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Shelf's Gifts Just Keep on Giving

Older Fields Continue to Add Reserves

If you want a glimpse of the future, you first take a good look at the past.

This is the approach taken by Richard Nehring, president of NRG Associates, in his recent study to assess the future potential for hydrocarbon production on the Gulf of Mexico (GOM) Outer Continental Shelf (OCS).

"It is only through a careful and extensive analysis of the shelf's past, including both what happened and what didn't happen, that we can have a realistic basis for understanding what is likely to occur in its future," Nehring said

He will present the findings from his study at the upcoming GCAGS annual meeting in Houston. Taking the meeting's general theme a step further, the paper exhorts the audience to "Remember the Past To Visualize the Future."

An increasing number of companies and individuals in the domestic oil and gas industry consider the heavily-drilled shelf to hold little promise for the future, particularly its vast array of aging fields. This makes Nehring's findings that much more compelling.

"When you look at recent reserve additions - from 1991-1998 - we've actually added more reserves on average in older fields than the average size of new field discoveries," he said. "And I think it will come as a great surprise to people that that's where the big additions on the shelf are coming from."

Additions Add Up

To evaluate the past and envision the future of the OCS, Nehring focused on reserve additions - their rates, composition and distribution. He explained these are the goal and measure of success of drilling activity and, aggregated over time, add up to known petroleum resources.

The data source on reserve additions used in the study is the Significant Oil and Gas Fields of the Gulf of Mexico Database, a subset of NRG Associates' Significant Oil and Gas Fields of the United States Database.

Recent (1991-98) reserve additions on the GOM OCS were 6.57 billion barrels of oil equivalent (BOE), or 15.4 percent of total U.S. reserve additions of 42.6 billion BOE. These recent additions, which accounted for 17.6 percent of the 37.3 BOE ultimate recovery on the shelf, were predominantly natural gas (69 percent). The crude oil component was 20 percent, and natural gas liquids accounted for 11 percent.


Table 1.
Recent Reserve Additions and Ultimate Recovery by Product on the Gulf of Mexico OCS Shelf

 

Crude Oil
(million bbls)

NGL
(million bbls)

Natural Gas
(Bcf)

BOE
(million bbls)

1983-1990 Reserve Additions

1,886 664 30,982 7,713

1991-1998 Reserve Additions

1,307 721 27,232 6,567

Est. Ultimate Recovery, 12-31-1998

9,723 3,244 14,610 37,317

Source: NRG Associates, The Significant Oil and Gas Fields of the Gulf of Mexico Database


Impressive as they are, however, the recent reserve additions are 15 percent less than the preceding period from 1983-1990, with a 31 percent drop in crude oil additions and a 12 percent decline in natural gas. This indicates the heavy use of 3-D seismic that began around 1990 and the concurrent rising demand for natural gas were insufficient to stem the gradual depletion of new possibilities, according to Nehring.

Recent reserve additions differ substantially by broad area across the OCS. Nehring simplified his study by dividing the region into six areas:

  • South Texas (South Padre Island to Brazos).
  • North Texas (Galveston and High Island).
  • West Louisiana (West Cameron to Vermilion).
  • Central Louisiana (South Marsh Island to South Timbalier).
  • East Louisiana (Grand Isle to Chandeleur).
  • MAFLA (Destin Dome, Mobile, Pensacola and northern Viosca Knoll).

The three Louisiana areas were the most important both historically and recently in terms of absolute reserve additions, accounting for more than 75 percent of the aggregate 1991-98 additions on the shelf.

Reserve additions from each shelf area were evaluated according to type of addition - i.e., additions from new field discoveries and additions from older fields.


Table 2.
Recent Reserve Additions by Type and Area on the Gulf of Mexico OCS Shelf (million BOE)

 

1983-1990
Reserve Adds

1991-1998
Reserve Adds

 

New Fields

Older Fields

New Fields

Older Fields

South Texas

400

547

137

475

North Texas

362

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If you want a glimpse of the future, you first take a good look at the past.

This is the approach taken by Richard Nehring, president of NRG Associates, in his recent study to assess the future potential for hydrocarbon production on the Gulf of Mexico (GOM) Outer Continental Shelf (OCS).

"It is only through a careful and extensive analysis of the shelf's past, including both what happened and what didn't happen, that we can have a realistic basis for understanding what is likely to occur in its future," Nehring said

He will present the findings from his study at the upcoming GCAGS annual meeting in Houston. Taking the meeting's general theme a step further, the paper exhorts the audience to "Remember the Past To Visualize the Future."

An increasing number of companies and individuals in the domestic oil and gas industry consider the heavily-drilled shelf to hold little promise for the future, particularly its vast array of aging fields. This makes Nehring's findings that much more compelling.

"When you look at recent reserve additions - from 1991-1998 - we've actually added more reserves on average in older fields than the average size of new field discoveries," he said. "And I think it will come as a great surprise to people that that's where the big additions on the shelf are coming from."

Additions Add Up

To evaluate the past and envision the future of the OCS, Nehring focused on reserve additions - their rates, composition and distribution. He explained these are the goal and measure of success of drilling activity and, aggregated over time, add up to known petroleum resources.

The data source on reserve additions used in the study is the Significant Oil and Gas Fields of the Gulf of Mexico Database, a subset of NRG Associates' Significant Oil and Gas Fields of the United States Database.

Recent (1991-98) reserve additions on the GOM OCS were 6.57 billion barrels of oil equivalent (BOE), or 15.4 percent of total U.S. reserve additions of 42.6 billion BOE. These recent additions, which accounted for 17.6 percent of the 37.3 BOE ultimate recovery on the shelf, were predominantly natural gas (69 percent). The crude oil component was 20 percent, and natural gas liquids accounted for 11 percent.


Table 1.
Recent Reserve Additions and Ultimate Recovery by Product on the Gulf of Mexico OCS Shelf

 

Crude Oil
(million bbls)

NGL
(million bbls)

Natural Gas
(Bcf)

BOE
(million bbls)

1983-1990 Reserve Additions

1,886 664 30,982 7,713

1991-1998 Reserve Additions

1,307 721 27,232 6,567

Est. Ultimate Recovery, 12-31-1998

9,723 3,244 14,610 37,317

Source: NRG Associates, The Significant Oil and Gas Fields of the Gulf of Mexico Database


Impressive as they are, however, the recent reserve additions are 15 percent less than the preceding period from 1983-1990, with a 31 percent drop in crude oil additions and a 12 percent decline in natural gas. This indicates the heavy use of 3-D seismic that began around 1990 and the concurrent rising demand for natural gas were insufficient to stem the gradual depletion of new possibilities, according to Nehring.

Recent reserve additions differ substantially by broad area across the OCS. Nehring simplified his study by dividing the region into six areas:

  • South Texas (South Padre Island to Brazos).
  • North Texas (Galveston and High Island).
  • West Louisiana (West Cameron to Vermilion).
  • Central Louisiana (South Marsh Island to South Timbalier).
  • East Louisiana (Grand Isle to Chandeleur).
  • MAFLA (Destin Dome, Mobile, Pensacola and northern Viosca Knoll).

The three Louisiana areas were the most important both historically and recently in terms of absolute reserve additions, accounting for more than 75 percent of the aggregate 1991-98 additions on the shelf.

Reserve additions from each shelf area were evaluated according to type of addition - i.e., additions from new field discoveries and additions from older fields.


Table 2.
Recent Reserve Additions by Type and Area on the Gulf of Mexico OCS Shelf (million BOE)

 

1983-1990
Reserve Adds

1991-1998
Reserve Adds

 

New Fields

Older Fields

New Fields

Older Fields

South Texas

400

547

137

475

North Texas

362

576

143

543

West Louisiana

552

1,067

168

969

Central Louisiana

607

1,997

217

2,254

East Louisiana

219

1,223

312

1,041

MAFLA

163

0

58

251

Total

2,303

5,410

1,034

5,533

Source: NRG Associates, The Significant Oil and Gas Fields of the Gulf of Mexico Database


On the GOM shelf, the latter category includes:

  • Better drainage from known reservoirs.
  • Discoveries of new fault blocks in known sand bodies.
  • Discoveries of new sand bodies.
  • Discoveries of new reservoirs of exploratory significance (those where the combination of the specific chronostratigraphic age and the depositional type of the reservoir are different from all previous discoveries within a field).

Revitalization

The growing importance of reserve additions in older fields is aptly demonstrated during both the 1983-90 and the 1991-98 time periods, when the average reserve additions per field from older fields was 27 percent larger than the average size of new field discoveries.


Table 3.
The Distribution of Recent Reserve Additions by Amount Added and Type on the Gulf of Mexico OCS Shelf

Amount of Reserve Adds. (million BOE)

1983-1990

1991-1998

New Fields

Older Fields

New Fields

Older Fields

>100

2

5

0

4

50-100

6

23

3

18

25-50

13

44

6

43

10-25

46

80

19

121

5-10

43

54

24

74

1-5

96

87

80

152

0-1

24

44

29

93

Negative

0

90

0

176

Total # Fields

230

427

161

681

Source: NRG Associates, The Significant Oil and Gas Fields of the Gulf of Mexico Database


This margin increases to 75 percent if the large proportion of older fields with negative revisions is ignored.

Both the average size and the number of new field discoveries declined significantly between 1991 and 1998, compared to the previous seven years. The decline in the average size of new discoveries was nearly universal across all areas, with the exception of the East Louisiana area where the average size of new discoveries actually doubled.

According to Nehring, there were 103 national class giant fields (100 million BOE and more) on the GOM OCS at the end of 1998. However, the concentration of recent reserve growth in older fields was not primarily a case of the big fields getting bigger.

"Recent large reserve additions in older fields were disproportionately concentrated in previously small and medium-size fields, advancing them to larger size categories," Nehring said. "In the late 1990s, an interesting sidelight of this phenomenon has been the revitalization of previously abandoned small fields through substantial new pool discoveries."

He offers insight into the lack of dominance of giant fields in recent reserve additions.

"Those fields were discovered in the 1950s and 1960s for the most part and recognized early-on as major fields," he said. "So they were treated as core assets by their operators, undergoing several cycles of re-evaluation and renewed exploration, which left relatively few reserves to be added."

Historically, reservoirs of Pleistocene, Pliocene and Miocene age have monopolized discoveries on the shelf. In fact, at the end of 1998, these reservoirs collectively contained 99 percent of OCS ultimate recovery, according to Nehring. The Miocene accumulations accounted for 41.5 percent of this tally.

Like reserve additions on the field level, additions on the reservoir level are dominated by additions to older reservoirs, where 4.8 billion BOE were added during the period between 1991-98. Only 1.77 billion BOE were provided by new reservoir discoveries, which include all reservoirs in new fields discoveries, as well as all new reservoirs of exploratory significance in older fields.

Of the three most prolific reservoirs cited earlier, new reservoir discoveries were most important in the Miocene, despite the fact that even the earliest exploration on the shelf was predominantly for Miocene objectives.

Intensive Potential

The depositional types and resulting plays defined by the Minerals Management Service (MMS) for the GOM OCS provide yet another useful tool to examine recent reserve additions on the shelf.

Paleo-shelf plays (aggradational, progradational and retrogradational) supplied 69.5 percent of all recent reserve additions on the shelf and also accounted for 83.5 percent of shelf ultimate recovery as of the end of 1998. Their dominance in the realm of OCS reserve additions and ultimate recovery may soon be challenged by paleo-slope plays (submarine fans), which are becoming a significant exploration and development objective on the shelf.

Indeed, between 1991 and 1998 reserve additions from paleo-slope plays added 48.2 percent to paleo-slope ultimate recovery as of the end of 1990. Recent reserve additions from paleo-shelf plays, however, added only 17.1 percent to paleo-shelf ultimate recovery.

There is a high probability that at least eight billion BOE remain to be added to shelf reserves, according to Nehring, and a low probability that future reserve additions will exceed 17 billion BOE.

It's unlikely the upper range of this estimate will be exceeded, he said, given the recent declines in both the number and size of new field discoveries, the large proportion of lease blocks already assigned to fields and the growth to date in reservoirs less than 12,000 feet deep in existing fields.

Over the next several years, annual rates of reserve additions on the shelf are likely to average 700-800 million BOE, Nehring said, with natural gas making up as much as 75 percent of the total. New reservoirs of exploratory significance in older fields likely will become more important than new field discoveries, meaning reserve additions in older fields will continue their dominant role.

Overall, Nehring said, 50-75 percent of future reserve additions will come from growth in existing major reservoirs of known producing fields. The eastern and central lease areas of the GOM OCS will be the primary nucleus for these additions, which will be concentrated in Miocene and Pliocene objectives that continue to harbor the bulk of untested sediments.

But, you ask, after a half-century of being punched by the drill bit, how can these rocks have anything left to give?

Well, the GOM OCS may be a highly mature petroleum province in the conventional sense, but it's a highly mature province with a difference, according to Nehring.

"Unlike most other mature provinces, the Gulf of Mexico OCS has both an unusually thick sedimentary section, with potentially productive reservoirs throughout that section, and an unusual degree of structural complexity because of the extensive movement of the Jurassic salt.

"So although the shelf is highly mature extensively, many opportunities remain for more intensive exploration."

You just have to look in the right places.

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