Going Beyond Exploration Lecture 15 Going Beyond Exploration Headlines: Alpha Wildcat Finds Thick Oil Zone! Block 7 Bonanza Basin Discovery Well 8 Salt Diapir Slide 1 Title slide – the Alpha wildcat discovers oil! What happens next Courtesy of ExxonMobil L 15 – Beyond Exploration

Our Exploration Flowchart Management Approved Wildcat Well Capture Prime Areas Identify Opportunities Acquire Seismic Data Process Seismic Data Wildcat Drilled Interpret Seismic Data Slide 2 Here is part of our exploration flow chart – up to making a discovery We Have: reviewed our Alpha prospect to management they approved the expenditure for a wildcat well we got a rig on-site to drill Alpha we waited expectantly for the well to reach our target depth the well encountered a thick oil-bearing interval – success! Assess Prospects Success Courtesy of ExxonMobil Courtesy of ExxonMobil L 15 – Next Steps L 15 – Beyond Exploration

Our Assessment Results Alpha Prospect – Main Compartment - Risked 1.0 100 0.8 Gas Only 62 % COS Gas Cap & Oil Leg 0.6 51 % Chance of Finding More Than the Economic Minimum Slide 3 Just as a reminder… here is our pre-drill assessment 51% chance to exceed the economic minimum 0.4 Economic Minimum Oil Only 0.2 0.0 100 200 300 400 500 Million Oil Equivalent Barrels 62% Chance to find any hydrocarbons 51% Chance to find 100 MBOE 5% Chance to find 400 MBOE Courtesy of ExxonMobil L 15 – Beyond Exploration

Congratulations! A Huge Success Alpha Prospect YOUR exploration well on the Alpha prospect discovered an estimated 325 MBO Block 7 Bonanza Basin Discovery Well 8 Salt Diapir Slide 4 The well found oil down to a depth of 4500 meters – very close to our prediction The net-to-gross and porosity of the sand is slightly better than we predicted – great Our preliminary estimate is 325 MBO – our assessment was that there was a 20% chance to find this much 0.0 0.2 0.4 0.6 0.8 1.0 100 200 300 400 500 Million Oil Equivalent Barrels Alpha Prospect – Main Compartment - Risked Gas Cap & Oil Leg Gas Only 62 % COS Oil Only Economic Minimum Courtesy of ExxonMobil L 15 – Beyond Exploration

What’s Next? Exploration would drill one or two confirmation wells to verify there is enough HCs to make some money (Value > Costs) If results continue to be good, the FIELD would pass on to Development or Production people Success Uneconomic Drill Wildcats Assess Prospects Confirmation Well Interpret Seismic Data Process Acquire Capture Prime Areas Identify Opportunities To Development Or Production Slide 5 So what is next? Still within exploration, we would drill one or more confirmation (aka delineation) wells Before management approves $2 billion to build & install a platform, they want more proof that Alpha can make some money The exploration folks will work the details of where to drill – mainly to address the biggest uncertainties Courtesy of ExxonMobil L 15 – Beyond Exploration

Delineation Well 6 Months later… Alpha Prospect 6 Months later… A delineation well is completed to the NE An OWC is found at 4500 m – the same depth as in the discovery well The porosity is slightly better – 26% versus 23% in the discovery well Block 7 Delineation Well Salt Diapir Discovery Well Slide 6 6 months later, a rig is on location to drill a second well The biggest uncertainty is how much oil is NE of the major fault We find the OWC is again at 4500 m – the fluids are in communication at a geologic time scale We also find the porosity is a little better at the delineation well – more good news Based on 2 wells, we revise the EUR (estimated ultimate recovery) to 34b MBO Now management is ready to move Alpha from the Exploration phase to the field Development phase Block 8 Bonanza Basin The delineation well has confirmed enough oil to merit field development – EUR now set at 348 MBO Courtesy of ExxonMobil L 15 – Beyond Exploration

G&G in Development Questions: Exploration has drilled a discovery and a delineation well. The ultimate recover for Alpha is estimated to be 338 MBO, which greatly exceeds the economic threshold of 100 MBO Questions: Can we refine our picture of the distribution of oil at Alpha? Is the reservoir a single unit, or is it segmented (separate regions to drain)? How many wells and where should they be drilled? What sort of facilities (platform?) will we need? How can we speed-up time to first oil? What uncertainties remain? Slide 7 Given the results of the discovery and one delineation well, Alpha is turned over to Development In development, geoscientists are needed to answer questions such as: Can we ………… Is the reservoir ………. How many ……………… What sort …………. How can we ……………… What uncertainties remains Courtesy of ExxonMobil L 15 – Beyond Exploration

We Need More Detail Reservoir Map at the end of Exploration Slide 8 To answer development questions, we need more detail on the reservoir, its properties, and the distribution of oil & gas We want to understand where to place wells to get the most for the least cost For exploration, we can live with a ‘broad brush’ picture of the reservoir For development, we need considerably more detail As shown on the right, we may drill some more wells during development – before placing a production platform Reservoir Map at the end of Exploration Reservoir Map at the end of Development Courtesy of ExxonMobil L 15 – Beyond Exploration

Some Questions … #2 #3 Why did they drill well #3? #4 #1 Slide 9 Why might they have drilled the western development well (#3)? Confirm the oil-water contact See if reservoir quality changed (better or worse) at the western edge of the field Why might they have drilled the eastern development well (#4)? The oil is isolated from the rest – probably have to develop as a separate compartment Is there enough oil to merit producing it – or is it cost-prohibitive See if reservoir quality changed (better or worse) at the eastern edge of the field If some big surprise occurs when drilling the development wells, it may be possible to cancel the development without too much loss Why did they drill well #4? Where would you place well #5? Why? Courtesy of ExxonMobil L 15 – Beyond Exploration

Data Used for Exploration Reshot for Development Data for Development We may need better quality data to address development needs Slide 10 Data quality that was adequate for exploration may not be adequate for development issues The seismic data may need to be reprocessed – using more sophisticated, expensive, time-consuming methods We may have to reshoot a new survey to get acceptable data quality Data on the right is ‘sharper’ and has better vertical resolution (red & black bands are thinner -> more stratigraphic detail) Data Used for Exploration Data Reprocessed or Reshot for Development And Production Courtesy of ExxonMobil L 15 – Beyond Exploration

G&G in Production Production has begun at Alpha. The initial production rates are as expected. Questions: How should we manage the field so as to maximize our investments? Can we monitor how oil is being swept out of the reservoir? What about injection wells and enhanced recovery? Is there more oil in the vicinity – either at deeper depths or in nearby traps? Can we build a computer model of the field that matches existing production data? If so, we can test future recovery with different drilling scenarios. Slide 11 The development department has a platform built, installed, and start to produce oil at Alpha The initial production rates (barrels/day) are about what they predicted Now the field is turned over to the Production Department In production, geoscientists are needed to answer questions such as: How should we ………… Can we ………. What about …….. Is there …………. Can we build ……. Courtesy of ExxonMobil L 15 – Beyond Exploration

Reservoir Simulation HISTORY MATCH FEEDBACK INPUT Geologic Model Oil Production Actual in Blue Slide 12 A very useful tool for production people is a reservoir simulation A detailed geologic model of the reservoir is built – rock type/lithology, porosity, permeability, etc. Then fluids are placed within each cell of the geologic model along with fluid properties The reservoir simulator models how the fluids move through time Until recently, the first simulation would be run after about 5 years of production time The simulation would be calibrated by doing a history match - comparing the simulated production (red curve) with the actual production data (blue boxes) If a reasonably good history match is obtained, the model is taken to be fairly accurate Then we can simulate future production – 10, 20, 30 years into the future We can do some ‘what if’ scenarios – e.g., if we placed 3 additional producers at these locations and 5 injectors at these locations, how much additional oil would we produce? If the cost of these 8 wells is less than the value of the additional oil, we might do it Obviously if the cost of the 8 additional wells would not be recovered, we would not do it – look for other ‘profitable’ scenarios We can also look for portions of the reservoir that are not swept of oil (in the simulations) and target these locations with additional wells – if profitable Modeled in Red Production Time INPUT Reservoir Simulation Courtesy of ExxonMobil L 15 – Beyond Exploration

The Value of G&G to an Oil Company G&G work is done to add HC reserves (volumes) New discoveries More from discovered producing zones Additional producing zones Get the most reserves at the lowest cost Invest in the right basins Drill in the optimum locations Correctly assess what can be recovered Avoid unnecessary wells Slide 13 So geoscientists can have great value to an energy company They can: Do work that leads to added HC reserves – making new discoveries, getting more from producing zones, or finding additional zones to produce They can get more reserves at lower costs Investing in …… Drilling in ……….. Correctly assessing ……… Avoiding ……. For example, say that: I am on a team of 4 working production at the Alpha field The initial plan was to drill 10 wells Average cost for a well is $75 million Through our team effort, we determine that we can get the same amount of oil with only 8 wells drilled in more optimum locations The team of 4 saved the company $150 million (cost of 2 wells) That would be enough to pay each person for 50+ years – they have certainly earned their keep! Courtesy of ExxonMobil L 15 – Beyond Exploration

Let’s Fast Forward a Number of Years The Alpha field has been producing for 5 years We want to maximize production Slide 14 Let’s go forward 5 years after the start of production (drawing fluids out of the reservoir) Our main objective is to maximize production while minimizing the costs We would build a computer model of the subsurface – with rocks and fluids We would simulate how each well would produce fluids over the 5 years of production We use the actual well production to calibrate the model (simulation) If we get the model to match actual production, we build confidence that the model is close to reality Then we can model production into the future With the model, we can test ideas such as “what if we add to producers at locations A, B and C and an injector at location Z?” Build a Geologic Model Develop a Reservoir Simulation Match Past Production Model Future Production Iterate to Match Production History Courtesy of ExxonMobil L 15 – Beyond Exploration

A Geologic Model An integration of all geologic, geophysical, petrophysical and interpreted or conceptual information about a reservoir into a single 3D numerical description of that reservoir Structural Interpretation Stratigraphic Interpretation Petrophysical Interpretation Geophysical Interpretation Slide 15 The subsurface (geologic model) is an integration of all geologic, geophysical, petrophysical and interpreted or conceptual information about the reservoir into a single 3D numerical description of that reservoir Courtesy of ExxonMobil L 15 – Beyond Exploration

A Geologic Model 1m 75 m Perm 250 mD Sand Shale 0.1 mD 50 m Slide 16 Each cell in the model is assigned rock and fluid properties: Rock type (lithology) Porosity Permeability Fluid Saturation Water properties Oil properties Gas properties Etc. Cell size can vary depending on the field size, computing resources, etc. But they are typically about 50 to 100 m in X and Y and about 1 m in depth (Z) Each cell can be populated with rock & fluid Properties: Facies Porosity Permeability Fluid Saturation Etc. Courtesy of ExxonMobil L 15 – Beyond Exploration

How do we use this information? Using a Simulation Past Production Future Production Time (yrs) Oil Rate Base Case EOR Infill Drilling Actual Modeled Slide 17 The first task is to get a history match – a model (simulation) that matches the history of field production If this is done, then we start to model future production We can see the impact of using EOR – enhanced oil recovery methods Or of doing infill drilling The main question is will the cost of EOR and/or infill drilling going to result in enough extra production that the extra costs are more than recovered by the extra oil or gas to sell How do we use this information? Field development planning Field production optimization Reservoir surveillance Courtesy of ExxonMobil L 15 – Beyond Exploration

The assignments are challenging, fast-paced, and multi-disciplined In Summary The O&G Industry needs top-notch scientists and engineers to work on a vast array of problems The assignments are challenging, fast-paced, and multi-disciplined Often your work is tested in the matter of months Great Ideas + Good Science -> Success Slide 18 In summary ….. Courtesy of ExxonMobil L 15 – Beyond Exploration