Devising Development Plans for Oil Reserves with a Tailored Strategic Planning Model (SPM)
Authors: Dougherty E.L. , Chang J. , Taeger J.P. , Al-Fulaij A/N. , McBride R.D. 
Published: December 2007

Abstract
This paper presents an analytical approach that determines the optimal way to supply targeted rates of oil offtake from one or more oil reservoirs. In general each reservoir produces a mixture of associated gas, crude oil and water. These fluids are separated in a sequence of surface processing facilities in which oil is prepared for shipment or refining, associated gas is split into five products and water is disposed of or injected into the producing formations. Produced gas may be recycled for gas lift and additional water for injection obtained from a sea water processing plant. Some gas requires sweetening before the liquids recovery plant.
The optimal plan is determined with a Strategic Planning Model (SPM). The time horizon varies from five to 30 years. The plan specifies the production rate and surface processing route of all fluids produced from all reservoirs in every year of the horizon. The plan also specifies all investments in wells, gas lift equipment, water injection and supply facilities, surface separation, gas compression and liquid recovery facilities.
In addition to the desired crude offtake vector input for an optimization includes sales price of crude and products and escalated investment and operating costs vs time. Input also fixes the existing capacity in all reservoirs and of all surface processing equipment and defines the expansion alternatives available. SPM uses a generalized network flow model with side constraints to model the capacitated flow possibilities for all fluids. SPM's network solver determines the plan which maximizes discounted cash flow (NPV). The optimal plan is determined iteratively. On each iteration the network model is a linearized representation of the physical system for the current estimates of the optimal flows. At convergence the optimal flows correspond closely to those used for the latest linearization.
This paper explains the analytical approach and reports on computing experience. A brief review of current and planned applications is given. A companion paper gives an in-depth look at applications and benefits from SPM's use.

Introduction
SPM is a computer modeling system whose seven modules:interactively create input data files,allocate needed storage while reading these input files,generate a model of the segment (may be all) of Kuwait Oil Company's (KOC) oil producing complex defined by the input,determine the optimal solution that supplies targeted offtake rates, andoutput graphs, tables and input files for Excel.
The primary technical advance in SPM is the representation of a large crude oil producing, gathering and processing system as a generalized network flow model with side constraints. To simplify the discussion we refer to the latter as SPMMOD.
We sketch the computer layout of SPM, explain briefly how each module works and outline some of the mathematical procedures used to construct each system iteration's linearized SPMMOD. Given the extent of the underground and surface facilities, SPMMOD consists of a very large number of linear equations. However, because the bulk of these are contained in the network, solution times are reasonable. As a result it is feasible to apply SPM a broad range of planning problems, some of which encompass both exploration and development planning of multi-reservoir situations over a 30-year horizon subdivided into np = 15–20 periods. How SPM fits into KOC's management process is discussed along with benefits foreseen from current and projected applications.

What SPM Does
Investment decisions considered include:
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