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Stochastic Approach to Economic Evaluation and Optimization of Stimulation Design Accounting for Internal and External Uncertainties/Risks

IP.com Disclosure Number: IPCOM000129722D
Publication Date: 2005-Oct-06

Publishing Venue

The IP.com Prior Art Database

Abstract

This publication describes a novel method for appraising stimulation treatment designs accounting for both internal uncertainties (such as treatment design and reservoir parameters) and external risks (such as oil & gas price, geographical, and political) for optimizing economic returns.

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Stochastic approach to economic evaluation and optimization of stimulation design accounting for internal and external uncertainties/risks

Summary

This publication describes a novel method for appraising stimulation treatment designs accounting for both internal uncertainties (such as treatment design and reservoir parameters) and external risks (such as oil & gas price, geographical, and political) for optimizing economic returns. This method generates a fully quantified distribution of production, revenue, and discounted cash flow accounting for afore mentioned internal and external risks. Furthermore, this distribution enables us to appraise new technologies (reliable fracture fluids and accurate measurement techniques) in their ability to impact the ultimate revenue by risk reduction.

Introduction

Economic analysis of stimulation treatments is part of the routine investment decision evaluation for our clients. As part of our service we provide valuation of our treatment in terms of production rate and cumulative recovery over a selected period of time and the corresponding Net Present Value (NPV). Almost all the input parameters used in stimulation simulator are subject to uncertainty. Despite the uncertainty in input parameters that affect the outcome, all existing well stimulation simulators, currently, use a deterministic model. For instance, designing a hydraulic fracture treatment, we obtain single discrete solution for fracture half-length (xf), height (hf), conductivity (kfw) and consequently the cumulative production volume (Q) for a given schedule, i.e., injection rate (qi), fluid rheology (k', n'), proppant concentration, and reservoir properties (Closure Pressure, Permeability (k), Porosity (φ), etc.). The cumulative production volume (Q), based on the current price environment, is used to determine the revenue stream and the NPV. This reduction of the inherently stochastic problem to a deterministic reduces the ability of the client to fully determine or appreciate the optimal solution. The substantial volatility in oil and gas prices can be leveraged if accounted for properly. This invention proposes a novel technique to achieve the goal of optimizing stimulation treatment, specifically hydraulic fracturing, by accounting for both internal uncertainties and external risks such as price volatility. A consistent quantification of risks and corresponding return would assist our clients in making a decision towards pursuing a treatment design based on their tolerance for risk and business strategy.

The benefits of using new technologies, e.g., technology to improve reliability of fracturing fluids or accuracy of measurement of reservoir parameter, can be appraised and demonstrated by enabling comparison of revenue distributions with and without deploying the new technologies with the proposed methodology. Furthermore, the value added can be clearly manifested based on a tighter distribution (reduced likelihood of wo...