Integrating Resource Surveys and Portfolio Management
Authors: Etherington John 
Published: March 2010

Implementing a merged, corporate-wide portfolio management and resource survey system requires a rigorous approach to integrating volume and value assessments. In the proposed system design, a single database thoroughly documents a company's current hydrocarbon assets with associated risks and uncertainties; stochastic applications are then used to project future year changes to this asset portfolio, and compute economic performance under alternative capital investment scenarios.

Introduction

Energy companies are increasingly adopting stochastic-based portfolio management applications to improve long term planning. However, the resource inventory systems that document the underlying hydrocarbon assets are often deterministic-based, and incompletely populated. Typically reserve reporting is a perfunctory annual regulatory disclosure process, and is not well integrated with the portfolio planning process.

Dynamic Resource Tracking

Resource volumes inventories must accommodate the dynamics of industry activities (Figure 1). In addition to the annual reductions through production, there are a number of potential additions (exploration discoveries, acquisitions) and deletions(property sales). Moreover, the internal uncertainty distribution of the inventory changes as developments proceed. These distributions can be characterized both stochastically and by resource classes; for example, a drilling program may transfer probable to proved (developed and undeveloped) reserves.

Many financial performance metrics (cost of finding, reserves replacement ratio, reserves/production ratio) require integration of field level proved reserve volumes with production and cash flow profiles without the "portfolio effect" inherent in stochastic aggregation.

Resource Classification

A modified version of the SPE petroleum resource classification(1) (Figure 2) provides a framework for characterizing hydrocarbon opportunities in terms of their technical and commercial uncertainty. Note that the horizontal axis represents a continuous uncertainty distribution, while the vertical axis is modelled as a series of chance nodes.

A contingent resource is a discovered volume that has a commercial constraint (e.g., lack of gas pipeline). A contingent resource may transfer to a reserve, given a funding commitment based on improvements in project economics and/or technology; the chance of overcoming the commercial contingency is termed "Pct."

The chance of converting exploration prospective resources to discovered volumes, i.e., the chance of prospect success, is termed "Pg." Technical certainty subdivisions for undiscovered prospective resources use the SPE terminology low/best/high estimate. The SPE recommended correlation of resource classes to stochastic distributions is that a proved volume is greater than 90% probability (&gt; P90), proved plus possible &gt; P50, and proved plus probable plus possible is &gt; P10.

Oil and gas opportunities cover a wide spectrum of upstream projects, from mature producing fields to poorly defined exploration leads. The portfolio may include potential projects on acreage owned by others or not currently leased. For portfolio aggregation, each non-owned opportunity must be discounted by an associated chance of capture ("Pcp"). In addition to the "identified projects," the portfolio projection includes a series of yet "unidentified opportunities;" these are represented using production and resource volume uncertainty profiles taken from identified analog entities.

Deterministic-Probabilistic Integration