Prospect Model in Petroleum Geology

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Exercises Prospect Model in Petroleum Geology

1. You are an exploration geologist in Exeter Oil Company’s South Louisiana District. By subsurface mapping you found a large unleased isopach thin and structural closure at the Marginulina texana level of the Frio Formation at 14,600 ft. You saw that this lead was confirmed by seismic surveys at a cost of $28,000. Now it is time to take leases on the new prospect, which is designated Crawfish prospect. You, however, must convince Exeter management that the potential returns justify the future exploratory costs of leasing and drilling the prospect.

Leases on 1200 acres will cost $325/acre and drilling an exploratory well to casing point will cost an additional $2.2 million. It is anticipated that 500 acres will be productive; the reservoir thickness will be 75 ft, and based on experience at nearby Turtle field, the recovery per acre-ft will be 1500 Mcf. If the well is successful (the odds are about 1:8 for a successful well in this region), additional completion costs will be $1.0 million.

Assume gas is selling for $2.50/Mcf (after operating costs and taxes are deducted), and the net revenue interest (NRI) after royalty payments is 80%. The company regards a 3/1 Risk Adjusted Potential Return as an acceptable risk

Solution

Leases on 1200 acres will cost $325acre and drilling an exploratory well to casing point will cost an additional $2.2 million. It is anticipated that 500 acres will be productive; the reservoir thickness will be 75 ft, and based on experience at nearby Turtle field, the recovery per acre-ft will be 1500 Mcf. If the well is successful (the odds are about 1:8 for a successful well in this region), additional completion costs will be $1.0 million.

Assume gas is selling for $2.50/Mcf (after operating costs and taxes are deducted) and the net revenue interest (N RI) after royalty payments is 80%. The company regards a 3/1 Risk Adjusted Potential Return as an acceptable risk.

Anticipated Reserves:
$500\textrm{ acres} \cdot 75 ft \cdot 1500 \tfrac{\textrm{Mcf}}{\textrm{acre-ft}} = 56,250,000 \textrm{ Mcf gas}$
Investment Risked:
$2,200,000 exploratory costs+($325⋅1200) lease costs=$2,590,000
Future Gross Revenue:
$56,250,000 Mcf \cdot \dfrac{Dollar2.50}{\textrm{Mcf}} \cdot 0.80\textrm{ NRI} = Dollar112,500,000$
Undiscounted Future Net Revenue:
$112.5 million−($2.59+1.0) million=$108.91 million
Risk Adjusted Return to Risk Investment:
$\dfrac{108.91\textrm{ million}}{2.59\textrm{ million}} \cdot 0.125$ $= 5.26/1$
The risk adjusted return to risk investment of about 5.3/1 exceeds the company minimum of 3/1 and is an acceptable risk.

2. Rock salt (halite) is ductile and water-soluble, with density (2.2g/cm³) lower than other consolidated rocks and acoustic velocity (4400ms) higher than most of the clastic rocks with which it is commonly associated. How are these properties important in

(a) creating subsurface structure,

(b) giving the appearance of subsurface structure, and

Solution

(a) Ductility allows salt to form readily into ridges, domes, and diapirs, thereby structurally deforming overlying and adjacent sediment. Solubility gives rise to subsurface collapsed areas with associated residual highs on beds above salt.

(b) Seismic reflections from surfaces below locally thick salt bodies display false highs because of higher velocity (shorter travel time) in thick salt.

(c) Low density makes salt swells, diapirs, residual thicks, and abrupt salt edges readily detectable as minimum anomalies when surveyed by gravity meter.

3. Why are gravity meters used to generate prospects in regions of pinnacle reefs?

Solution

Because the gravity meter provides an inexpensive uniform search pattern for a region and detects dense carbonate reef facies surrounded by less dense shales or salt as local gravity maxima.