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Discounting and risking in production forecasting: Difference between revisions
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Discounting and risking can help mitigate the effects of our less than perfect knowledge and model shortcomings. Discounting is a pragmatic measure reflecting that it is impossible to capture the full range of all factors contributing to forecast uncertainty. | Discounting and risking can help mitigate the effects of our less than perfect knowledge and model shortcomings. Discounting is a pragmatic measure reflecting that it is impossible to capture the full range of all factors contributing to forecast uncertainty. | ||
== Technical factors == | |||
As well as addressing some of the human factors, discounting can be used to reflect technical factors often inherent in modeling techniques such as: | As well as addressing some of the human factors, discounting can be used to reflect technical factors often inherent in modeling techniques such as: | ||
*Under-estimation of reservoir heterogeneity | |||
*Under-estimation of back-out and interference effects | *Under-estimation of reservoir heterogeneity | ||
*Under-estimation of back-out and interference effects | |||
*Under-estimation of schedule uncertainty, especially in complex projects | *Under-estimation of schedule uncertainty, especially in complex projects | ||
*Learning curve when applying new technology | *Learning curve when applying new technology | ||
== Historical performance analysis == | |||
Discount factor must be determined by technical judgment and experience but primarily it must be anchored in historical performance analysis for the field in question, if available, and for analogue fields. That is to say that past under and over performance compared to predictions should guide the discount factor. | Discount factor must be determined by technical judgment and experience but primarily it must be anchored in historical performance analysis for the field in question, if available, and for analogue fields. That is to say that past under and over performance compared to predictions should guide the discount factor. | ||
==Application== | == Application == | ||
The latter is preferred as it leads to improved models for future forecasts and better and more consistent discounting with analogue forecasts. | Discount factors can be applied to forecasts in two ways: | ||
*Discount rates or decline of the forecast itself by a constant factor | |||
*Determine the root cause of the risk and adjust model parameters (such as reduced availability factor, higher skins, adjusting relperms) to achieve the desired effect. | |||
The latter is preferred as it leads to improved models for future forecasts and better and more consistent discounting with analogue forecasts. | |||
== Excessive discounting == | |||
A decision to apply technical discounting should be an integral part of the process to develop consistent Low, Best and High Cases and should not be applied as an afterthought to individual cases. Excessive discounting applied to generated forecasts should always raise a red flag. | A decision to apply technical discounting should be an integral part of the process to develop consistent Low, Best and High Cases and should not be applied as an afterthought to individual cases. Excessive discounting applied to generated forecasts should always raise a red flag. | ||
== References == | == References == | ||
== Noteworthy papers in OnePetro == | |||
Goodwin, N. 2015. Bridging the Gap Between Deterministic and Probabilistic Uncertainty Quantification Using Advanced Proxy Based Methods. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/173301-MS http://dx.doi.org/10.2118/173301-MS]. | |||
Landa, Jorge. 2007. “Assessment of Forecast Uncertainty in Mature Reservoirs”. SPE Distinguished Lecturer Program. [http://www.spegcs.org/events/1066/ http://www.spegcs.org/events/1066/]. | |||
Choudhary, M. K., Yoon, S., & Ludvigsen, B. E. 2007. Application of Global Optimization Methods for History Matching and Probabilistic Forecasting - Case Studies. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/105208-MS http://dx.doi.org/10.2118/105208-MS]. | |||
Zubarev, D. I. 2009. Pros and Cons of Applying Proxy-models as a Substitute for Full Reservoir Simulations. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/124815-MS http://dx.doi.org/10.2118/124815-MS]. | |||
Mohaghegh, S. D. 2006. Quantifying Uncertainties Associated With Reservoir Simulation Studies Using a Surrogate Reservoir Model. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/102492-MS http://dx.doi.org/10.2118/102492-MS]. | |||
Mohaghegh, S. D. 2006. | Mohaghegh, S. D., Modavi, C. A., Hafez, H. H., Haajizadeh, M., Kenawy, M. M., & Guruswamy, S. 2006. Development of Surrogate Reservoir Models (SRM) For Fast Track Analysis of Complex Reservoirs. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/99667-MS http://dx.doi.org/10.2118/99667-MS]. | ||
Peng, C. Y., & Gupta, R. 2003. Experimental Design in Deterministic Modelling: Assessing Significant Uncertainties. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/80537-MS http://dx.doi.org/10.2118/80537-MS]. | |||
Schaaf, T., Coureaud, B., & Labat, N. 2008. Using Experimental Designs, Assisted History Matching Tools and Bayesian Framework to get Probabilistic Production Forecasts. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/113498-MS http://dx.doi.org/10.2118/113498-MS]. | |||
Osterloh, W. T. 2008. Use of Multiple-Response Optimization To Assist Reservoir Simulation Probabilistic Forecasting and History Matching. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/116196-MS http://dx.doi.org/10.2118/116196-MS]. | |||
Nandurdikar, N. S., & Wallace, L. 2011. Failure to Produce: An Investigation of Deficiencies in Production Attainment. Society of Petroleum Engineers. [http://dx.doi.org/10.2118/145437-MS http://dx.doi.org/10.2118/145437-MS]. | |||
| Line 52: | Line 57: | ||
Society of Petroleum Engineers (U.S.). 2011. Production forecasting. Richardson, Tex: Society of Petroleum Engineers. [http://www.worldcat.org/oclc/776204491 WorldCat] or [http://store.spe.org/Production-Forecasting-P623.aspx SPE Bookstore] | Society of Petroleum Engineers (U.S.). 2011. Production forecasting. Richardson, Tex: Society of Petroleum Engineers. [http://www.worldcat.org/oclc/776204491 WorldCat] or [http://store.spe.org/Production-Forecasting-P623.aspx SPE Bookstore] | ||
Ringrose, P., & Bentley, M. 2014. Reservoir model design: A practitioner's guide. http://www.worldcat.org/oclc/892733899. | Ringrose, P., & Bentley, M. 2014. Reservoir model design: A practitioner's guide. [http://www.worldcat.org/oclc/892733899 http://www.worldcat.org/oclc/892733899]. | ||
== External links == | == External links == | ||
Production Forecasts and Reserves Estimates in Unconventional Resources. Society of Petroleum Engineers. http://www.spe.org/training/courses/FPE1.php | Production forecasts and reserves estimates in unconventional resources. Society of Petroleum Engineers. [http://www.spe.org/training/courses/FPE.php http://www.spe.org/training/courses/FPE.php] | ||
Production Forecasts and Reserves Estimates in Unconventional Resources. Society of Petroleum Engineers. [http://www.spe.org/training/courses/FPE1.php http://www.spe.org/training/courses/FPE1.php] | |||
== See also == | == See also == | ||
| Line 63: | Line 69: | ||
[http://petrowiki.org/Production_forecasting_glossary Production forecasting glossary] | [http://petrowiki.org/Production_forecasting_glossary Production forecasting glossary] | ||
[http://petrowiki.org/ | [http://petrowiki.org/Aggregation_of_forecasts Aggregation of forecasts] | ||
[http://petrowiki.org/Challenging_the_current_barriers_to_forecast_improvement Challenging the current barriers to forecast improvement] | |||
[http://petrowiki.org/Commercial_and_economic_assumptions_in_production_forecasting Commercial and economic assumptions in production forecasting] | |||
[http://petrowiki.org/Controllable_verses_non_controllable_forecast_factors Controllable verses non controllable forecast factors] | |||
[http://petrowiki.org/Discounting_and_risking_in_production_forecasting Discounting and risking in production forecasting] | |||
[http://petrowiki.org/Documentation_and_reporting_in_production_forecasting Documentation and reporting in production forecasting] | |||
[http://petrowiki.org/Empirical_methods_in_production_forecasting Empirical methods in production forecasting] | |||
[http://petrowiki.org/Establishing_input_for_production_forecasting Establishing input for production forecasting] | |||
[http://petrowiki.org/Integrated_asset_modelling_in_production_forecasting Integrated asset modelling in production forecasting] | |||
[http://petrowiki.org/Long_term_verses_short_term_production_forecast Long term verses short term production forecast] | |||
[http://petrowiki.org/Look_backs_and_forecast_verification Look backs and forecast verification] | |||
[http://petrowiki.org/Material_balance_models_in_production_forecasting Material balance models in production forecasting] | |||
[http://petrowiki.org/Probabilistic_verses_deterministic_in_production_forecasting Probabilistic verses deterministic in production forecasting] | |||
[http://petrowiki.org/Production_forecasting_activity_scheduling Production forecasting activity scheduling] | |||
[http://petrowiki.org/Production_forecasting_analog_methods Production forecasting analog methods] | |||
[http://petrowiki.org/Production_forecasting_building_blocks Production forecasting building blocks] | |||
[http://petrowiki.org/Production_forecasting_decline_curve_analysis Production forecasting decline curve analysis] | |||
[http://petrowiki.org/Production_forecasting_expectations Production forecasting expectations] | |||
[http://petrowiki.org/Production_forecasting_flowchart Production forecasting flowchart] | |||
[http://petrowiki.org/Production_forecasting_frequently_asked_questions_and_examples Production forecasting frequently asked questions and examples] | |||
[http://petrowiki.org/Production_forecasting_in_the_financial_markets Production forecasting in the financial markets] | |||
[http://petrowiki.org/Production_forecasting_principles_and_definition Production forecasting principles and definition] | |||
[http://petrowiki.org/Production_forecasting_purpose Production forecasting purpose] | |||
[http://petrowiki.org/Production_forecasting_system_constraints Production forecasting system constraints] | |||
[http://petrowiki.org/Quality_assurance_in_forecast Quality assurance in forecast] | |||
[http://petrowiki.org/Reservoir_simulation_models_in_production_forecasting Reservoir simulation models in production forecasting] | |||
[http://petrowiki.org/Types_of_decline_analysis_in_production_forecasting Types of decline analysis in production forecasting] | |||
[http://petrowiki.org/ | [http://petrowiki.org/Uncertainty_analysis_in_creating_production_forecast Uncertainty analysis in creating production forecast] | ||
[http://petrowiki.org/ | [http://petrowiki.org/Uncertainty_range_in_production_forecasting Uncertainty range in production forecasting] | ||
[http://petrowiki.org/ | [http://petrowiki.org/Using_multiple_methodologies_in_production_forecasting Using multiple methodologies in production forecasting] | ||
== Category == | == Category == | ||
[[Category:5.6 Formation evaluation and management]] [[Category:5.6.9 Production forecasting]] [[Category: | [[Category:5.6 Formation evaluation and management]] [[Category:5.6.9 Production forecasting]] [[Category:GIWS-PF]] [[Category:Chapter 4]] [[Category:DW]] [[Category:DW Complete]] [[Category:DW All Pages]] | ||
Latest revision as of 12:20, 31 May 2016
Discounting and risking can help mitigate the effects of our less than perfect knowledge and model shortcomings. Discounting is a pragmatic measure reflecting that it is impossible to capture the full range of all factors contributing to forecast uncertainty.
Technical factors
As well as addressing some of the human factors, discounting can be used to reflect technical factors often inherent in modeling techniques such as:
- Under-estimation of reservoir heterogeneity
- Under-estimation of back-out and interference effects
- Under-estimation of schedule uncertainty, especially in complex projects
- Learning curve when applying new technology
Historical performance analysis
Discount factor must be determined by technical judgment and experience but primarily it must be anchored in historical performance analysis for the field in question, if available, and for analogue fields. That is to say that past under and over performance compared to predictions should guide the discount factor.
Application
Discount factors can be applied to forecasts in two ways:
- Discount rates or decline of the forecast itself by a constant factor
- Determine the root cause of the risk and adjust model parameters (such as reduced availability factor, higher skins, adjusting relperms) to achieve the desired effect.
The latter is preferred as it leads to improved models for future forecasts and better and more consistent discounting with analogue forecasts.
Excessive discounting
A decision to apply technical discounting should be an integral part of the process to develop consistent Low, Best and High Cases and should not be applied as an afterthought to individual cases. Excessive discounting applied to generated forecasts should always raise a red flag.
References
Noteworthy papers in OnePetro
Goodwin, N. 2015. Bridging the Gap Between Deterministic and Probabilistic Uncertainty Quantification Using Advanced Proxy Based Methods. Society of Petroleum Engineers. http://dx.doi.org/10.2118/173301-MS.
Landa, Jorge. 2007. “Assessment of Forecast Uncertainty in Mature Reservoirs”. SPE Distinguished Lecturer Program. http://www.spegcs.org/events/1066/.
Choudhary, M. K., Yoon, S., & Ludvigsen, B. E. 2007. Application of Global Optimization Methods for History Matching and Probabilistic Forecasting - Case Studies. Society of Petroleum Engineers. http://dx.doi.org/10.2118/105208-MS.
Zubarev, D. I. 2009. Pros and Cons of Applying Proxy-models as a Substitute for Full Reservoir Simulations. Society of Petroleum Engineers. http://dx.doi.org/10.2118/124815-MS.
Mohaghegh, S. D. 2006. Quantifying Uncertainties Associated With Reservoir Simulation Studies Using a Surrogate Reservoir Model. Society of Petroleum Engineers. http://dx.doi.org/10.2118/102492-MS.
Mohaghegh, S. D., Modavi, C. A., Hafez, H. H., Haajizadeh, M., Kenawy, M. M., & Guruswamy, S. 2006. Development of Surrogate Reservoir Models (SRM) For Fast Track Analysis of Complex Reservoirs. Society of Petroleum Engineers. http://dx.doi.org/10.2118/99667-MS.
Peng, C. Y., & Gupta, R. 2003. Experimental Design in Deterministic Modelling: Assessing Significant Uncertainties. Society of Petroleum Engineers. http://dx.doi.org/10.2118/80537-MS.
Schaaf, T., Coureaud, B., & Labat, N. 2008. Using Experimental Designs, Assisted History Matching Tools and Bayesian Framework to get Probabilistic Production Forecasts. Society of Petroleum Engineers. http://dx.doi.org/10.2118/113498-MS.
Osterloh, W. T. 2008. Use of Multiple-Response Optimization To Assist Reservoir Simulation Probabilistic Forecasting and History Matching. Society of Petroleum Engineers. http://dx.doi.org/10.2118/116196-MS.
Nandurdikar, N. S., & Wallace, L. 2011. Failure to Produce: An Investigation of Deficiencies in Production Attainment. Society of Petroleum Engineers. http://dx.doi.org/10.2118/145437-MS.
Noteworthy books
Society of Petroleum Engineers (U.S.). 2011. Production forecasting. Richardson, Tex: Society of Petroleum Engineers. WorldCat or SPE Bookstore
Ringrose, P., & Bentley, M. 2014. Reservoir model design: A practitioner's guide. http://www.worldcat.org/oclc/892733899.
External links
Production forecasts and reserves estimates in unconventional resources. Society of Petroleum Engineers. http://www.spe.org/training/courses/FPE.php
Production Forecasts and Reserves Estimates in Unconventional Resources. Society of Petroleum Engineers. http://www.spe.org/training/courses/FPE1.php
See also
Production forecasting glossary
Challenging the current barriers to forecast improvement
Commercial and economic assumptions in production forecasting
Controllable verses non controllable forecast factors
Discounting and risking in production forecasting
Documentation and reporting in production forecasting
Empirical methods in production forecasting
Establishing input for production forecasting
Integrated asset modelling in production forecasting
Long term verses short term production forecast
Look backs and forecast verification
Material balance models in production forecasting
Probabilistic verses deterministic in production forecasting
Production forecasting activity scheduling
Production forecasting analog methods
Production forecasting building blocks
Production forecasting decline curve analysis
Production forecasting expectations
Production forecasting flowchart
Production forecasting frequently asked questions and examples
Production forecasting in the financial markets
Production forecasting principles and definition
Production forecasting purpose
Production forecasting system constraints
Reservoir simulation models in production forecasting
Types of decline analysis in production forecasting
Uncertainty analysis in creating production forecast
Uncertainty range in production forecasting
Using multiple methodologies in production forecasting