade names or commercial products constitute endorsement or recommendation for use by 

the Federal Government.

REPORT AVAILABILITY 

Extra copies of this model and user guide may be obtained from: 

 U.S. Department of the Interior 

 Minerals Management Service 

 Environmental Studies Program 

 381 Elden Street 

 Herndon, VA 20170-4817 

CITATION 

Suggested citation: 

Ashton, P.K., R.A. Speir, and L.O.Upton III. 2004. Modeling exploration, development and production 

in the Gulf of Mexico. Volume II: IIC EDP Model 1.0 User’s Guide. U.S. Dept. of the Interior, 

Minerals Management Service,Environmental Studies Program, Herndon, VA. OCS Study 

MMS 2004-018. 62 pp. 

II-i

Table of Contents 

1. Overview and Installation ........................................................................... II-1

1.1 Overview..................................................................................................................... II-1 

1.2 Installation................................................................................................................... II-3 

Installing the .NET Framework v1.1. ................................................................................. II-3 

Checking for Required Components................................................................................... II-3 

Installing the IIC EDP MODEL ......................................................................................... II-4 

Uninstalling the IIC EDP MODEL..................................................................................... II-4 

Running the IIC EDP MODEL........................................................................................... II-4 

Restrictions ......................................................................................................................... II-5 

1.3 Associated Files .......................................................................................................... II-5 

2. Model Structure And Flow.......................................................................... II-6

2.1 Abbreviated Model Theory......................................................................................... II-6 

Exploration.......................................................................................................................... II-6 

Development....................................................................................................................... II-7 

In-Field Reserves Growth................................................................................................... II-7

Production and Infrastructure ............................................................................................. II-8 

Revenue and Cost Estimation ............................................................................................. II-8 

2.2 Model Flow................................................................................................................. II-9 

The Forty Year Loop ........................................................................................................ II-13 

2.3 The Access Database – Lookup.mdb........................................................................ II-15 

3. Model Forms............................................................................................... II-18

3.1 Initial Form ............................................................................................................... II-18 

3.2 Cost Inputs Form....................................................................................................... II-21 

3.2.1 Cost Input Form Assumptions .......................................................................... II-21 

3.2.2 Cost Input Form Restrictions............................................................................ II-23 

3.2.3 Form Buttons .................................................................................................... II-23 

3.3 Set Price Path Form .................................................................................................. II-24 

3.3.1 Price Path Inputs ............................................................................................... II-24 

3.3.2 Price Path Input Restrictions............................................................................. II-26 

3.3.3 Price Path Buttons............................................................................................. II-26 

3.4 Main and Sub Drill Forms ........................................................................................ II-27 

3.4.1 Main Drill Form Inputs..................................................................................... II-27 

3.4.2 Main Drill Input Restrictions............................................................................ II-28 

3.4.3 Main Drill Form Buttons .................................................................................. II-29 

3.4.4 Sub Drill Form .................................................................................................. II-30 

3.4.5 Sub Drill Form Input Restrictions..................................................................... II-32 

3.4.6 Sub Drill Form Buttons..................................................................................... II-32 
II-ii

3.5 Production Inputs Form ............................................................................................ II-33 

3.5.1 Production Form Inputs .................................................................................... II-33 

3.5.2 Production Inputs Form Restrictions ................................................................ II-35 

3.5.3 Production Inputs Form Buttons....................................................................... II-35 

3.6 Royalty Rule Entry Form.......................................................................................... II-36 

3.6.1 Royalty Rule Entry Form Inputs....................................................................... II-37 

3.6.1.1 Default Values Group Box........................................................................... II-37

3.6.1.2 Adding a New Rule....................................................................................... II-37

3.6.2 Royalty Rule Entry Form Restrictions.............................................................. II-39 

3.6.3 Royalty Rule Entry Form Buttons .................................................................... II-40 

3.7 Lease Drilling Distribution Form.............................................................................. II-40 

3.7.1 Lease Drilling Distribution Form Inputs........................................................... II-41 

3.7.1.1 Changing the lease drilling distribution for a number of years .................. II-41

3.7.1.2 Changing the lease drilling distribution year by year................................. II-42

3.7.2 Lease Drilling Distribution Input Restrictions.................................................. II-43 

3.7.3 Lease Drilling Distribution Command Buttons ................................................ II-44 

3.8 Five Year Reserves Form.......................................................................................... II-44 

3.8.1 Five Year Reserves Form Inputs....................................................................... II-45 

3.8.1 Five Year Reserves Form Input Restrictions.................................................... II-45 

3.8.3 Five Year Reserves Form Buttons .................................................................... II-46 

3.9 Outputs Form ............................................................................................................ II-46 

3.9.1 Selecting the Output Data ................................................................................. II-47 

3.9.2 Viewing The Results......................................................................................... II-47 

4. Running the Model..................................................................................... II-47

4.1 Modeling the Single Sale Scenario........................................................................... II-48 

4.2 Using the No Action and Single Sale Buttons.......................................................... II-51 

4.3 Drill Distribution Determination............................................................................... II-52 

5. Outputs........................................................................................................ II-52

5.1 Output Results........................................................................................................... II-52 

5.2 Historic Data ............................................................................................................. II-53 

5.3 Area Summary Data.................................................................................................. II-54 

5.4 Aggregated Gulf Data............................................................................................... II-56 

5.5 Detailed Data By Cell ............................................................................................... II-57 

5.6 The Input Data .......................................................................................................... II-58 

5.7 Saving Data............................................................................................................... II-58 

6. Updating the Model.................................................................................... II-58

6.1 Undiscovered Resources........................................................................................... II-58 

6.2 Existing Fields .......................................................................................................... II-59 

6.3 Historic Tables.......................................................................................................... II-62 
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List of Figures 

Figure II.1. The three main components of the IIC EDP MODEL............................................ II-9 

Figure II.2. The initial processes that occur prior to displaying the first form........................ II-10 

Figure II.3. Schematic Depicting the Flow of the Typical Model Run ................................... II-12 
II-iv
II-v

List of Tables 

Table II.1. Initial Form Choices for User Interaction .............................................................. II-10 
II-vi
II-1

1. Overview and Installation

 This section begins with a brief overview of the IIC EDP MODEL 1.0, followed by 

sections describing the program installation process and program-associated files. 

1.1 Overview 

 The IIC EDP MODEL is an expected value simulation of future “field” discoveries in 

the Gulf of Mexico (“GoM”). The model draws upon a set of default inputs and algorithms 

(“base case”) that are specific to determining future annual exploratory well drilling, discoveries, 

oil and gas production, production and non-production well drilling, infrastructure additions and 

removals, and royalty revenue over a forty-year cycle. The ability to modify and update various 

inputs and assumptions within the scope of the program enables the user to quickly and easily 

generate new simulations under modified conditions. This provides the capability to compare the 

results of different economic, regulatory or industrial constraints/changes to the base case. 

 The future course of exploration, development, and production in the GoM is primarily 

bound by the expected undiscovered resource distribution and the currently known existing fields 

(including estimates of ultimately recoverable resources). Regardless of the method or program 

employed, future expectations are not only bound by these resource distributions, but are also 

dependent on the choice of inputs. The IIC EDP MODEL offers a flexible environment, and 

offers users these advantages over conventional expected value simulations: 

 The model is quick to iterate, portable, and easily adaptable to a wide range of problems. 

1. The model is not simply a standard discovery model, but rather incorporates an 

economic component that not only determines field feasibility, but also directly 

impacts exploration, development and production trends. 

2. The model is extremely flexible in defining particular areas of the GoM for 

investigation. Although the model is currently configured to divide the GoM into 

twenty-one areas, associated with three planning areas and seven water depth 

categories, the user is free to implement a change in area definition to match 

problem definition. 

3. The model draws upon only two tables for resource distribution (undiscovered 

fields and discovered fields), which when updated, can be copied easily into an 

underlying database, without worrying about program modification. This ensures 

that the model adheres to the user’s long-term resource forecast in the GoM. 

4. The model incorporates actual historical data, and allows easy comparison 

between the actual historical data, and the future model years. 
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5. The model incorporates a wide variety of inputs and assumptions that when 

modified, allow the user to simulate results under different expectations. These 

include: 

(a) Economic Inputs: 40-year price path (what the user expects prices to 

actually be), discount rate, tax rate, gas to oil price ratio, capital and 

operating cost escalators, and decision-maker price escalator (e.g., a 

decision-maker in year 23 may observe an actual price of $30/BoE, but in 

order to assess future profitability, what price escalation, if any, should be 

applied in determining net present value of the investment). 

(b) Regulatory Inputs: Royalty rates and suspension volumes, specific to 

model year and GoM area; lease drilling constraints (to model restricted 

access to different areas or model a single sale scenario), the ability to 

force five-year fixed reserves discovery; and rental rates. 

(c) Drilling Inputs: Rig count assumptions (dynamic or manual) and response 

variables; and area-specific rig preferences, drill rates, and exploratory 

well variables. 

(d) Production Inputs: Production coefficients and adjustment factors to 

accurately capture current production results and future production 

expectations. 

 It is important to note and reiterate that this model was developed using data for the Gulf 

of Mexico only. Therefore it is intended to be used to model Gulf of Mexico exploration, 

development and production activity only. It should not be applied to other regions or planning 

areas. 

 The IIC EDP MODEL expected value simulation is driven by profitability of future field 

discoveries, combined with continued development and production of existing resources. The 

simulation begins in model year one with expected area well demand, both from an exploratory 

well and existing production well perspective. Existing fields demand continued in-field wells to 

stimulate continued reserve growth to maintain production levels. Once the well demand has 

been calculated, in-field wells are allocated (subject to rig constraints) to existing fields to 

stimulate reserve growth and production. Similarly, exploratory wells are allocated to each area 

(subject to both lease drilling and rig constraints) to generate new field discoveries. The model 

also computes the net present value (NPV) of each possible “cell” (areas disaggregated into area 

and size of field) and tests whether the corresponding new discovery “cell” exhibits a positive 

net present value. If the NPV is positive, each new discovery “cell” is put into development and 

ultimately production. If the NPV is negative, the discovery “cell” is placed into a holding 

queue, where it will be tested the following year(s) to determine economic viability. Once the 

discovery and economic-testing process is complete, the model updates the well-profitability 

variables, stores outputs in annual arrays, and updates rig variables (assuming dynamic 

selection). At the conclusion of a forty-year loop, the model exports the results to an output 

table(s) specified by the user. 
II-3

 The IIC EDP MODEL 1.0, developed in the .NET Framework v1.1, is written entirely in 

C# code for Windows operating systems that employ the .NET Framework. The .NET 

Framework is publicly available and is intended to be installed on Windows 98 (including 

second edition), Windows Me, Windows NT 4.0, Windows 2000, and Windows XP. 

1.2 Installation 

Installing the .NET Framework v1.1. 

The IIC EDP MODEL cannot operate unless the .NET Framework v1.1 is installed on the 

host machine. The .NET Framework is publicly available and can be easily downloaded from 

the Microsoft web site. As part of the installation package, we have also included a copy of the 

.NET Framework v1.1 on the installation CD. Once the user has installed the .NET Framework, 

they do not need to do so again. 

Installing the .NET Framework from the CD. To install the .NET Framework, place 

the CD in the host computer CD drive and display the contents of the CD. Double click on the 

file entitled, “dotnetfx.exe”. This will launch the .NET installer, and the user only needs to 

follow the on-screen instructions. The installer will load the required components, and finish 

installation in a few minutes. 

Installing the .NET Framework from the Microsoft Web Site. To install the .NET 

Framework via the web, the user should enter the following link in the web address bar in 

Internet Explorer, Netscape or their preferred Web Browser: 

http://www.microsoft.com/downloads/details.aspx?FamilyID=262d25e3-f589-4842-8157-

034d1e7cf3a3&displaylang=en

 This will bring up the “Microsoft .NET Framework Version 1.1 Redistributable Package” 

window, where the user can select the download button in the upper right hand corner. At this 

point, the user can either choose to install the Framework directly, or save it to disk for later 

installation. 

Checking for Required Components 

 The IIC EDP MODEL relies upon data access components to connect, retrieve, and write 

variables to the underlying Access database. As such, there are components which are required 

in order for the IIC EDP MODEL to run correctly. The host machine must include Microsoft 

Data Access Components (MDAC) version 2.6 or higher. 

Note: The easiest way to check for these components is to complete the installation of the model, and 

then attempt to run the program. If the host machine lacks the necessary components, an error will be 

generated following program execution. 
II-4

Installing MDAC from the Microsoft Web Site. To install an appropriate version of of 

MDAC via the web, the user should enter the following link in the web address bar in Internet 

Explorer, Netscape or their preferred Web Browser: 

http://www.microsoft.com/downloads/details.aspx?FamilyID=6c050fe3-c795-4b7d-b037-

185d0506396c&DisplayLang=en

 This will bring up the “Microsoft .Data Access Components (MDAC) 2.8” window, 

where the user can select the download button in the upper right hand corner. At this point, the 

user can either choose to install MDAC 2.8 directly, or save it to disk for later installation. 

Note: Windows XP includes MDAC 2.7, thus satisfying the requirement from MDAC 2.6 or higher. 

However, previous versions of Windows operating systems will require the installation of MDAC 2.6 or 

higher, even if they include MDAC 2.5 or previous versions In the previous example, we selected the 

most recent MDAC version at the time of this manual completion, however the user is only bound by 

selecting version 2.6 or higher. 

Installing the IIC EDP MODEL 

 To install the IIC EDP MODEL, the user should again view the contents of the 

distribution CD. The IIC EDP MODEL is wrapped up in a Windows Installer program, which 

can be launched by double-clicking on the “IICEDPMODEL-D.msi” file on the distribution CD. 

The user is then prompted with a series of dialog boxes, stepping through the installation 

process. 

 The user is encouraged to install the model in the “C:\MMSModel” directory of the host 

computer. This directory can be created during the installation process. At the very least, the 

user must place the associated database, “Lookup.mdb” and the Help folder and contents in a 

directory entitled “C:\MMSModel”. The internal code of the IIC EDP MODEL searches for the 

database in this folder, and failure to include it will generate a launch time error which will 

terminate the program. 

Uninstalling the IIC EDP MODEL 

 If the user elects to uninstall the IIC EDP MODEL, they can do so by double clicking on 

the installation file and electing to uninstall the model. If they choose to re-install the model, we 

encourage the user to ensure that all files associated with previous installations have been 

removed prior to doing so. This will help avoid complicating factors surrounding which versions 

of associated files to keep. 

Running the IIC EDP MODEL 

 Start the IIC EDP MODEL by double-clicking on the application file, 

“IICEDPMODEL.exe,” by double-clicking any user installed shortcuts, or from the Start Menu 

entry. 
II-5

Restrictions 

 The user is not allowed to run multiple instances of the IIC EDP MODEL given the 

reliance on the singular Lookup.mdb database. 

1.3 Associated Files 

 The underlying default variables and inputs are stored in a series of tables within a 

Microsoft® Access database, entitled “Lookup.mdb”. When the IIC EDP MODEL program is 

executed, the model establishes a connection with Lookup.mbd and imports many of the 

underlying datasets and input variables, storing them in arrays that endure as long as the program 

is running. In the course of running the IIC EDP MODEL, the user is allowed to change the 

different input variables through user interfaces and should employ this method to test 

sensitivities. The user is also allowed to overwrite many of the default values in the Lookup.mdb 

database tables. It is possible, but NOT ADVISABLE, to change default inputs in the Access 

database while the program is running. The model front-loads many variables into arrays for the 

duration of the program existence, and changing inputs in the Access tables while the program is 

running will not cause the model to re-load these variables. Only when the program is 

terminated, and started again, will these changes be evident. 

 At the conclusion of a model run, the user is allowed to view the output results in 

Microsoft® Excel. If the user chooses to view the results, the model tests to see whether an 

existing Excel connection is open, and if not, creates a new Excel connection. Although the 

model tests the connection at each output request, it is highly advisable to leave the first Excel 

connection open for the duration of the program run. Furthermore, with each program launch, a 

new Excel connection will be created, regardless if the user is currently running Excel. 

 Each time a user chooses to view a set of results, a new workbook is created in Excel 

with the applicable data included in different worksheets. The user is allowed to display as many 

workbooks as Excel can reasonably handle, given memory and application constraints. It is 

advisable that the user discard non-essential data results by closing the appropriate Excel 

workbook, and likewise, it is incumbent upon the user to save any results they choose. The IIC 

EDP MODEL only creates the Excel connection and writes out the data to workbooks. The IIC 

EDP MODEL does not automatically save any Excel data, nor does it close the Excel 

Application upon program termination. 

 The underlying help files associated with the IIC EDP MODEL are contained within the 

“Help” folder in the C:\MMSModel directory. When the user depresses help buttons on model 

forms, the associated help files are displayed through the use of the host computer’s web 

browser. Although the first help file displayed subsequent to depressing a help button is specific 

to the particular form, the user is allowed to access other help files by clicking on the appropriate 

links. 
II-6

2. Model Structure And Flow 

 This section provides an abbreviated overview of the actual flow of the model, including 

documentation of the underlying Microsoft® Access database and a description of the Excel 

output. 

2.1 Abbreviated Model Theory 

 The IIC EDP MODEL generates simulations following typical GoM exploration, 

development and production behavior. This section briefly discusses this behavior, which 

directly impacts how the model performs the simulation. 

Exploration 

 Undiscovered resources are found through a discovery process that begins with 

exploratory well drilling. The first step in the exploration process is the determination of the 

exploratory well “demand.” This demand is calculated on an area basis, and is generated by the 

profitability of previous discoveries and the profitability of expected future discoveries, which 

are a function of the net present values for each area. After the annual well demand is computed 

for each area, certain constraints must be tested to determine the actual number of exploratory 

wells that are allocated to each area. 

 These constraints include both regulatory constraints and rig availability. If the user has 

imposed a lease drilling constraint for a particular area, the well “demand” is reduced by the 

fraction the user has specified. In addition, if there are an insufficient number of rigs to drill the 

“demand” wells, the model will allocate as many wells as feasible to each area given the rig 

constraints. Although the model employs a well allocation cycle to ensure that no area is 

completely “shut-out” of wells, the preference of exploratory well allocation is driven by the 

expected NPV per well. For example, if “Area 1” has an expected NPV value per well of 

$1,000,000 and “Area 2” has an expected NPV value per well of $2,000,000, the model will 

allocate wells (in each allocation cycle) to “Area 2” before “Area 1.” 

 The actual number of exploratory wells allocated to each area, each model year, is the 

number “demanded” less the number of wells “lost” due to regulatory or drilling constraints. 

Once the model has allocated exploratory wells by area, the discovery process can begin. 

Exploratory wells discover fields of various USGS sizes in different areas. Although a 

discovered field’s size classification is based on its ultimate grown (total) reserve size, only 20-

25 percent of the reserves are “known” at discovery. This is a direct result of the reserve 

appreciation process employed by the MMS. 

 Exploratory drilling success is determined by area and field size specific search 

coefficients, total fields in the area of each size class, and past discoveries. The process is 

exponential so that the total field inputs restrict the number of fields of any type that will be 

discovered in an area. The result of the annual discovery process employed by the model is a 

series of field discoveries by area and size of field. 
II-7

Development 

 The next step is to determine the viability of continuing with the development process of 

the new field discoveries. The model computes an annual net present value (see Revenue and 

Cost Estimation in this section) of such an investment for each area and size of field. If the net 

present value is positive, the discovery is placed into a development (and ultimately, production) 

process. Depending on the area, and size of field, the discovery enters the development queue 

that delays onset of production for a number of years to facilitate further exploration events and 

infrastructure construction. If the net present value is negative, the new discovery enters a 

Holding queue, where it remains until conditions change such that the expected economic 

benefits of developing and producing the field are positive. 

In-Field Reserves Growth 

 Exploratory well “demand” is only a portion of the well demand that occurs on an annual 

basis in the GoM. Just as important is the annual well demand generated from fields that are 

currently in development and production. To simulate the development, delineation, and 

subsequent in-field exploration process, fields’ proved reserves grow each year. This reserve 

growth will continue at an exponentially declining rate for 50-years, as defined by the MMS in 

its National Assessment Reserve Appreciation methodology, unless constrained by rig 

availability. As such, there is an annual demand for exploration, delineation, development 

(“ED&D”) and production wells for existing fields. 

 The model approaches the in-field growth phenomenon by examining each “cell” and 

determining well requirements. The “cell” methodology is a fundamental aspect of the IIC EDP 

MODEL. The three primary properties of each cell are Area, Size, and Development Production 

Year (DPY). Prior to the first model year, all existing fields are rolled up into cells based on the 

particular area, size, and most importantly DPY. The model examines where each existing field 

is in terms of cumulative production (as a percent of the total grown estimate) and imputes what 

year of production this field should be in under an unconstrained reserve growth scenario. Thus, 

if there are 1200 existing fields in the underlying Field Input table, the model will roll these up 

into cells and track each cell’s area, size, DPY, field count, grown reserve estimate, and current 

imputed reserve estimate, among others. It is possible to have more than one field rolled up into 

a particular cell, for example there might be three fields in Area 1, Size 11, DPY 12, and this cell 

would incorporate the value of each field contribution. The model determines the well 

requirements on a cell basis for the purpose of well allocation. Because some ED&D wells, in 

reality, become production wells, the model simply divides these into non-production and 

production wells. 

 Similar to exploratory wells, the demand for production and non-production wells is also 

subject to constraints. The actual production and non-production wells allocated by area follow 

a similar allocation scheme as the exploratory wells, where wells are allocated based on available 

rigs and drilling rates. However, the in-field wells take precedence over the exploratory wells, 

such that the production and non-production wells get allocated across the GoM before a single 

exploratory well is allocated. If there are not enough rigs to satisfy even the in-field 

requirements, then areas with the highest remaining reserves receive priority. Within this area, 
II-8

the younger, larger fields receive the first allocated wells, and the smaller, older fields are the last 

to receive wells. Like the exploratory wells, the production and non-production well allocation 

occurs in ten installments, to ensure that no area is entirely shut-out of the well allocation 

process. 

 Absent zero production and non-production wells allocated, each cell will experience a 

growth in its annual reserve estimate. If a well-shortfall is experienced, the reserve growth will 

result in an estimate that is lower than the unconstrained reserve estimate, and an interpolated 

reserve estimate is based on the actual number of wells allocated versus unconstrained well 

allocation behavior. Each model year, the number of production and non-production wells 

drilled are tabulated for each cell, and stored in arrays, where they are ultimately retrieved to 

display in the output results. 

Production and Infrastructure 

 Production and infrastructure concerns are computed based on a cell’s current model year 

DPY, as well as coefficients and inputs specific to the cell’s primary characteristics (area and 

size). To enable development time, the first production year actually corresponds to a DPY of 8. 

If a cell is in DPY 7, initial infrastructure, including platforms and pipelines, is put into place. In 

addition to the initial infrastructure additions, depending on the water depth (specified by the 

area) and size of the field, additional infrastructure may be added and removed. Each model 

year, the number of platforms added and removed, as well as the pipeline miles added, are 

tabulated for each cell, and are stored in arrays, where they are ultimately retrieved to display in 

the output results. 

 Once a cell is producing, the annual production is expressed as a function of the 

remaining reserves in each year. The amount of oil and gas produced depends on the specific 

yield inputs for that particular cell. Cells that exist prior to the model run will follow the yield 

profile dictated by the oil and gas reserve estimates in the Field Input database table. Newly 

discovered fields, which are allocated to cells when the net present value of the field is positive, 

are assigned a yield based on an aggregation of historic data given the area and size of field. As 

the productive life of each field reaches a terminal point, production ceases, and remaining 

infrastructure is removed. Each model year, the amounts of oil and gas production for each cell 

are tabulated and stored in arrays, where they are ultimately retrieved to display in the output 

results. 

Revenue and Cost Estimation 

 A central and appealing feature of the IIC EDP MODEL is the incorporation of an 

economic component that handles revenue and cost estimation based on user inputs. Each model 

year, a net present value (NPV) for each area and size of field is computed based on the 

particular inputs entered by the user. Such inputs include the model year price, cost escalators, 

and royalty rules or incentives. These NPVs are used as a primary component of the model’s 

simulation of a producer/explorer’s decision process. Rising (falling) NPVs stimulate (reduce) 

exploratory drilling and make smaller fields more (less) attractive to develop and produce. 
II-9

 The principal components of the NPV determination are expected revenues, exploration 

and drilling costs, development costs, operating costs, depreciation and user defined inputs such 

as the tax rate, royalty rate, possible suspension volume, and discount rate. The NPV calculation 

begins with the determination of a typical unconstrained field production profile, and then 

computes the annual costs of exploration, development, and production of the field. Revenues 

are computed based on the production profile, the current model year price, and the decisionmaker’s estimation of where the price will head in the future via a price escalator (which can be 

positive, zero or negative). In addition, revenues are adjusted for taxes and royalties. Once the 

cost and net revenue streams are determined, the discounted cash flow over a forty-year cycle is 

summed to arrive at the NPV for a particular area and size of field. These values are stored in an 

array, where they are retrieved as needed to determine the economic viability of a field. 

2.2 Model Flow 

 This section discusses how the model loads default inputs, offers different user options 

for modifications, and ultimately processes the data in a series of routines to derive the output 

results. 

Figure II.1. The three main components of the IIC EDP MODEL 

Figure II.1 represents the highest-level look at the program hierarchy. The three main 

components represent the program itself, the underlying Access database, and the program 

results, contained in Excel workbooks. A two-way relationship is defined between the database 

and program. Although data are originally loaded from the database, there are opportunities 

within the scope of the program to overwrite certain variables within the database. Alternatively, 

the Excel output and program entail a one-way data transfer. At the conclusion of an individual 

model run, the program offers the user the ability to view a wide-range of data results, and if 

selected to do so, will write out the results into an Excel workbook. The program does not 

interact with the written data results to obtain variables or inputs for successive model runs. 

 Once the program is launched, several events occur as the first form is displayed, prior to 

any user interaction. These events are shown in Figure II.2, and represent the creation of the 

data connection between the program and the Access database, as well as the initial loading of 

several default variables and historical data. Once the data connection has been established 

between the program and the database, the connection remains open until the termination of the 

program. It is not necessary to have the Access database open during the running of the IIC EDP 

MODEL. 

Access 

Database 

IIC EDP 

MODEL .EXE 

Excel 

Output 
II-10

Figure II.2. The initial processes that occur prior to displaying the first form 

 Once the data connection has been established, the program populates default arrays, 

storing variable values that are retrieved from the Access database. Once certain historical and 

default values have been loaded, the program creates two objects that are necessary in 

determining annual economic feasibility and well generation. The first is a generic “Production” 

object, which computes and stores unconstrained production profiles assuming a fifty-year 

production life. Each production profile establishes the annual oil and gas production, as a 

percent of the total grown field size that is expected for a field in a given area that is not subject 

to reserve growth or production constraints. The second object that is created is a Historic Array 

object that loads historic drilling, discovery, production and infrastructure data into arrays for 

future use. The drilling and discovery data are particularly important, as these data will be 

necessary for computing the annual expected well “demand” in each area during the initial years 

of the model run. 

 These preliminary steps are independent of user interaction, and are entirely dependent 

on default values and actual historical data. Following the creation of the Production and 

Historic Array objects, the model displays the initial form and waits for user interaction. There 

are several possible decisions a user can make when viewing the initial form. Table II.1 lists 

these possibilities, and each is discussed in detail in Section 3 of this user manual. With the 

notable exception of the Run, Exit and Help buttons, all selections involve user input to modify 

assumptions or underlying data that are relied upon after the user has executed a model run by 

pressing the Run button. 

Table II.1. Initial Form Choices for User Interaction 

Event Control Result 

Scenario Name Text Box User can edit scenario name displayed on results 

Run Button Runs a simulation with current inputs 

Stop Button 

Initially disabled, allows user to stop simulation 

mid-Run 

Field Update Button 

Re-creates existing field distribution given input 

changes 

Cost Inputs Button Allows modification of cost inputs 

Exit Button Exits program 

Historic NPVs Button 

Launches utility to compute historic NPVs for 

comparison purposes only 

Set Price Path Button User can modify actual model year prices 

Drill Data Button Allows modification of drilling inputs 

Start .exe 

Create Database 

Connection 

Initialize Default 

Variables 

Create Default Production Object

Create Historic Arrays (HA) 

Populate with Historic Values 

Show 

Main 

 Form 
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Production Button 

Allows modification of size-specific production 

coefficients 

Help Button Displays initial help file 

Royalty Input Select Area Combo Box

User can select area for royalty input rule 

modification 

Royalty Input Modify Button 

Displays royalty rule entry form for user 

modification 

Royalty Input Default Button Loads the pre-set default royalty inputs 

Lease Drilling Distribution Select Area Combo Box

User can select area for lease drilling distribution 

modification 

Lease Drilling Distribution Modify Button 

Displays lease drilling distribution form for user 

modification 

Lease Drilling Distribution Default Button 

Loads the pre-set default lease drilling 

distributions 

Lease Drilling Distribution No Action Button 

Loads the pre-set no action lease drilling 

distributions 

Lease Drilling Distribution Single Sale Button 

Loads the pre-set single sale lease drilling 

distributions 

Five Year Constant Reserves Select 

Area Combo Box

User can select area for five year constant 

reserves modification 

Five Year Constant Reserves Modify Button 

Displays five year constant reserves form for user 

modification 

Enforce Fixed Reserves Check Box 

Allows user to force model to discover fixed 

reserves in first five model years 

 After deciding upon different inputs and assumptions, the user begins a model run by 

depressing the Run button, and the model follows the procedure outlined in Figure II.3. The 

processes depicted in the flow chart either apply to the creation of program-specific objects, or 

deal with algorithms designed to closely model GoM exploration, development and production 

behavior. The remainder of this section will briefly discuss the steps involved in generating the 

results of a model case. 
II-12

Figure II.3. Schematic Depicting the Flow of the Typical Model Run 
II-13

At the beginning of each model run, the following program-specific objects are created: 

Discovery Object – The model creates a new discovery object, which retrieves the initial 

undiscovered resource data from the underlying Access database and creates an array storing the 

undiscovered resource data necessary to determine future discoveries on an area and size of field 

basis. 

Holding Object – The model creates a new holding object that retrieves the initial distribution of 

fields in “holding,” e.g., those that have been discovered but are uneconomical as of the 

beginning of the model run, from the Access database and stores these data in an array. 

Cell NPVs Object – The model creates a cell NPV object that creates a large array, 

encompassing each area and size of field combination, with the intent of storing annual NPV 

values for each combination. 

Cell Output Object – The model creates a new cell output object that retrieves the initial

distribution of existing cells (which represents the existing fields) from the Access database. 

Through the creation of an array of cells, the cell output object is primarily responsible for 

tracking each cell’s properties, including reserve estimates, production drilling, production 

volume, and infrastructure output. Most importantly, the cell output object handles the annual 

responsibility of updating each cell’s properties, as well as handling the creation of new cells that 

result from discovery. 

Well Generation Object – The model creates a new well generation object that is responsible for 

handling the complex calculations needed to determine exploratory well demand. The primary 

function of the well generation object is simply that: it generates the wells that are expected from 

each area in each model year. 

The Forty Year Loop 

 Once the model has created the fundamental objects needed to carry out the complex 

algorithms involved in the modeling process, it begins a forty-year cycle of NPV determination, 

well generation, well allocation, discovery, development and production. At the beginning of 

each model year, NPVs for each possible area and size of field are determined, and the results 

are stored in the cell NPV object. The well generation object steps in and determines how many 

wells each area expects, given the past and future profitability, while the cell output object cycles 

through each active cell and determines the production well drilling requirements. Once the well 

expectations are determined, a well allocation process begins in order to allocate the available 

number of wells given different constraints. 

 The well allocation procedure (handled through the creation of an annual Well Allocation 

object) begins by handling existing in-field requirements, followed by exploratory well demand. 

In order to allocate wells needed for existing cells, the different areas are ranked based on which 

areas have the most remaining reserves. On a volume basis, these areas offer the highest return, 

and are ranked at the front of the priority list. Similarly, once production wells have been 

allocated, the well allocation routine focuses on satisfying the exploratory well demand. Each 
II-14

area undergoes a similar ranking process, where the areas with the highest expected NPV per 

well receive higher priority than areas with low expected NPVs per well. 

 Wells are allocated using rigs available, area specific drilling rates, and rig preferences. 

The model employs a ten cycle process for production well and exploratory well allocation, 

designed to ensure that no area is completely “shut-out” from obtaining any wells. As wells are 

allocated to each area, the number of rigs declines based on the drilling rates. If there are not 

enough rigs to satisfy the well requirements, then a rig shortfall is logged, and the particular area 

does not receive all the wells that are demanded. It is important to reiterate that the model 

handles in-field requirements first, and then handles exploratory well requirements. 

 Once in-field wells are allocated, the cell output object retrieves those wells and allocates 

them according to each cell’s demand. Beginning with the larger, younger cells, the cell output 

object allocates wells, thereby stimulating reserve growth. If a well shortfall exists based on a 

rig constraint, the reserve growth of affected cells will be constrained, and the reserve estimate is 

computed based on the number of wells that were actually allocated. This will lead to a lower 

increase in the reserves added, and will result in lower production due to constrained reserve 

growth. Once the additional reserves, if any, are added, the cell production is determined as a 

function of remaining reserves (last year’s reserve estimate plus the additional reserves gained 

from reserve growth this year, less cumulative production through last year). Depending on the 

reserve estimate profile, the cell output object will impute a DPY, and calculates infrastructure 

output based on this imputed DPY. At the conclusion of the in-field well allocation, the cell 

output object has updated the reserve estimate, and logged the production and non-production 

wells drilled, production volume, platforms added, platforms removed, and pipeline miles added 

for each cell. 

 Next, the model proceeds to handle new discoveries. The model determines fields 

discovered this particular model year based on area and size of field-specific search coefficients, 

total fields, and past discoveries (tracked in the discovery object), using exponential discovery 

equations and the number of exploratory wells allocated to each area as a result of the well 

allocation routine. Once these new fields are discovered for a particular area and size of field, 

the model performs an economic feasibility test, by retrieving the NPV for this area and size 

stored in the cell NPV object. If the NPV is positive, a new cell is created. The cell will store 

the relevant properties of the new discovery, and begins the development process in a queue 

designed to delay the onset of production by a set number of years. Alternatively, if the NPV is 

negative, the new discovery is handled by the holding object, which will store it until conditions 

change such that the NPV is positive (e.g., a future price increase). 

 At the conclusion of the discovery and economic feasibility process the model performs 

an end of year rig analysis. The model will abandon rigs based on the user-specified rig 

abandonment rates, and will check to see if any rig shortfalls were logged in the well allocation 

process. If so, the model will stimulate additional rig construction, relying on user-specified 

inputs concerning response factors and construction times. Finally, new rigs that were 

previously under construction, but ready to come on-line, are added to the next year’s rig count. 

The model then proceeds to the beginning of the forty-year model loop, and cycles through the 

next model year. After forty years, the model will exit the loop, tabulate results, and offer the 

user the ability to view these results. 
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2.3 The Access Database – Lookup.mdb 

 An integral part of the model structure is the underlying Access database. The database, 

through its 23 tables, serves as the initial starting point for many of the default inputs and 

assumptions that are used in the model flow. This section briefly discusses each table and the 

involvement of table data in the model structure and flow. 

Area – The area table is the primary source for defining the number of areas involved in the 

model simulation. The IIC EDP MODEL was designed to handle three planning areas, with 

seven depth categories in each area. As such, the area table contains twenty one records, each 

corresponding to a planning area, depth category, and average depth value for each depth 

category. The model accesses this table for information on the number of areas under 

consideration, as well as the average depth value for each area. 

CostInputs – The cost inputs table contains only one record with several columns. The model 

will access the data elements of this table to use in the net present value determination of each 

area and size of field. This table is loaded as the program is executed and not at the beginning of 

each model run. 

Drilling – The drilling table contains area-specific default information. As such, this table 

should always have the same number of rows as the number of areas. For each area, there are 

several elements, including rig preferences, rig drill rates, a rig factor, exploratory well inputs, a 

rental rate and a production adjustment factor. These elements are loaded as the program is 

executed and not at the beginning of each model run. Rig preferences and drill rates are used 

exclusively in the well allocation routines, while the exploratory well inputs are used exclusively 

in the well generation routine for determining exploratory well demand. Although not entirely 

drilling-related, the rig factor and area production adjustment are used in the cell output well 

determination and existing cell production, respectively. Finally, the rental rate is used in the net 

present value determination. 

ExistingDevProd – The existing development and production table is a model generated table

that contains the underlying cells that exist at the beginning of each model run. This table is 

created with the “FieldUpdate” button on the initial program form, and the data is accessed at the 

beginning of each model run (as opposed to when the program is launched). This table contains 

many cell properties of the existing field distribution. 

FieldInput – The field input table is a user-provided table that incorporates data associated with 

the existing field distribution prior to a model run. The user is free to update or change this 

table, and then generate a new ExistingDevProd table via the “FieldUpdate” button on the initial 

program form. Ultimately, each model run does not access the Field Input table, but rather 

accesses the ExistingDevProd table. 

FiveYearValues – The five year values table contains area-specific default data. One option the 

user has in running a model scenario is to force the model to discover a fixed amount of reserves 

for the first five model years. The five year values table holds the default reserves amount for 

each area. In addition, the table holds the default exploratory wells drilled, in case the reserves 

amount cannot be achieved by any possible exploratory well amount. 
II-16

Historic – The historic table stores actual historical economic data that were used to generate the 

historic net present values used in the exogenous exploratory well fitting analysis. The model 

does not access these data for the purpose of a model run, however, these data will be accessed if 

the user chooses to run the historical NPV comparison utility provided by the program. 

HistoricEWellsDrilled – The historic exploratory wells drilled table contains the annual history 

of exploratory well drilling for the twenty-one areas defined by the area table. These data are 

accessed when the program is launched and are used in determining the expected well generation 

of the first few model years in any given model run. These data are also used in displaying 

historic results as part of the output. 

HistoricFieldsFound – The historic fields found table contains the annual history of exploratory 

well drilling for each area and size of field combination defined by the area and size of field 

tables. These data are accessed when the program is launched and are used in determining the 

expected well generation of the first few model years in any given model run. These data are 

also used in displaying historic results as part of the output. 

Historic Outputs – The historic outputs table holds annual area-specific historic production and 

infrastructure data, which are only accessed by the model in displaying historic results as part of 

the output. 

Holding – The holding table is a model generated table that stores information concerning fields 

that exist as of the beginning of the model run, but are not profitable. This table is generated 

through the use of the “FieldUpdate” button, and is accessed at the beginning of each model run. 

LeaseDrillingDistribution – The lease drilling distribution table contains area-specific lease 

drilling constraint information. There are annual entries for each area that specify the percent of 

exploratory wells that are allowed to be drilled. Within this table are two sets of data, one 

pertaining to the default scenario, and the other pertaining to a single-sale scenario. These 

distributions are accessed during each model run, and the user is free to change the lease drilling 

distributions within the framework of the model. 

NPV_OutputHistoric – The historic NPV table stores the underlying net present values that are 

relied upon in determining the profitability components of the historic drilling cycle. These 

NPVs are used in the exogenous determination of exploratory well inputs, as well as in the first 

ten years of model well generation. The user is not allowed to overwrite these data at any point 

during the model run. 

NPV_OutputHistoricComparison – The historic NPV comparison table allows the user to take 

advantage of the IIC EDP MODEL’s built-in historic NPVs utility. The historic NPVs button on 

the initial form can be depressed to generate new historic NPVs using a discount rate, or 

different cost input assumptions, for comparison purposes. The resulting NPVs are stored in this 

table, but are not accessed by the model during any model run. 

OilYieldGravity – The oil yield and gravity table contains area- and size-specific inputs 

concerning the amount of oil in each undiscovered field, as a percent of the total mmBOE, as 

well as the particular gravity value for each undiscovered field in each area. The model will 

access the data elements of this table to use in the net present value determination of each area 
II-17

and size of field, as well as in determining the amounts of oil and gas produced following 

discovery. This table is loaded as the program is executed and not at the beginning of each 

model run. 

Pre1983FieldsData – The pre-1983 fields table represents the sum total of area- and sizespecific fields found prior to 1983. The data contained in this table are accessed when the 

program is launched, and are stored in the historical data arrays. 

Pre1983WellsDrilled – The pre-1983 wells drilled table represents the sum total of areaspecific wells drilled prior to 1983. The data contained in this table are accessed when the 

program is launched, and are stored in the historical data arrays. 

ProductionCoefficients – The production coefficients table contains the default settings of the 

size-specific production coefficients. These default coefficients represent the percent of 

remaining reserves produced each year, without consideration of any calibration adjustments for 

existing fields. 

ReserveGrowthParameters – The reserve growth parameters table stores three coefficients that 

are used in the MMS Reserve Appreciation annual growth factor equations. These parameters 

are accessed by the model to determine the unconstrained reserve growth and corresponding 

production arrays. These values are extremely important in model flow, and the user is not

allowed to modify these values during any of the model runs. As the reserve appreciation factors 

are updated by the MMS, the values of this table can be changed accordingly. 

Rig Inputs – The rig inputs table stores the rig-specific default values. For each of the three rig 

types, this table stores the default number that are initially available, the delay time in 

constructing new types, the rig shortfall response factor, and the annual abandonment rate. The 

user is allowed to modify these variables during the scope of each model run. 

RoyaltyValues – The royalty values table contains area-specific default values for royalty rates 

and suspension volumes. This table is accessed during the launch of the program, however, the 

user is allowed to modify and change royalty provisions prior to each model run. 

SizeOfField – The size of field table is the primary source for defining the number of different 

field sizes the model will iterate over in determining NPVs and new discoveries. The model 

accesses this table throughout each model run, and follows the MMS field size definitions. The 

lower bound of class size n (in mmBOE) is defined as .03125 * (2^(n-1)), while the upper bound 

is double the lower bound amount. Thus, fields of class size 7 contain between 2 and 4 mmBOE, 

with an average of 3 mmBOE. For each class size, the minimum, maximum and average 

mmBOE are displayed in the Access table. 

UndiscoveredFields – The undiscovered fields table is a user-generated table that contains the 

underlying distribution of undiscovered resources, along with exogenously determined search 

coefficients that are used in the discovery process. The data are both area- and size- specific. 

The model accesses this table at the beginning of each model run, and determines future 

discoveries using the data in this table. 
II-18

3. Model Forms 

 This section describes the different model forms. Options on the different forms allow 

the user to modify and change inputs, load new distributions, access help files, or run a model 

simulation. 

3.1 Initial Form 

This section describes each component of the initial form. 

Scenario Name (Text Box)...user is allowed to enter a name that will be recorded in the 

output Excel workbooks. The user can choose to keep the same name for a series of runs, or 

alternatively, can re-name each model run. Although it appears in the Excel output, it does not 

otherwise affect the IIC EDP MODEL’s results. 

Run (Button)...clicking the Run button will launch a model simulation, relying on the 

various inputs that have been selected by the user. At the conclusion of the model simulation, 

the inputs will remain the same, unless changed by the user through one of the different user 

interfaces. Clicking the Run button consecutively will generate model simulations based on the 

same set of user inputs. 
II-19

Stop (Button)...initially disabled, the Stop button will enable itself only after the Run 

button has been clicked. The Stop button allows the user to halt the model simulation at any 

point prior to the conclusion of the forty year cycle. 

Field Update (Button)...will allow the user to easily load a new existing field 

distribution based on data contained in the underlying database. Once clicked, the user is 

prompted with a dialog box to confirm the decision to overwrite the existing field distribution 

and load a new one... 

 If the user elects to proceed, the Lookup.mdb Access data table “ExistingDevProd” is 

cleared of all current data, and the program will proceed to populate the table with new data, 

based on the “FieldInput” Access table. 

 The Field Update procedure accesses the field input data and for each field, computes a 

beginning of model year 1 reserve estimate (for IIC EDP MODEL 1.0, this would correspond to 

end of year 2001/beginning of year 2002). This reserve estimate (and corresponding 

development or production year) is determined by examining the cumulative production/grown 

reserve estimate ratio versus the unconstrained production profile determined by the model. If 

the field has yet to produce, it is either placed in a development year, or if the field is not 

economically feasible, is placed in the holding table. 

 Once the reserve estimate and development or production year are determined, each field 

is either added to an existing cell, if it has the same area, size and DPY as a previous field or 

fields, or is stored in a new cell. Each cell stores the information necessary to compute future 

reserve growth, production, well drilling and infrastructure requirements. In addition, each cell 

also stores grown reserve estimates, oil yield (percent of reserve estimate that is oil), remaining 

platforms, applicable royalty rate, and royalty suspension volumes. After each field in the Field 

Input table has been examined and all cells are created, the Field Update procedure will populate 

the “ExistingDevProd” Access table with the new data. At the beginning of each simulation, the 

model will access the “ExistingDevProd” table to create the cell output object, which is 

responsible for handling the future outputs from the existing field distribution. 

Cost Inputs (Button)...launches the Cost Inputs Form, where the user can modify cost 

inputs or assumptions, as described in Section 3.2 – Cost Inputs Form. 

Exit (Button)...closes the IIC EDP MODEL and ends the program. Clicking the close 

box, selecting “Close” from the System menu (accessed by right clicking on the form title bar) or 

depressing Alt-F4 while the main form window has the focus will all have the same effect as 

depressing the Exit button. 
II-20

Historic NPVs (Button)...when selected, the program will compute the historic net 

present values of each area and size of field between 1983 and 2001. The historic NPVs 

calculation draws upon the “Historic” table of the Lookup database, and allows the user to 

compare the historic NPVs using a discount rate as opposed to the fixed discount rate computed 

for the default historic NPVs. 

 The historic NPV calculations are for comparison purposes only, and are never accessed 

by the model. However, if the user wishes to change the historic NPVs and re-fit the exogenous 

exploratory well fit equations, the historic NPVs button can be adapted to handle this situation. 

Set Price Path (Button)...launches the Set Price Path Form, where the user can modify 

the model year’s price path on a $/BoE basis, as described in Section 3.3 – Set Price Path Form.

Drill Data (Button)...launches the Main Drill Form, where the user can modify the initial 

rig data, and can access area-specific information, as described in Section 3.4 – Main and Sub 

Drill Forms. 

Production (Button)...launches the Production Inputs Form, where the user can modify 

the size-specific production coefficients, as described in Section 3.5 – Production Inputs Form. 

Help (Button)...launches the initial Help file. 

Royalty Input (Group Box)...contains a drop-down combo box, populated with the 

number of areas specified by the underlying Lookup.mdb table “Area,” as well as the Modify 

and Default buttons. Depressing the Modify button will launch the Royalty Rule Entry Form, 

where the user can modify and create different royalty rules for the area displayed in the combo 

box when the button is depressed. Depressing the Default button will re-populate the royalty 

rule values with the default values contained in the underlying Access database for all areas, not 

just the one listed in the combo box. The Royalty Rule Entry Form is discussed in Section 3.6 – 

Royalty Rule Entry Form. 

 Lease Drilling Distribution (Group Box)...contains a drop-down combo box, populated 

with the number of areas specified by the underlying Lookup.mdb table “Area,” as well as the 

Modify button. Depressing the Modify button will launch the Lease Drilling Distribution Form, 

where the user can modify and create different lease drilling distributions for the area displayed 

in the combo box when the button is depressed. The Lease Drilling Distribution Form is 

discussed in Section 3.7 – Lease Drilling Distribution Form. The Lease Drilling Distribution 

group box also contains three buttons, labeled Default, No Action and Single Sale. Depressing 

the Default button will automatically load the default area drilling distributions stored in the 

underlying Lookup.mdb. Similarly, depressing the No Action or Single Sale button will 

automatically load the no action or single sale drilling distributions stored in the underlying 

Lookup.mdb, respectively. 

Five Year Constant Reserves (Group Box)...contains a drop-down combo box, 

populated with the number of areas specified by the underlying Lookup.mdb table “Area”, as 

well as the Modify button. Depressing the Modify button will launch the Five Year Reserves 

Form, where the user can specify the fixed five-year reserves amount for each area. The Five 

Year Reserves Form is described in Section 3.8 – Five Year Reserves Form. In addition, the Five 
II-21

Year Constant Reserves group box contains the Enforce Fixed Reserves check box. If this 

check box is selected at the time the user clicks the Run button, then the model will by-pass the 

discovery process for the first five years, and will “find” the resources dictated by the reserve 

estimates determined by the user for each area. 

Upper List Box...displays the annual progress of the model through each forty year 

cycle. 

Lower List Box...logs and tracks the different selections made by the user in terms of 

modifying particular areas of data, e.g., modifying the drill data. This list box also tracks the 

annual discoveries and feasibility for each model year during a simulation. 

3.2 Cost Inputs Form 

 This section describes the Cost Inputs Form, and the different variables the user is 

allowed to modify. The Cost Inputs form is displayed when the user selects the Cost Inputs 

button on the main form. It is initially loaded with default data obtained from the underlying 

database. 

3.2.1 Cost Input Form Assumptions 

Discount Rate. The discount rate is used when the model determines the net present value of a 

typical field size in a given area in each model year. In determining net present value, the model 

computes costs and revenues (which are dependent upon annual model assumptions such as 
II-22

royalty rules, tax rates, cost escalators, and the actual model year price) and discounts the aftertax cash flow using the discount rate. 

Price Escalator. During the course of determining the net present value of a field, in any given 

model year, the decision-maker must assume something about future price expectations. The 

price escalator represents this assumption about future price expectations, given that the 

decision-maker only knows what the price is “today.” For example, in model year 7, the actual 

price (as set in the Price Path Form) might be $23/BoE. In determining the net present value, 

and thus economic feasibility, the decision-maker has to compute the field revenue stream based 

on some assumption of where the $23/BoE price will head in future years. If they assume a 2 

percent price escalation, then the decision-maker is implicitly computing future revenue stream 

under a price of $23/BoE this year, $23.46/BoE next year (a 2 percent increase), $23.93 the 

following year (another 2 percent increase), and so on into the future. It is extremely important

to realize that this price escalator is only used in projecting the future revenue stream of field 

production for purposes of determining net present value, and does not affect the model year 

price path. The decision-maker does not have knowledge of next year’s model price, which 

could easily be set by the user to be $20/BoE, as opposed to $23.46/BoE. 

Tax Rate. The tax rate is used when the model determines the net present value of the cash flows 

from a typical field of a given size in a particular area. The net present value is determined by 

taking the after-tax cash flows and discounting them to present value. 

Gas to Oil Price Ratio. The IIC EDP MODEL relies upon a singular $/BoE price assumption. 

However, areas and field sizes have historically had different proportions of oil and gas reserves. 

When computing net present value for the different areas and field sizes, it is necessary to 

separate the oil and gas volumes, and apply an oil price and a gas price to each volume to arrive 

at revenue. The oil price is a dollar per barrel basis, but the gas price is established as a certain 

percentage of the oil price. The gas to oil price ratio represents what fraction of the oil price (in 

dollars per barrel) is taken to arrive at a gas price (in dollars per mcf). For example, if the oil 

price is $25/BoE, and the gas price ratio is 0.1, then the corresponding gas price would be 

$2.50/mcf. 

Gravity Adjustment. Net present value of future revenue streams is based upon the oil and gas 

price, as well as the respective volume produced of each resource. In determining the oil 

revenue, the model makes an adjustment to the oil price based on the quality of the oil that is 

extracted from different areas of the Gulf of Mexico. The $/barrel that is relied upon by the 

decision-maker is assumed to be the oil price at 40 degrees API. Given the difference in quality 

between areas, the oil price is adjusted by the gravity adjustment. For example, if the oil price is 

$23/BoE, but the quality of oil from Area 7 is only 36.3 degrees API, then the adjusted oil price 

would be $22.852/BoE, based on a gravity adjustment of $0.04 per degree ( $23 - ( (40-36.3) * 

$0.04) ). 

Operating Expense Escalator. The operating expense escalator is used as a proxy to escalate 

operating expenses in the future. This escalator is applied to both the model year-to-year 

progression, as well as the decision-maker’s estimate. For example, if the operating expense is 

$5/BoE in model year 1, and the escalator is 2%, then in model year 2, the operating expense is 

$5.1/BoE. However, in determining a net present value of a field discovered in model year 2, the 
II-23

decision maker would start with operating expenses equal to $5.1/BoE, and then compute future 

costs based on a 2% escalation, for the sole purpose of determining the future cost stream. 

Capital Expense Escalator. The capital expense escalator functions in an analogous manner to 

the operating expense escalator, but is applied to capital expenses such as exploration, drilling 

and infrastructure costs. It represents both the model expectations, as well as a decision-maker’s 

expectations. 

3.2.2 Cost Input Form Restrictions 

 This section briefly describes the restrictions placed on values entered in the text boxes of 

the Cost Inputs Form, thereby reducing the number of entry errors and avoiding the following 

error box: 

One universal convention is that all entries must be expressed as numbers, and contain only 

numeric or decimal characters. Thus, “5%,” “$0.1”, and “ten” will generate input errors. 

Discount Rate: Must be a number between 0 and 1, in decimal form 

Price Escalator: Can be negative, positive or zero, expressed in decimal form 

Tax Rate: Must be a number between 0 and 1, in decimal form 

Gas to Oil Price Ratio: Must be a non-negative number, expressed in integer or decimal form 

Gravity Adjustment: Must be a non-negative number, expressed in integer or decimal form 

Operating Expense Escalator: Must be expressed in integer or decimal form 

Capital Expense Escalator: Must be expressed in integer or decimal form 

3.2.3 Form Buttons 

 The Cost Inputs Form also contains five buttons for user interaction. 

OK...clicking this button signals that the values entered in the text boxes are the values the user 

wants to use in the next model simulation. If the user has not made any errors in input values, 

the OK button will store the selections, and close the form. 

Save to DB...if the user wishes to overwrite the default values in the database, clicking this 

button will perform that action. The user is asked to verify that they wish to overwrite the 
II-24

default values, and if they choose affirmatively, the model will indeed overwrite the default 

values stored in the Lookup.mdb table “Cost Inputs.” 

Note: Once the user has saved the current selections to the database, these selections are now the 

default values! The old values are lost, and every time the IIC EDP MODEL is launched, the cost input 

default values will be the last ones saved in the database. 

Default...clicking this button will re-load the default values that are stored in the underlying 

database. The values in the text boxes will change to equal the default values. 

Cancel...clicking this button will close the Cost Inputs Form, without saving any of the changes 

that have been made. The cost inputs will remain the same as they were when the form was first 

open, even if the user has clicked the SavetoDB button. If the user wishes to employ the new 

defaults, they must open the form, click the default button, and then click OK. 

Help...loads the help file associated with the cost inputs form. 

3.3 Set Price Path Form 

 This section describes the form that is displayed when the user selects the Set Price Path 

button on the main form. The purpose of the price path form is to allow the user to modify the 

actual price path over the forty years of the model run. The form displays the currently loaded 

price path in the list box on the left hand side of the form. The list box contains forty entries, one 

for each model year. For example, the list box entry “4: 25.00” indicates that the price (in 

dollars per BoE) for model year 4 is $25.00 per BoE. 

3.3.1 Price Path Inputs 

 The user is allowed to modify the actual price path via three methods: randomly, constant 

inflation, or manually. To establish a random price path, the user can enter a lower bound and 

upper bound in the Low and High text boxes on the form. Once they have entered acceptable 
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values and clicked the Random button, the list box on the left hand side of the form will display 

the new model price path. 

 Similarly, a user can create a constant or inflated price path by entering a starting price 

and corresponding inflation rate in the Start and Inflate text boxes. Once they have entered 

acceptable values and clicked the Constant button, the list box on the left hand side of the form 

will display the new model price path. In order to create a constant price path, the user only 

needs to enter a Start price, and set the inflation rate to zero. An example of a constantly inflated 

price path is shown below. 

 Lastly, the user has the ability to manually change any of the price path entries. This is 

accomplished by clicking on the individual entry in the list box. Upon clicking an entry, the user 

is shown the “Edit Single Value” dialog (which appears throughout the model when listbox 

entries are clicked). The user is prompted to enter the specific value for the entry that was 

clicked. For example, clicking on model year 8 in the above figure will generate the edit single 

value form. 

We can change this value to 30.05 

And click OK to overwrite the value in the list box for model year 8. 
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3.3.2 Price Path Input Restrictions 

 This section briefly describes the restrictions placed on values entered in the text boxes of 

the Cost Inputs Form, thereby reducing the number of entry errors and avoiding error boxes: 

One universal convention is that all entries must be expressed as numbers, and contain only 

numeric or decimal characters. Thus, “5%,” “$0.1”, and “ten” will generate input errors. 

Low: Must be a non-negative number, lower than the high value. 

High: Must be a non-negative number. 

Start: Must be a non-negative number. 

Inflate: No restrictions, but note that the entry is in decimal percent notation. 

3.3.3 Price Path Buttons 

 The Price Path Form contains four buttons for user interaction. 

OK...clicking the OK button saves the current price path into memory for the successive 

model runs, until the user changes the price path again. Only by clicking OK will the user save 

the current annual prices contained in the list box. 

Default...clicking the Default button will overwrite the list box values with the default 

values. 
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Cancel...clicking the Cancel button will close the form. The price path will remain the 

price path that was originally displayed regardless of changes made by the user while the price 

path form was open. 

 Help...loads the help file associated with the price path form. 

3.4 Main and Sub Drill Forms 

 This section describes the Main Drill Form, and the different variables the user is allowed 

to modify. The Main Drill form is displayed when the user selects the Drill Data button on the 

main form. It is initially loaded with default data obtained from the underlying database. 

Associated with the Main Drill Form is the Sub Drill Form, which contains area-specific 

variables and assumptions. 

3.4.1 Main Drill Form Inputs 

 The main drill form enables the user to view the initial rig variables, select between a 

dynamic or manual rig count system, and modify area-specific variables primarily related to 

drilling. 

 The main drill form is divided into two sections, one entitled Area Specific Drilling 

Inputs, and the second Model Specific Drilling Inputs. The area specific drilling inputs section 

contains a drop-down combo box, populated with the number of areas specified by the 
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underlying Lookup.mdb table “Area,” as well as the Modify button. Clicking the Modify button 

will launch the Sub Drill Form discussed in Section 3.3.4.

 The model specific drilling inputs section contains rig data concerning the number of 

initial rigs, dynamic rig variables, manual rig list boxes, and an option box for selecting the rig 

count methodology. If the user selects the dynamic option, the manual list boxes are disabled (as 

shown in the above figure), and the dynamic rig inputs are enabled. Likewise, if the user selects 

the manual option button, the manual rig list boxes are enabled, and the dynamic rig inputs are 

disabled. The primary function of the rig inputs is in determining annual model year well 

allocation. 

 If the user elects to use a dynamic rig method, the model will automatically track the 

number of rigs each year, updating for rig abandonment, and also stimulating new rig 

construction if rig constraints are evident in any given model year of a simulation. The IIC EDP 

MODEL employs three rig types, which are listed as rig type 1, rig type 2, and rig type 3, each of 

which has the following dynamic variables. 

Initial Drilling Rigs – This represents the number of rigs available at the beginning of the model 

simulation, e.g. in the figure above, there are 118.6 rigs of rig type one available in model year 

one. The user is free to change these numbers to suit their simulation requirements. 

Delay Time – In the event there is a rig shortfall, the delay time represents the amount of time 

needed to construct a new rig of the corresponding rig type. 

Response Factor – In the event there is a rig shortfall in any given model year, the response 

factor represents the proportion of the shortfall that will be “responded” to by new construction. 

For example, consider a rig shortfall of 12 rig type 1’s in model year 7 and a response factor of 

0.5. At the end of that model year, the simulation will note the 12 rig shortfall, subsequently 

checks to see if any new rigs are coming on line, and then will begin construction on 50 percent 

of the remaining shortfall. If no new rigs are coming on line the next year, the model will begin 

construction of 6 rigs, which will be available after the delay time specified in the Delay Time

variable. 

Abandonment Rate – The dynamic rig tracking system also assumes that each year, a certain 

percentage of the available rigs will be abandoned. This percent is determined by the user and is 

taken from this form. 

If the user elects to use the manual rig option, then the number of manual rigs available will 

correspond to the yearly values contained in the list box for each rig type. To change the number 

of rigs available in each year, the user clicks upon the list box value. The Edit Single Value 

dialog box is displayed and asks the user to enter the rig type value. 

3.4.2 Main Drill Input Restrictions 

One universal convention is that all entries must be expressed as numbers, and contain 

only numeric or decimal characters. Thus, “5%,” “$0.1”, and “ten” will generate input errors. 
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Dynamic Inputs: 

Initial Rig Values: Must be non-negative numbers. 

Delay Time: Must be non-negative integers. 

Response Factor: Must be a non-negative number between 0 and 1. 

Abandonment Rate: Must be a non-negative number between 0 and 1. 

Manual Inputs: 

List Box Values: Must be non-negative numbers. 

3.4.3 Main Drill Form Buttons 

 The Main Drill Form contains six buttons for user interaction. 

Modify...this button, contained in the area-specific drill inputs section, will launch the sub drill 

form. 

OK...clicking this button signals that the values entered in the text boxes or list boxes are the 

values the user wants to use in the next model simulation. If the user has not made any errors in 

input values, the OK button will note the rig methodology selected, store the values, and close 

the form. 

Save in DB...if the user wishes to overwrite the default values in the database, clicking this 

button will perform that action. The user is asked to verify that they wish to overwrite the 

default values, and if they choose affirmatively, the model will indeed overwrite the default 

values stored in the Lookup.mdb tables “Rig Inputs” and “Drilling.” 

Note: Once the user has saved the current selections to the database, these selections are now the 

default values! The old values are lost, and every time the IIC EDP MODEL is launched, the cost input 

default values will be the last ones saved in the database. 

Note: Selecting the SavetoDB button will also save all the variables that were changed in the Sub Drill 

Form, even though these values are not currently visible to the user! 

Restore Defaults...clicking this button will re-load the default values that are stored in the 

underlying database. The values in the text boxes and list boxes will change to equal the default 

values. 

Note: The default button will also restore all the defaults for the area-specific drill variables, even though 

these values are not currently visible to the user. 

Cancel...clicking this button will close the Main Drill Form, without saving any of the changes 

that have been made. The main drill inputs will remain the same as they were when the form 

was first open, even if the user has clicked the SavetoDB button. If the user wishes to employ 

the new defaults, they must open the form, click the default button, and then click OK. 

However, unlike the Restore Defaults button, if any changes were made and accepted from the 

Sub Drill Form, these changes will not revert to the values that were present when the Main Drill 

Form was first opened. 

Help...loads the help file associated with the main drill form. 
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3.4.4 Sub Drill Form 

 Selecting the Modify button in the area-specific drill inputs will launch the sub drill form 

for the area displayed in the drop-down combo box. The sub drill form contains two sections, 

Drilling Variables and Exploratory Well Inputs. 

 The top section of the sub drill form deals with “Drilling Variables,” although it is easily 

noted that two of the variables do not depend on drilling. These variables are included here due 

to their area-specific nature. 

 The model employs three different rig types (one through three), and allows each area to 

employ different rig preferences and drilling rates. In addition, each area contains a rig factor, 

rental rate, and production adjustment: 

Drilling Preference – These inputs signify the particular area’s rig preferences. If the area elects 

to use Rig Type 1 as its first priority, followed by Rig Type 2, and does not allow Rig Type 3 to 

be used, the drilling preferences would be “1” for Rig Type 1, “2” for Rig Type 2, and “0” for 

Rig Type 3. Alternatively, if an area is only allowed Rig Type 3, then the drilling preferences 

would be “0” for Rig Type 1, “0” for Rig Type 2, and “1” for Rig Type 3. A drilling preference 

of 0 indicates that this area is not allowed to use that particular rig type.
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Drilling Rate – Each rig type has the ability to drill at different rates in each area. The drilling 

rate for each rig type is expressed as the number of wells drilled per year. Thus, if Rig Type 1 

has a drilling rate of 11.4, it is able to drill 11.4 wells per year per rig in the selected area. 

Area Rig Factor – Each area may also have the opportunity to drill a portion of in-field wells 

directly from the existing infrastructure, and does not require outside rigs. The percent of infield wells that require rigs are specified by the Area Rig Factor. If the area rig factor is equal to 

0.75, this means that 75 percent of the area’s in-field wells drilled will require the use of a rig. 

Area Rental Rate – The area rental rate represents the dollar per acre rental that is collected prior 

to the commencement of production. It is used in the annual determination of net present values 

for each area and size of field. 

Production Adjustment – The production adjustment factor represents a disturbance term used in 

the calibration of production data for pre-model run existing fields only. The production 

coefficients are determined on a size of field basis, without regard for the particular area. In 

actuality, certain areas produce at levels either above or below the aggregate, and the production 

adjustment is applied to the production coefficients for pre-model run existing fields. For 

example, if the selected area has a production adjustment of .015, then for each field (recall they 

are rolled into cells by area, size and DPY) in this area that exists prior to the model run, the 

production coefficients will be increased by 1.5 percent. If the cell size is 13, then the 

production is determined by multiplying the remaining reserves by 16.5 percent (the 15 percent 

size 12 production coefficient plus the 1.5 percent area production adjustment factor). 

Also Apply to Areas – This extremely useful text box allows the user to apply the “Drilling 

Variable” assumptions they have modified for the selected area to other areas without having to 

launch the sub drill form for each area. However, all the aforementioned variables will be 

assigned to each area, which may not be feasible if areas have different production adjustment 

factors, 

 The bottom section of the sub drill form contains exploratory well inputs that are used in 

the exploratory well generation process. This process takes into account past and expected 

profitability and utilizes a Weibull distribution to create the expected well demand. 

25% of weight for most recent Y1 years – These variables (one for past discoveries, one for 

expected discoveries) represent the first set of coefficients used in determining the Weibull 

distribution. The default values were determined through the exogenous well fitting analysis 

performed separately in Excel. 

50% of weight for most recent Y2 years – These variables (one for past discoveries, one for 

expected discoveries) represent the second set of coefficients used in determining the Weibull 

distribution. The default values were determined through the exogenous well fitting analysis 

performed separately in Excel. 

Scale Factors – These variables (one for past discoveries, one for expected discoveries) are 

applied to the past and expected NPVs per well, respectively, in determining each model year 

well generation. The default values were determined through the exogenous well fitting analysis 

performed separately in Excel. 
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Area Specific Well Constant – During the exogenous well fitting analysis certain areas were 

assigned exponentially declining well constants to ensure proper calibration with history. This 

variable represents the well constant that is included in well generation. 

Also Apply to Areas – This extremely useful text box allows the user to apply exploratory well 

inputs for this particular area to other areas without having to launch the sub drill form for each 

area. 

Note: The exploratory well inputs were determined through the well fitting analysis, and are separate and 

distinct for many of the areas. It is not advisable to arbitrarily change the exploratory well inputs without 

performing the requisite well fitting analysis. 

3.4.5 Sub Drill Form Input Restrictions 

 One universal convention is that all entries must be expressed as numbers, and contain 

only numeric or decimal characters. Thus, “5%,” “$0.1”, and “ten” will generate input errors. 

Drilling Preference: Must be non-negative integers, with only a singular value for “1,” “2”, and 

“3.” If the area is not allowed to use a rig type, a “0” should be entered. Multiple zeros are 

allowed, as long as there is at least one rig type preference (e.g., at least one “1”). Furthermore, 

the existing rig preferences must be sequential. For example the case of having a rig preference 

of “1” and a rig preference of “3,” without a rig preference of “2” is not allowed. 

Drilling Rate: Must be non-negative numbers. 

Area Rig Factor: Must be a non-negative number between 0 and 1. 

Area Rental Rate: Must be a non-negative number. 

Production Adjustment: Must be a non-negative number between 0 and 1. 

25% of weight for most recent Y1 years: Must be a non-negative number, less than the value for 

the 50% weight by at least 0.5. 

50% of weight for most recent Y2 years: Must be a non-negative number. 

Scale Factors: Must be a non-negative number. 

Area Specific Well Constant: Must be a non-negative number. 

Also Apply to Areas: Data must be numeric data, including only commas and dashes. For 

example, if you wish to apply the values to other areas, enter them as “2, 3, 5-8, 9.” 

3.4.6 Sub Drill Form Buttons 

 The Sub Drill Form contains four buttons for user interaction. 

OK...clicking this button will test whether the user has entered acceptable values subject to the 

input restrictions, and will store the area-specific variables for use in the next model simulation. 

The model will also apply these variables to the other areas indicated in the Also Apply to Areas 

text boxes. The variables will be stored and used in each model simulation until the user changes 

them. 
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Cancel...clicking this button will close the sub drill form and return the user to the main drill 

form. Any variables that were changed while the sub drill form was open will not be saved, and 

the values will revert to those that existed prior to the current display of the sub drill form. 

Default...clicking this button will restore the area-specific default values contained in the 

underlying Lookup.mdb “Drilling” table. The model will not restore default values for any other 

area, even if the user has specified other areas in the Also Apply to Areas text boxes. If the user 

wishes to restore all area-specific defaults for the sub drill form variables, they are able to do so 

by clicking the Restore Defaults button in the main drill form. 

Help...launches the help file associated with the sub drill form. 

3.5 Production Inputs Form 

 This section describes the Production Inputs Form, and the different variables the user is 

allowed to modify. The Production Inputs form is displayed when the user selects the 

Production button on the main form. It is initially loaded with default data obtained from the 

underlying database. Production coefficients are applied in the annual determination of 

production volume from existing fields, subject to the following equation: 

Annual BoE Production = (Production Coefficient + Area Production Adjustment) * (Reserve 

Estimate Last Year + Reserve Additions This Year – Cumulative Production) 

The production coefficients are specified as a percentage of the remaining reserves. 

3.5.1 Production Form Inputs 

 The production form contains only a list box and five buttons. The list box is populated 

with the production coefficients that are used to determine the annual model year production 

from active cells. The list box contains 25 entries, corresponding to the number of field sizes 

defined in the Lookup.mdb SizeOfField data table, and its corresponding production coefficient. 

Although only 11 are visible in the figure above, the user can scroll down the list box to view the 
II-34

remaining 14 field sizes. The entry “11: 0.16” indicates that, in absence of any production 

adjustments, size 11 fields will produce 16 percent of their remaining reserves in each year. 

 The user is allowed to modify and change the production coefficients by clicking on the 

particular list box entry. The Edit Single Value box will be displayed and the user will be 

prompted to enter a new value. For example, the default production coefficient for a size 14 

field is 13 percent: 

Clicking on this will open the Edit Single Value box, and the user can change this to another 

value, 17 percent. 

Selecting the OK button on the Edit dialog box will overwrite the 13 percent previously recorded 

in the Production Inputs Form. 

 Once the user has adjusted the coefficients to fit the particular simulation requirements, 

these coefficients are accessed whenever cell production occurs. For example, suppose there is a 
II-35

cell with two class 14 fields, in their seventh year of production. Assuming there are no well 

constraints, in the following year, reserves will be added based on in-field drilling, and additional 

reserves will be added to the remaining reserves. The model will then compute the production 

by retrieving the production coefficient (now 17 percent after our last change) and applying this 

coefficient plus any area-specific production adjustment to the level of remaining reserves. The 

result is the amount of BoE produced in that model year from those two fields in that particular 

cell. The oil and gas production will be determined by the cell oil yield, and stored away until 

the results are displayed. 

3.5.2 Production Inputs Form Restrictions 

 The production form has no direct inputs, but through the use of the edit single value 

dialog box, the form ensures that the production coefficients are non-negative numbers less than 

or equal to one. An attempt to put in a number exceeding one would generate the following error 

box: 

3.5.3 Production Inputs Form Buttons 

OK...clicking this button signals that the values entered in the list box are the values the user 

wants to use in the next model simulation. If the user has not made any errors in input values, 

the OK button will store the selections. The model will generate new unconstrained production 

profiles based on the change in production coefficients, and close the form. 

Note: The cell output object is created directly from the ExistingDevProd table stored in the Lookup 

database. If the user elects to change the production profile, it is sound practice to regenerate the 

ExistingDevProd using the new unconstrained production profile. This is accomplished by clicking the 

Field Update button on the main form. 

Save to DB...if the user wishes to over-write the default values in the database, clicking this 

button will perform that action. The user is asked to verify that they wish to overwrite the 

default values, and if they choose affirmatively, the model will indeed overwrite the default 

values stored in the Lookup.mdb table “ProductionInputs.” 

Note: Once the user has saved the current selections to the database, these selections are now the 

default values! The old values are lost, and every time the IIC EDP MODEL is launched, the production 

input default values will be the last ones saved in the database. 

Default...clicking this button will re-load the default values that are stored in the underlying 

database. The values in the list box will change to equal the default values. 
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Cancel...clicking this button will close the Production Inputs Form, without saving any of the 

changes that have been made. The production coefficients will remain the same as they were 

when the production form was last opened and updated, even if the user has clicked the 

SavetoDB button. If the user wishes to employ the new defaults, they must open the form, click 

the default button, and then click OK. 

Help...loads the help file associated with the production inputs form. 

3.6 Royalty Rule Entry Form 

 This section describes the Royalty Rule Entry Form, and the different variables the user 

is allowed to modify. The royalty rule entry form is an area-specific form that is displayed when 

the user selects the Modify button in the Royalty Inputs section of the main form. The form is 

specific to the area that is displayed in the Royalty Inputs combo box when the Modify button is 

clicked. 
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3.6.1 Royalty Rule Entry Form Inputs 

 The royalty rule entry form is composed of two group boxes, a list box, an Also Apply to 

Areas text box, and five command buttons. The form’s primary function is to allow the user to 

incorporate different royalty policies for new discoveries over the forty-year model cycle. The 

user can elect to change the royalty rate, offer different types of suspension volume, or shut-off 

all royalty relief, thereby simulating a wide variety of exploration, development and production 

scenarios in the Gulf of Mexico. 

3.6.1.1 Default Values Group Box 

 The default values group box shows the currently loaded default values for this particular 

area. The default values are retrieved from the Lookup database, and are populated for all forty 

years in the list box. 

Restore Defaults...this button will re-populate the list box with the default values listed in the 

default values group box. 

3.6.1.2 Adding a New Rule 

 The Add New Rule group box allows the user to easily add new royalty rules for different 

time periods. The user is required to enter a royalty rate and one of three possible royalty 

suspension volumes (if any) per field. The three suspension types are mmBOE, mmBbl, and 

Bcf. 

mmBOE – represents the suspension volume of a combined oil and gas production in terms of 

mmBOE. For example, the Deepwater Royalty Relief Act specified suspension volumes of 17.5 

mmBOE for fields between water depths of 200 and 400 meters. 

mmBbl – represents an oil only suspension volume, if the user wishes to institute a rule that 

offers a specific amount of oil suspension, independent of gas production. 

Bcf – represents a gas only suspension volume, if the user wishes to institute a rule that offers a 

specific amount of gas suspension, independent of oil production. 

 The user is free to institute a combination of mmBOE, mmBbl, and Bcf suspension 

volumes in different years. However, in a year where the user has elected to enter both mmBOE 
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and one or both of the mmBbl and Bcf suspension volumes, the model will always use the 

mmBOE suspension volume as the definitive amount and will disregard the mmBbl and Bcf 

suspension volumes. 

 To add a rule, the user enters the requisite royalty rate and suspension volumes, followed 

by the years in which the user wishes the royalty policies to be in effect. The user then presses 

the Add button contained in the Add New Rule group box. 

 For example, the user may choose to add a royalty provision that specifies a royalty rate 

of 0.20 and a suspension volume of 17.5 mmBOE for years 5 through 10 of the model run. Once 

the Add button is depressed, the list box is updated to reflect the addition of this rule. 
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 The user is free to enter as many rules as he wants, covering the forty-year period of a 

given model simulation run. Furthermore, the user is able to take advantage of the useful Also 

Apply to Areas text box located at the bottom of the form. Once the user has established a set of 

rules for the area specified in the label at the top of the form, the user can also apply the same set 

of rules to other areas, without having to open the royalty rule entry form for each area. The user 

simply designates the other areas in the text box, and when the user clicks OK, each area is 

updated automatically. 

3.6.2 Royalty Rule Entry Form Restrictions 

 This section briefly describes the restrictions placed on values entered in the text boxes of 

the Add New Rule group box on the royalty rule entry form, thereby reducing the number of 

entry errors and avoiding error boxes: 

 One universal convention is that all entries must be expressed as numbers, and contain 

only numeric or decimal characters. Thus, “5%,” “$0.1”, and “ten” will generate input errors. 

Royalty Rate: Must be a non-negative number between 0 and 1. 
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Royalty Volumes (mmBOE, mmBbl, and Bcf): Must be non-negative numbers. 

Begin Year: Must be a value between 1 and 40, and cannot exceed the end year. 

End Year: Must be a value between 1 and 40, and cannot be less than begin year. 

Also Apply to Areas: Data must be numeric data, including only commas and dashes. For 

example, if you wish to apply the values to other areas, enter them as “2, 3, 5-8, 9.” 

3.6.3 Royalty Rule Entry Form Buttons 

 The royalty rule entry form contains five command buttons. The Default and Add 

buttons were discussed in the preceding sections. 

OK...this button click will save the area-specific royalty rates and royalty suspension volumes 

established by the user of the forty-year model simulation. If the same rules apply to other areas, 

the user should enter these areas in the Also Apply to Areas: text box prior to clicking OK. If 

there are other areas listed, the model will automatically update those areas once the OK button 

has been clicked. 

During the course of the model run, the simulation will continually track the different royalty 

rules in place in determining the annual net present value for each area and size of field, as well 

as tracking royalty revenue based on each cell’s royalty rate and remaining suspension volume. 

Cancel...this button will close the royalty rule entry form without storing any of the changes 

made by the user since the form was opened. 

Help...this will open the help file associated with the royalty rule entry form. 

3.7 Lease Drilling Distribution Form 

 This section describes the lease drilling form and how the user can modify the 

distributions to impose lease drilling constraints. In its simplest form the lease drilling 

distribution specifies for a particular model year, for a particular area the amount of exploratory 

wells that are allowed to be drilled. The leasing constraint is represented as a fraction of the 

area-specific exploratory well demanded. The constraint is imposed prior to the allocation of 

exploratory wells. As a result, an area only “uses” a number of rigs required to drill allowed 

wells, and prevents other areas from experiencing a rig shortfall when none should exist due to a 

lease drilling constraint. 

 It is through the lease drilling distribution utility/procedure that the user can model 

scenarios such as limited Eastern Gulf of Mexico drilling or alternatively, model a single sale 

simulation, where they can adjust the lease drilling distribution to examine the incremental 

effects of one more lease sale. 

Note: The user has the ability to load three named distributions that are stored in the underlying Access 

database. These encompass all areas, and are loaded via the Default, No Action and Single Sale 

buttons in the Lease Drilling Distribution group box on the Main form. 
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3.7.1 Lease Drilling Distribution Form Inputs 

 The lease drilling distribution form is an area-specific form that is displayed when the 

user selects the Modify button in the Lease Drilling Distribution section of the main form. The 

form is specific to the area that is displayed in the Lease Drilling Distribution combo box when 

the Modify button is clicked. 

 The lease drilling distribution form is composed of a change values group box, a list box 

that displays the annual allowable drilling fractions, an Also Apply to Areas text box, and four 

command buttons. 

3.7.1.1 Changing the lease drilling distribution for a number of years 

 The user can elect to change the fraction of exploratory wells that are allowed to be 

drilled by using the change values group box. The user inputs the begin year, the end year and 

the allowed fraction. Clicking the Update command button will update the lease drilling 

distribution, displayed in the list box. 
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 For example, in Area 1, there may be a lease drilling constraint which dictates that only 

20 percent of exploratory wells demanded are actually allowed to be drilled in the first ten years 

of the model run (again, this is prior to well allocation, so prior to any rig constraint). When the 

model runs, only 20 percent of the wells demanded by area one can be allocated, and the 

resulting discovery, development and production figures will represent the reduced exploratory 

well allocation. 

3.7.1.2 Changing the lease drilling distribution year by year 

 Alternatively, the user can elect to change specific years. This is accomplished by 

manually selecting the year in the list box by clicking on it. The edit single value dialog box will 

appear and prompt the user to enter an appropriate lease drilling fraction. 

 For example, suppose the user wishes to reduce the allowable exploratory well drilling in 

year two from 100 percent to 80 percent. The user clicks on the year two value, enters 0.8 in the 

edit single value dialog box and clicks ok. The lease drilling distribution form list box will show 

that the change has been made in the list box. 
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3.7.2 Lease Drilling Distribution Input Restrictions 

 This section briefly describes the restrictions placed on values entered in the text boxes of 

the change values group box on the lease drilling distribution entry form, thereby reducing the 

number of entry errors and avoiding error boxes: 

 One universal convention is that all entries must be expressed as numbers, and contain 

only numeric or decimal characters. Thus, “5%,” “$0.1,” and “ten” will generate input errors. 

Begin Year: Must be integer between 1 and 40. 

End Year: Must be integer between 1 and 40, and greater than or equal to Begin Year. 

Value: Must be a non-negative number between 0 and 1. 

Also Apply to Areas: Data must be numeric data, including only commas and dashes. For 

example, if you wish to apply the values to other areas, enter them as “2, 3, 5-8, 9.” 

In addition, if the user chooses to manually enter a single value through the edit single value box, 

they are required to include a value that is between 0 and 1. 
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3.7.3 Lease Drilling Distribution Command Buttons 

 The lease drilling distribution has four command buttons. The Update command button 

applies to the change values group box and was discussed previously. 

OK...this button click will save the area-specific lease drilling fractions established by the user 

of the forty-year model simulation. If the same annual fractions apply to other areas, the user 

should enter these areas in the Also Apply to Areas: text box prior to clicking OK. If there are 

other areas listed, the model will automatically update those areas once the OK button has been 

clicked. 

The lease drilling distributions will be accessed each model year, for each individual area to 

determine the number of exploratory wells that can actually be allocated given leasing 

constraints. 

Cancel...this button will close the lease drilling distribution form without storing any of the 

changes made by the user since the form was opened. 

Help...this will open the help file associated with the lease drilling distribution form. 

3.8 Five Year Reserves Form 

 This section describes the Five Year Reserves Form, and how the user inputs data to 

model a situation where “fixed” reserve discovery occurs during the initial five years of the 

model run. This situation arises if the user has opted to check the “Enforce Fixed Reserves” 

check box on the Main form. The model essentially runs the discovery process backwards, and 

determines the amount of exploratory well drilling in each area to discover new fields whose 

reserves add up to the desired reserve amount. 

 The five year reserves form is an area-specific form that allows the user to specify the 

reserve amount they wish to be discovered in each of the first five model years. It is conceivable 

that the user will enter a reserve estimate that can never be discovered, and so the form also 

contains an input for the maximum number of exploratory wells the model should devote to each 

area in each model year. 

 The form is displayed when the user selects the Modify button in the Five Year Reserves 

group box on the main form. The selected area to be modified corresponds to the current 

selection in the Five Year Reserves combo box on the main form. 
II-45

3.8.1 Five Year Reserves Form Inputs 

 The five year reserves form contains three text boxes and three command buttons. 

Reserve Amount(mmBOE) – this text box represents the user’s specification for the annual 

reserves to be discovered in each of the first five years. If the user enters 100 mmBOE for Area 

1, then the model will generate the annual number of exploratory wells required in each of the 

first five years to generate 100 mmBOE in discoveries each year. The number of wells will be 

passed to the discovery process for Area 1 during the five year fixed reserves period. 

Maximum Number of Wells – this text box prompts the user to specify a maximum well 

constraint, thus avoiding the possible situation that either the reserve amount can never be 

achieved or perhaps the unrealistic situation where thousands of exploratory wells are drilled 

each year to achieve the desired reserve result. This latter case would conflict with the historical 

well drilling and lead to an intuitively incorrect result. If the user enters 100 maximum 

exploratory wells for Area 1, the model will not exceed 100 annual exploratory wells for this 

area during the fixed period regardless of the fixed reserves amount desired. 

Also Apply to Areas – this text box allows the user to apply the five year reserves values for the 

specified area to other areas, as indicated in the text box. This prevents the user from having to 

open this form for each specific area when there is data duplication. 

3.8.1 Five Year Reserves Form Input Restrictions 

 This section briefly describes the restrictions placed on values entered in the text boxes of 

the change values group box on the five year reserves form. 

 One universal convention is that all entries must be expressed as numbers, and contain 

only numeric or decimal characters. Thus, “5%,” “$0.1,” and “ten” will generate input errors. 

Reserves Amount(mmBOE): Must be a non-negative number. 

Maximum Number of Wells: Must be a non-negative number. 
II-46

Also Apply to Areas: Data must be numeric data, including only commas and dashes. For 

example, if you wish to apply the values to other areas, enter them as “2, 3, 5-8, 9.” 

3.8.3 Five Year Reserves Form Buttons 

OK...this button click will save the area-specific five year reserves estimate and maximum 

number of wells established by the user. If the same reserves estimates and maximum wells 

apply to other areas, the user should enter these areas in the Also Apply to Areas: text box prior 

to clicking OK. If there are other areas listed, the model will automatically update those areas 

once the OK button has been clicked. 

Cancel...this button will close the five year reserves form without storing any of the changes 

made by the user since the form was opened. 

Help...this will open the help file associated with the five year reserves form. 

3.9 Outputs Form 

At the conclusion of each model simulation, the outputs form is displayed. The user can 

either elect to view a selection of results, or choose to exit the outputs form and return to the 

Main form. 

Note: Once the user has exited the outputs form by either clicking the Exit button, using the close box, or 

pressing Alt+F4, they will not have the opportunity to view the results of the last model simulation. In 

order to do so, they will have to press Run on the main form without modifying any assumptions to arrive 

at the outputs form once again. 
II-47

3.9.1 Selecting the Output Data 

 The user is allowed to view the simulation results based on an area summary basis, on an 

aggregated Gulf of Mexico basis, or by detailed cell data. The user can select any combination, 

but must choose at least one option in order to launch Excel and view the results. Section 5 of 

the User’s Guide discusses the output results in detail. 

Area Summary Data – Checking the Area Summary Data check box will allow the user to view 

results based on an area basis. The IIC EDP MODEL has split the Gulf of Mexico into 21 

different areas, corresponding to the three planning areas, and seven water depth categories. The 

results that are generated using the Area Summary Data will aggregate individual size of field 

data within each area, and display only the annual model year results on an area by area basis. 

Aggregated Gulf Data – Check the Aggregated Gulf Data check box will allow the user to view 

results based on seven GoM regions that cut across the area by area analysis. The underlying 

data are identical to that used in the Area Summary Data, but instead of displaying results on an 

area by area basis, the results are displayed for three water depth categories (slope, shelf and 

deepwater), three planning areas (CGM, WGM, and EGM) and for the total aggregated gulf (all 

21 areas rolled up into one category). 

Detailed Data by Cell – Checking the Detailed Data by Cell check box will allow the user to 

view the results based on an area and size of field basis. This is the lowest level of aggregation 

possible, and will display results for all 525 combinations of area and size of field. 

Note: Given the vast amount of data associated with this option, the user should be prepared to wait for a 

minute or so while the data is written out to Excel. 

3.9.2 Viewing The Results 

 Once the user has specified the different result options, they can click the Summary 

Data button to launch a new Excel workbook, which displays results selected by the user. The 

Excel outputs are discussed in Section 5 of the User’s Guide. 

4. Running the Model 

 Once the inputs are complete, you can run the full simulation by clicking the Run button 

on the main form. The IIC EDP MODEL displays the annual progression in the upper list box 

on the main form. Furthermore, the lower list box will display how many fields were discovered 

in each year, followed by those that are economically feasible. These data are presented as a test 

of reasonableness, in helping the user determine whether or not they wish to view the complete 

results associated with the particular model run. 
II-48

 In order to view results, it is necessary to run at least one simulation after the program has 

been launched. If the user accidentally closes the outputs form before viewing the results, they 

can regenerate the exact same simulation by clicking the Run button before modifying any 

results or assumptions. 

4.1 Modeling the Single Sale Scenario 

One requirement of the IIC EDP MODEL was to incorporate the ability to model effects 

of a single lease sale. This requirement can be satisfied through the use of the lease drilling 

distribution. One can assume two separate scenarios, where the difference will illustrate the 

incremental effects on exploration, discovery, production, infrastructure additions/removals and 

royalty revenue due to the single lease sale. 

 The first scenario represents the situation where no additional lease sales are held during 

the next forty years. This represents a situation where no exploratory drilling will occur due to 

additional lease sales, rather only existing lease sales (a “No Action” situation). The user models 

this situation by determining two exogenous factors: the number of years each lease can drill, 

and the distribution of exploratory well drilling over this time. 

 For example, assume there are no additional lease sales in Area 1 (CGM 0-60) once the 

model begins running. This is analogous to stating that in model year 1 (2002 for IIC EDP 

MODEL 1.0) and all future years, a lease sale does not occur in Area 1, and over the initial 
II-49

model years, exploratory well drilling will decline to zero as old leases “expire.” Assume that 

the lease duration of each Area 1 lease is five years, and that a typical drilling distribution over 

that time is 20 percent for each year. This means that of all the exploratory wells drilled in a 

particular lease, 20 percent are drilled the first year, 20 percent the second year, 20 percent the 

third year, 20 percent the fourth year, and 20 percent in the fifth, and final, year. The 

significance of this distribution is that in model year 1 (2002), there will be 100 percent drilling 

for Area 1, 20 percent attributable to leases let in 1997, 20 percent attributable to leases let in 

1998, 20 percent attributable to leases let in 1999, 20 percent attributable to leases let in 2000, 

and finally 20 percent attributable to leases let in 2001. If there are no further lease sales, we 

will see a reduction in lease drilling in model year 2 (2003), as the 1997 leases have expired, and 

there is not a corresponding offset since no leases were let for 2003. Thus, the drilling 

percentage for model year 2 (2003) will be 80 percent. The following figure illustrates the 

declining lease drilling distribution to model no additional lease sales in Area 1. 

Model 

Year 1 

Model 

Year 2 

Model 

Year 3 

Model 

Year 4 

Model 

Year 5 

Model 

Year 6 

 2002 2003 2004 2005 2006 2007 

1997 0.2 

1998 0.2 0.2 

1999 0.2 0.2 0.2 

2000 0.2 0.2 0.2 0.2 

2001 0.2 0.2 0.2 0.2 0.2 

2002 0 0 0 0 0 0 

2003 0 0 0 0 0 0 

2004 0 0 0 0 0 0 

2005 0 0 0 0 0 0 

2006 0 0 0 0 0 0 

2007 0 0 0 0 0 0 

Drill 

Distribution 1 0.8 0.6 0.4 0.2 0 

 The user can model the no additional sales by incorporating this lease distribution for 

Area 1 by opening the lease drilling distribution form. The user can set the individual values for 

year 1 to 1, year 2 to 0.8, year 3 to 0.6, year 4 to 0.4, year 5 to 0.2 and all remaining years (using 

the change values group box) to 0. 
II-50

 The user can also apply this distribution to other areas using the Also Apply to Areas. 

Once the user has effectively modeled the no additional lease sales scenario, they can click Run

on the main form to generate the model simulation results. These results (described in Section 5) 

can be saved for future comparison. 

 The user can then model the effect of one additional lease sale, by allowing a model year 

1 (2002) sale. In area 1, this would result in lease drilling over model years 2-6 that was 

disallowed in the previous model simulation. 

Model 

Year 1 

Model 

Year 2 

Model 

Year 3 

Model 

Year 4 

Model 

Year 5 

Model 

Year 6 

 2002 2003 2004 2005 2006 2007 

1997 0.2 

1998 0.2 0.2 

1999 0.2 0.2 0.2 

2000 0.2 0.2 0.2 0.2 

2001 0.2 0.2 0.2 0.2 0.2 

2002 0 0.2 0.2 0.2 0.2 0.2 

2003 0 0 0 0 0 0 

2004 0 0 0 0 0 0 

2005 0 0 0 0 0 0 

2006 0 0 0 0 0 0 

2007 0 0 0 0 0 0 

Drill 

Distribution 1 1 0.8 0.6 0.4 0.2 
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 In a manner similar to the no additional sales scenario, the user can modify the lease 

drilling distribution to reflect the effects of the model year 1 (2002) lease sale. 

Note: There is a one year time lag assumed in the leasing process. Leases let in model year 1 will begin 

the five-year drilling cycle in model year 2. 

 The user can also apply this distribution to other areas using the Also Apply to Areas. 

Once the user has effectively modeled the one additional lease sale scenario, they can click Run

on the main form to generate the model simulation results. These results can be compared 

directly to the results saved from the no additional lease sale simulation, and the differences

represent the incremental effect of the additional lease sale. 

4.2 Using the No Action and Single Sale Buttons 

 The IIC EDP MODEL stores three named lease drilling distributions in the underlying 

Lookup.mdb. The user can bypass the manual lease drilling distribution entry form described in 

Section 4.1 by loading pre-set distributions automatically from the database. The user should 

depress the No Action button in the Lease Drilling Distribution group box on the main form to 

load the no additional lease sales drilling distribution. This has the identical effect of entering in 

the distributions through the lease drilling distribution form, assuming the inputs in the pre-set 

table are consistent with the user’s expectations. 
II-52

 Similarly, following the no action simulation, the user can then load the single additional 

sale drill distributions by clicking on the Single Sale button in the Lease Drilling Distribution 

group box on the main form. Following this simulation run, the user is free to compare the 

results as described above. 

4.3 Drill Distribution Determination 

 The IIC EDP MODEL is extremely flexible in allowing the user to perform exogenous 

data analysis to determine the appropriate drilling distributions for each area. It is incumbent 

upon the user to establish the lease duration and drilling profile for the areas they have defined. 

In addition, the simulation may lead to erroneous or incomplete results if the user does not take 

necessary caution in defining appropriate lease drilling distributions. The user should ensure that 

the lease drilling distribution he is electing to use satisfies his requirements through data analysis 

of existing or expected conditions. Furthermore, the user must remember that inputs do not vary 

in successive model runs unless modified by the user. Unless the user terminates the program 

and re-launches, selects one of the lease drilling distribution group box buttons, or manually 

modifies the lease drilling distributions through the lease drilling distribution form, the 

distributions will remain as they are from the prior run. 

5. Outputs 

 The IIC EDP MODEL can display three standard result pages, and one inputs page. 

When presented with the outputs form, the user is allowed to select a combination of three output 

scenarios, described in Section 3.9. This section discusses what results are displayed, and the 

layout of each display. 

5.1 Output Results 

 The IIC EDP MODEL stores and displays model simulation results for eleven variables: 

Discovered Fields – represents the number of fields discovered each year through the discovery 

process. 
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Exploratory Wells Drilled – represents the number of exploratory wells that are actually drilled 

in each historic or model year. The lowest level of aggregation for this variable is on an area 

basis, and therefore is not included in the Detailed Data by Cell output. 

Grown Reserves Discovered – represents the grown volume of reserves discovered (in mmBOE) 

in each model year. 

Oil Production – represents the volume of oil, in millions of barrels (mmBbls), produced each 

year. 

Gas Production – represents the volume of gas, in billions of cubic ft (bcf), produced each year. 

Production Wells Drilled – represents the number of in-field production wells that are drilled 

each year. 

Non-Production Wells Drilled – represents the number of in-field non-production wells that are 

drilled each year. 

Platforms Added – represents the number of platforms added each year. The IIC EDP MODEL 

is an expected value simulation, thus it is conceivable that partial platforms are installed and 

removed, depending on the new fields discovered. 

Platforms Removed – represents the number of platforms removed. The IIC EDP MODEL is an 

expected value simulation, thus it is conceivable that partial platforms are installed and removed, 

depending on the new fields discovered. 

Pipeline Miles Added – represents the initial number of pipeline miles added for each nonproducing field in the final year of development. 

Royalty Revenue – represents the dollar amount of royalty revenue collected each year. The 

royalty revenue is determined based on the model year price, and individual cell production 

volumes, royalty rates, and suspension volumes. This variable is not included in the Detailed 

Data by Cell output. 

Total Drilling Depth – represents the cumulative sum of drilling (in feet) for each model year, 

separated by exploratory wells, producing wells, and non-producing wells. This variable is not 

included in the Detailed Data by Cell output. 

5.2 Historic Data 

 The IIC EDP MODEL includes historic data in the Excel display for several of the output 

variables, allowing easy comparison of actual historic years and model years. This allows the 

user to easily view the transition point (2001-2002) to verify that the model is calibrated 

accurately. Historic data was derived from various MMS data sources, and is included for field 

discoveries, exploratory wells drilled, oil production, gas production, production wells drilled, 

platforms added and platforms removed. The IIC EDP MODEL currently does not include 
II-54

historic data for non-prodution wells drilled, pipeline miles added, and royalty revenue. The 

historic data are not included in the Detailed Data by Cell output. 

5.3 Area Summary Data 

 The selection of the Area Summary Data check box on the outputs form will result in the 

creation of an Excel worksheet displaying historic and model year data on an area-specific basis: 

 Every output sheet is marked by the Scenario Name and Current Date/Time, displayed 

in cells A1 and B1 of each worksheet. The model results are displayed variable by variable (e.g., 

discovered fields, oil production, etc.) for each area. The areas are listed in column A, under the 

header for each variable type. For example, cell A26 lists the variable, “Exploratory Wells 

Drilled” and cells A27 through A47 list the corresponding areas (1-21). The IIC EDP MODEL 

is configured for 21 areas, defined as: 

Area 

Planning 

Area Water Depth 

1 CGM 0-60 meters 

2 CGM 60-200 meters 

3 CGM 200-400 meters 

4 CGM 400-800 meters 

5 CGM 800-1600 meters 

6 CGM 1600-2400 meters 
II-55

7 CGM 2400+ meters 

8 WGM 0-60 meters 

9 WGM 60-200 meters 

10 WGM 200-400 meters 

11 WGM 400-800 meters 

12 WGM 800-1600 meters 

13 WGM 1600-2400 meters 

14 WGM 2400+ meters 

15 EGM 0-60 meters 

16 EGM 60-200 meters 

17 EGM 200-400 meters 

18 EGM 400-800 meters 

19 EGM 800-1600 meters 

20 EGM 1600-2400 meters 

21 EGM 2400+ meters 

 The historic and model years are listed in row 2, beginning with the historic years and 

proceeding across the sheet to the last year of the 40-year model simulation. As each of the 

outputs displays the results, the worksheets are frozen to allow the user to keep the variable, area 

and year labels in view at all times. The user can view the transition point at columns T and U. 

 In the above example, columns T and U are highlighted only for comparison purposes 

and are not highlighted in the model output. 
II-56

5.4 Aggregated Gulf Data 

 The selection of the Aggregated Gulf Data check box on the outputs form will result in 

the creation of an Excel worksheet displaying historic and model year data on a Gulf of Mexicospecific basis: 

 Seven categories are defined, and are entirely composed of the 21 areas defined in the 

Area Summary Data. 

Shelf (0-200m) – represents all GoM areas under water depths of 200 meters. These are Areas 1, 

2, 8, 9, 15, and 16. 

Slope (200-800m) – represents all GoM areas between water depths of 200 and 800 meters. 

These are Areas 3, 4, 10, 11, 17, and 18. 

Deepwater (800m+) – represents all GoM areas with water depths greater than 800 meters. 

These are Areas 5-7, 12-14, and 19-21. 

CGM – represents all water depths in the Central Gulf of Mexico. These are Areas 1-7. 

WGM – represents all water depths in the Western Gulf of Mexico. These are Areas 8-14. 

EGM – represents all water depths in the Eastern Gulf of Mexico. These are Areas 15-21. 
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Total Gulf – represents all areas in the Gulf of Mexico. These are Areas 1-21. This category 

represents the highest level of data aggregation in the IIC EDP MODEL. 

 Results are displayed in a manner analogous to the Area Summary Data, with column A 

containing variable headers and the seven category labels, with the data displayed on an annual 

basis to the right of each label. 

5.5 Detailed Data By Cell 

 The IIC EDP MODEL handles each cell based on area and size of field. The Detailed 

Data by Cell output represents the lowest level of aggregation, representing the specific field 

sizes for each area. Historical data are not included for the Detailed Data by Cell output display. 

 Data are displayed for each variable, each area, and each size of field. The user can 

determine the number of discovered fields for Area 1, Size 12 in model year 4 (2005) by finding 

the appropriate variable (“Discovered Fields” – cell A4), the appropriate Area (listed in column 

A – Area 1 is cells A5-A29), the appropriate field size (listed in column B – Size 12 is cell B16) 

and finding the appropriate Model Year (2005 – column F). The desired result is the intersection 

of these columns and rows, cell F16 – 0.05 fields were discovered. The result is highlighted 

above for this example only, and is not highlighted in the actual model output. 

Note: The Detailed Data by Cell output contains over 4,500 rows of data in Excel, and takes 

approximately 40 seconds to populate the corresponding Excel worksheet. The user should be prepared 

to wait and understand that the model has not crashed during this delay time. 
II-58

5.6 The Input Data 

 The final Excel worksheet created displays selected input assumptions so the user can 

keep track of what assumptions were made to generate the simulation results. 

5.7 Saving Data 

 Once the Excel connection is established and the user creates new Excel workbooks, it is 

the responsibility of the user to save any model simulation results contained in the Excel 

workbooks. Terminating the IIC EDP MODEL will not prompt the user to save any open 

Excel workbooks. Only when the user elects to close the Excel application will they be 

prompted to save any workbooks that are currently open (and have not been saved to date). 

6. Updating the Model 

 In this section, we describe the process for updating the model, including what 

components can be updated, and how. Greater detail for updating the model and developing 

other inputs to the model is provided in Volume III. 

6.1 Undiscovered Resources 

 The IIC EDP MODEL is entirely dependent on the user’s input for previous discoveries 

and the undiscovered resource estimates. To update the undiscovered resources, the user is only 

required to adjust the inputs of the “UndiscoveredFields” table in the Lookup Access Database. 

For each area and size of field, the user is required to enter the number of undiscovered fields 

remaining, the average size of each remaining field, the total number that have been discovered 

and the appropriate search coefficients: 

Area SizeOfField Undiscovered MMBoE Discovered ModelYear SearchCoeff1 SearchCoeff2 SearchCoeff3

1 1 0.000 0.0000 3 0 0 0.0026864 1

1 2 0.000 0.0000 2 0 0 0.0026864 1

1 3 0.846 0.2961 6 0 0 0.0021005 1

1 4 2.792 0.3661 9 0 0 0.0015940 1

1 5 5.025 1.1015 20 0 0 0.0011670 1

1 6 16.326 1.6441 34 0 0 0.0008193 1

1 7 21.643 3.0907 60 0 0 0.0005510 1

1 8 42.011 6.2814 84 0 0 0.0003622 1

1 9 56.786 12.2134 73 0 0 0.0002527 1

1 10 59.886 23.2452 79 0 0 0.0002227 1

1 11 36.210 45.6668 66 0 0 0.0002720 1

 The above figure represents only the first 11 rows of the UndiscoveredFields table, but 

includes all the variables that are needed. It should be noted that the Model Year is always set to 

zero, as this is an internal coding variable that indicates the initial data in the UndiscoveredFields

table is the beginning point. Furthermore, SearchCoeff1 is currently set to zero and 

SearchCoeff3 is currently set to one for each row. These coefficients are not used in the current 
II-59

IIC EDP MODEL, and are included as “hooks” for possible areas of future expansion in the 

discovery model. 

 The user can overwrite the current UndiscoveredFields table in a number of ways, 

however we encourage that the user export the table into Excel, saving it on disk as an Excel file. 

To export the table, the user only needs to right-click on the table name, and select Export... 

from the drop down menu that is displayed. This will open the Export Table window, where the 

user should select “Microsoft Excel 97-2002 (*.xls)” from the Save as type: combo box, and 

save the file using the given “UndiscoveredFields.xls” name. Once saved as an Excel file, the 

user can open the table in Excel, and modify in a manner that we feel is much easier than 

modifying each row of the table in the datasheet view in Access. 

Note: The user should not modify the column names as the IIC EDP MODEL will crash if it cannot 

recognize the original column names contained in each Lookup table! 

 After the user has updated each row, they can import the table back into Access, 

replacing the old UndiscoveredFields table. The user should delete the old UndiscoveredFields 

table prior to importing the new table. To import the Excel table, the user opens the Access 

database, ensuring that the main screen lists the various tables. Right clicking on any whitespace in the table name section will display a pop-up menu. The user should select the 

Import... entry. This will display the Import window, where the user should change the Files of 

type: to Microsoft Excel, and select the UndiscoveredFields.xls file that was saved as described 

in the previous paragraph. After clicking the Import button, the Import Spreadsheet Wizard will 

be displayed. The user should follow the steps, selecting the UndiscoveredFields sheet, selecting 

the “First Row Contains Column Headings” check box, store the data into a new table, skip over 

the Field options window, select “No primary key,” and name the table UndiscoveredFields.

 At this point, the table will appear in the Main table window, and the user can finish the 

importation process by setting the primary keys. The user must open the table in design view, 

and highlight the first two rows: Area and Size of Field, and click on the primary key button on 

the toolbar, or right click the mouse over the highlighted rows and select the Primary Key option. 

Setting the Primary Key is not required; however doing so usually has a beneficial impact on the 

performance of the model. 

Note: It is incumbent upon the user to perform the exogenous well-fitting analysis to determine that the 

search coefficient they are using is reflective of the drilling history and well expectations. 

6.2 Existing Fields 

In addition to updating the undiscovered resources, the user is also allowed to update the 

existing field inputs, to ensure that both data sets agree with each other. Failure to do so will 

lead to results that may not agree with the overall resource estimate chosen by the user. To 

update the existing field distribution, including allocating each field to a particular “cell,” the 

user only needs to update the “FieldInput” table in the Lookup database, and then click on the 

FieldUpdate button on the IIC EDP MODEL main form. In updating the FieldInput table, the 

user can either do so manually in the datasheet view, or perform an identical export/import 
II-60

process as that described in the Undiscovered table update. If the user elects to do so in Excel, 

he should not change any column headings, and should define the FieldName as the primary key. 

 For each field, the user is responsible for the following variables. We have also included 

the source of where we obtained the data for each variable in the default IIC EDP MODEL 

FieldInput table: 

 

FieldName DiscYear Area

AC024 1998 12

AC025 1997 12

AC065 1997 12

AC200 1998 12

AC600 1996 13

AT008 1997 5

Field Name: Represents the distinct name associated with each existing field. The field names, 

which we obtained directly from the MMS, typically consist of a two letter area code, followed 

by a three digit number, e.g., AC200, EB601, etc. 

Disc Year: Represents the year of discovery for each field. This variable is not used in the 

model to date, but is included for reference purposes. Discovery dates were also provided by the 

MMS. 

Area: Represents the area, as defined by the user, in which the field resides. The default IIC 

EDP MODEL divides the Gulf of Mexico into 21 areas according to planning area and water 

depth. For each field, the MMS provided data on water depth and planning area (contained in 

the National Assessment, production data, and additional MMS correspondence). For example, 

the 2000 National Assessment contains a file entitled “fldna99.xls” which lists field AC024 as 

being in the Western Gulf of Mexico at a water depth of 4,851 feet. Based on the default IIC 

EDP MODEL areas, the area variable for AC024 would be 12. 

 

FieldName OilEst GasEst TotalEst GrownEst

AC024 7.8 1.67 9.46 44.23

AC025 71.01 12.64 83.64 332.05

AC065 0.43 4.01 4.45 10.36

AC200 6.8 0.82 7.62 35.64

AC600 0.06 0.82 0.88 3.02

AT008 0 1.31 1.31 3.05

OilEst: Represents the user-provided estimate of recoverable oil. The default data is based on 

values contained in the 2000 National Assessment and additional correspondence for more 

recently discovered fields. 

GasEst: Represents the user-provided estimate of recoverable gas. The default data is based on 

values contained in the 2000 National Assessment and additional correspondence for more 

recently discovered fields. 

TotalEst: Represents the sum of the oil and gas estimates. The default data is based on values 

contained in the 2000 National Assessment and additional correspondence for more recently 

discovered fields. 
II-61

GrownEst: Represents a grown recoverable resource estimate. The default data relies upon the 

grown estimates using the 2000 National Assessment and additional correspondence for more 

recently discovered fields. 

Note: The GrownEst is the most important of the reserve estimates, as it represents the model’s view of 

the total recoverable resources, regardless of the TotalEst. 

FieldName TotalOilProd TotalGasProd ActivePlats RemovedPlats

AC024 0 0 0 0

AC025 12,109,170 15,067,456 1 0

AC065 0 0 0 0

AC200 0 0 0 0

AC600 0 0 0 0

AT008 0 0 0 0

TotalOilProd: Represents the total barrels of oil produced from each field as of the start of the 

model. The source of the default data is the production data provided to IIC, Inc. by the MMS. 

The most recent data file was provided in December 2003, and includes monthly production data 

on a field basis. 

Note: This is a cumulative total, not just the last year before the model run! 

TotalGasProd: Represents the total mcf of gas produced from each field as of the start of the 

model. The source of the default data is the production data provided to IIC, Inc. by the MMS. 

The most recent data file was provided in December 2003, and includes monthly production data 

on a field basis. 

Note: This is a cumulative total, not just the last year before the model run! 

ActivePlats: Represents the number of platforms that are currently in place during the last year 

prior to the start of the model run. The default data are based on the analysis of the platform 

data provided to IIC, Inc. by the MMS. These data include line item entries on each platform 

installed in the Gulf of Mexico on a field basis. 

Note: The initial download of platform data included missing data and duplication errors. IIC, Inc. 

reduced and modified the data to match field names and descriptions consistent with the field names and 

data used from other data sources. 

RemovedPlats: Represents the per field cumulative number of platforms that have been removed 

prior to the start of the model run. The default data are based on the analysis of the platform 

data provided to IIC, Inc. by the MMS. These data include line item entries on each platform 

removed in the Gulf of Mexico on a field basis. 

Note: The initial download of platform data included missing data and duplication errors. IIC, Inc. 

reduced and modified the data to match field names and descriptions consistent with the field names and 

data used from other data sources. 
II-62

FieldName UpdatedResEst RoyaltyRate RemRoymmBOE RemRoymmBbls RemRoyBcf

AC024 18.60 0.125 0 0 0

AC025 163.85 0.125 0 0 0

AC065 11.51 0.125 0 0 0

AC200 21.84 0.125 0 0 0

AC600 10.25 0.125 0 0 0

AT008 3.39 0.125 87.5 0 0

UpdatedResEst: Represents a more updated reserve estimate than that contained in the 

GrownEst column. Per the request of the MMS, the IIC EDP MODEL was constrained by the 

reserve estimates in the 2000 National Assessment. These estimates were made as of January 1, 

1999. However, in determining cumulative production, we encountered several fields whose 

production exceeded the grown reserve estimate. In these cases, we elected to rely upon the 

UpdatedResEst or increased the reserve estimate to avoid overproduction of resources. The 

source of the default UpdatedResEst was data provided by the MMS in March 2003 (grown 

reserve estimates) and June 2003 (updated field data). 

RoyaltyRate: Represents the royalty rate applicable to field production. 

RemRoymmBOE: Represents the remaining suspension volume (in millions of BOE) that the 

field is allowed. 

RemRoymmBbls: Represents the remaining oil suspension volume (in millions of barrels of oil) 

that the field is allowed. It is distinct and separate from the RemRoymmBOE variable. 

RemRoyBcf: Represents the remaining gas suspension volume (in billions of cubic feet) that the 

field is allowed. It is distinct and separate from the RemRoymmBOE variable. 

Note: All royalty variables were determined by examining lease level data to determine the applicable 

rate and suspension volumes. 

 Once the user has updated the data for all existing fields he wishes to include, he can 

replace the existing FieldInput table in the Lookup database. 

Note: The new data set will not be incorporated into model runs until after the user has pressed the 

FieldUpdate button during the execution of the IIC EDP MODEL. Only after the user has generated a 

new existing development production table will the new field inputs be used in the model runs. 

6.3 Historic Tables 

The user will also need to update the historic tables to incorporate actual events. The 

user can update the Historic, HistoricEWellsDrilled, HistoricFieldsFound, and HistoricOutputs 

table to reflect new data. Furthermore, it will become necessary to add additional historic net 

present values to the NPV_OutputHistoric table that will be used in the well generation 

equations. 
The Department of the Interior Mission

As the Nation's principal conservation agency, the Department of the Interior has responsibility 

for most of our nationally owned public lands and natural resources. This includes fostering 

sound use of our land and water resources; protecting our fish, wildlife, and biological diversity; 

preserving the environmental and cultural values of our national parks and historical places; 

and providing for the enjoyment of life through outdoor recreation. The Department assesses 

our energy and mineral resources and works to ensure that their development is in the best 

interests of all our people by encouraging stewardship and citizen participation in their care. 

The Department also has a major responsibility for American Indian reservation communities 

and for people who live in island territories under U.S. administration. 

The Minerals Management Service Mission 

As a bureau of the Department of the Interior, the Minerals Management Service's (MMS) 

primary responsibilities are to manage the mineral resources located on the Nation's Outer 

Continental Shelf (OCS), collect revenue from the Federal OCS and onshore Federal and Indian 

lands, and distribute those revenues. 

Moreover, in working to meet its responsibilities, the Offshore Minerals Management Program 

administers the OCS competitive leasing program and oversees the safe and environmentally 

sound exploration and production of our Nation's offshore natural gas, oil and other mineral 

resources. The MMS Minerals Revenue Management meets its responsibilities by ensuring the 

efficient, timely and accurate collection and disbursement of revenue from mineral leasing and 

production due to Indian tribes and allottees, States and the U.S. Treasury. 

The MMS strives to fulfill its responsibilities through the general guiding principles of: (1) being 

responsive to the public's concerns and interests by maintaining a dialogue with all potentially 

affected parties and (2) carrying out its programs with an emphasis on working to enhance the 

quality of life for all Americans by lending MMS assistance and expertise to economic 

development and environmental protection.