Oil Gas MODELING by kxh11968


									                   Oil & Gas
                   and Analysis Program

Accurate, Timely
 Information for
      and Policy

                          OIL AND GAS RD&D PROGRAMS

                                          W     here should DOE focus research, development, and
                                                deployment investments to yield the greatest benefits
                                          to the Nation? How will proposed environmental legislation
                                          or tax policy initiatives affect domestic oil and gas explo-
                                          ration and development? How effectively are oil and gas
                                          programs meeting their goals?
                                          Decisionmakers at the Department of Energy, other Federal
                                          agencies, Congress, and State and local governments require
                                          timely, accurate, quantitative information as they consider
                                          RD&D and policy questions affecting U.S. energy resources.
                                          To provide this information, DOE has developed a program
                                          of modeling and quantitative analysis that simulates the
                                          exploration, production, processing, and storage methods
                                          of the domestic oil and gas industry. Using detailed
                                          engineering and economic models, estimates are made of
                                          potential economic recoveries of domestic oil and gas
                                          resources over a wide range of technologies, economic
                                          criteria, and legislative and regulatory environments.
                                          Models provide DOE and its customers with unique quanti-
                                          tative and modeling capabilities that cannot be found
                                          anywhere else, producing information required for effective
                                          development of our Nation’s natural resources.

                                                       OIL & GAS MODELING AND ANALYSIS PROGRAM

Oil & Gas Modeling and
Analysis Program                                                       “Metrics are essential to
                                                                       support ongoing assessments
Oil and gas modeling systems support                                   that will help assure prudent
DOE in maximizing benefits from RD&D                                   investment of DOE energy
and policy programs. Unique DOE
                                                                       R&D funds with the goal
models support informed decisions
                                                                       of maximizing public
b y g o v e r n m e n t a n d i n d u s t r y.
                                                                       –   Task Force on
                                                                           Strategic Energy
D    OE has a responsibility
     for stewardship of our
natural resources and for
                                   DOE has developed a
                                   unique suite of oil, gas,
                                   and programmatic models that
                                                                           Research and
expending appropriated funds       are essential to satisfying its
                                                                           June 1995
to support environmentally         responsibilities. The models
sensitive development of these     are maintained and enhanced
resources for the benefit of the   by the Office of Fossil
general public. Stewardship        Energy, and provide DOE
of our oil and gas resources       with capabilities necessary to
includes ensuring their            successfully plan, implement,
effective and efficient devel-     and manage a complex RD&D
opment, while minimizing           and policy program, focusing
environmental impact. DOE          on areas that most benefit its
focuses its RD&D and policy        customers. Although models
efforts on removing major          of varying degrees of sophisti-
constraints to environmentally     cation are available outside
sensitive recovery of the          of DOE, none are suitable
domestic resource, which will      for evaluating the potential
yield substantial incremental      benefits of differing
oil and gas reserves for           technologies, economic
public benefit.                    criteria, and legislative and
                                   regulatory environments over
                                   the entire U.S. resource base.
                                   FE’s models are designed
                                   to evaluate these conditions.

                                                                                                         MODELING &


                                  Government Role

                          D    OE’s Oil and Gas
                               Program includes a
                          policymaking and advisory
                                                            These detailed engineering
                                                            and economic models provide
                                                            DOE and its stakeholders
                          component. The goal of the        with estimates of potential
                          policymaking and advisory         economic recoveries of
                          component of the Oil and          domestic petroleum resources
                          Gas Program is to support         over a wide range of
                          decisionmakers in DOE, other      technologies, economic
                          Federal agencies, Congress,       conditions, and legislative
                          and State and local govern-       and regulatory environments.
                          ments with timely and             These unique analytical
                          accurate quantitative infor-      capabilities, which cannot
                          mation and analyses, as they       be found elsewhere, provide
                          consider policies affecting our   information for DOE and
                          domestic petroleum industry.      stakeholders to maximize
                          To provide the information        the benefits of RD&D initia-
                          needed to support the             tives and to make informed,
                          Program, DOE has developed        economically-efficient, and
                          a unique suite of modeling        scientifically-sound decisions
                          and analytical capabilities       on a wide range of policies
                          that simulate the exploration,    affecting the domestic
                          production, processing, and       petroleum industry and
                          delivery components of our        the Nation.
                          domestic petroleum industry.

                                                     OIL & GAS MODELING AND ANALYSIS PROGRAM

Value to                        • To support the oil and gas
                                  policy analysis responsibil-
Customers                         ities of DOE and other
                                  Federal agencies. The
F   ossil Energy continues to
    maintain and improve the
oil and gas models to reflect
                                  models provide quanti-
                                  tative and analytical tools
current and future program        to assess the costs and
objectives. The models have       benefits of a wide range of
significant applications for      policy initiatives affecting
DOE and its customers.            the Nation’s petroleum
                                  industry. These initiatives
DOE as Customer                   include financial issues
                                  (e.g., changes to the
Primary uses of the models
                                  Federal tax code affecting
within DOE are:
                                  the petroleum industry or
• To prioritize oil and gas       royalty relief on Federal
  RD&D initiatives.               lands), environmental
                                  regulations affecting
• To develop budget               the industry, and issues
  support documentation           relating to the devel-
  by estimating the relative      opment of Federal lands.
  costs and benefits of
  different RD&D
  approaches to solve
  exploration, production,
  environmental, and                                  Success Stories
  processing problems facing
  the oil and gas industry.
                                           Support To States
                                           Worked with oil and gas producing States
                                           to assess the effects of State taxes on the
                                           performance of the industry. To date, eleven
                                           States have revised their tax codes to support
                                           the industry based on these analyses.
                                           Provided an assessment of the costs and benefits
                                           of eco-royalty relief to the Greater Green River
                                           Advisory Committee. Based on this analysis,
                                           the Committee adopted eco-royalty relief as
                                           a recommendation to the States in the Greater
                                           Green River Basin.
                                           For the Interstate Oil and Gas Compact
                                           Commission, assessed the impact of idle oil
                                           and gas wells on industry production, State
                                           and Federal revenues, and jobs. These results
                                           were included in IOGCC’s study and
                                           recommendations on idle wells.
                                                                                                    MODELING &


             Drivers                                          Goals
             • FE needs information from                      • Provide high quality
               modeling and analysis to                         modeling and quantitative
               make wise and efficient                          analyses in a timely
               choices for utilizing appro-                     manner to support FE
               priated funds to maximize                        and DOE in achieving their
               the benefits of its oil, gas,                    stated goals and objectives.
               and environmental RD&D
               programs for the public.                       • By 2010, fully integrate
                                                                DOE’s oil and gas models,
             • FE and DOE budget decision-                      so that they can be run
               makers need high quality                         in unison to simulate
               information on how varying                       oil and gas operations.
               levels of budgetary funding
               will affect the benefits that                  • Maintain and enhance
               can be derived from oil                          models that will continue
               and gas RD&D programs.                           to be recognized and relied
               Decisionmakers will use the                      on by DOE, Congress,
               information to choose appro-                     other governmental
               priate funding levels that                       agencies, industry, and
               maximize the benefits of these                   others as analytical tools
               programs versus the costs                        for quantitative and
               of their implementation.                         modeling simulations of
                                                                the petroleum industry.
             • Policymakers in DOE and
               in other Executive branch
               agencies, in Congress, in State
               energy and environmental
               agencies, and in the petroleum
               industry need quantitative
               and modeling analyses to
               assist them in determining
               the relative benefits and costs
               of a wide-range of policy
               initiatives affecting the
               petroleum industry.
             • FE requires models
               specifically designed to
               evaluate the potential benefits
               of differing technologies,
               economic criteria, and
               legislative and regulatory
               environments over the entire
               U.S. resource base. Other
               models available outside

               of DOE do not provide

               the required capabilities.

                                           OIL & GAS MODELING AND ANALYSIS PROGRAM

                                             Oil and Gas
Strategies                                   Modeling &
• Maintain and enhance a unique               Analysis
  set of oil, gas, and program-
  matic models with capabilities              Program
  that are not found elsewhere.
   –   Ensure that model coverage
       is consistent with RD&D
       and policy program scopes,
       by continually upgrading
       and improving models to
       expand regional coverage
       and to reflect the impacts of
       new technologies, economic
       conditions, and regulatory
       environments.                    Measures of Success
• Provide quantitative analyses         • Results of the quantitative and
  that apply the set of models            modeling analyses provide timely
  effectively, to provide timely,         and useful information as needed.
  accurate information that meets
  the specific requirements             • Results of the analyses reflect the
  of customers.                           entire suite of program elements
                                          and model their interactions, as
   –   Analyze the potential              well as their direct impacts.
       impacts of the oil, gas,
       and related environmental        • Models succeed in peer reviews on
       RD&D programs on current           a regular basis and ensure that they
       exploration, production,           are of high caliber and acceptable
       and utilization of our             to knowledgeable experts.
       petroleum resources.
   –   Provide policymakers with
       accurate and timely quanti-
       tative analyses of legislative
       and regulatory initiatives
       affecting the petroleum
       industry, to ensure that
       these initiatives are cost-
       effective and beneficial to
       the industry and the Nation.
                                                                                       MODELING &


                                                                      Other Customers

                                                                      D   OE also uses these
                                                                          models to provide
                                                                      analytical support to many
                                                                      other customers outside of
                                                                      DOE who do not have such

                                                                      • The U.S. Congress relies
                                                                        on these models to analyze
                                                                        the costs and benefits
                                                                        of legislative initiatives
                                                                        that impact domestic
                                                                        oil and gas production
                                                                        and reserves.
                                                                      • Local and State govern-
                                                                        ments rely on the models
                                                                        to assess the costs and
                                                                        benefits of financial or
                                                                        regulatory reforms on
                                                                        their oil and gas
                                                                      • Oil and gas operators
                                                                        use the models to identify
                                                                        marginal properties with
                                                                        potential for additional
                                                                        recovery through appli-
                                                                        cation of improved
                               Success Stories                          technologies. Public
                                                                        versions of TORIS (Total
                                                                        Oil Recovery Information
                     Other Support To Industry
                                                                        System) databases and
                     Assessed an industry proposal to extend            models are routinely used
                     the Federal Tax Code Section 43 tax credit for     by major and independent
                     enhanced oil recovery operations to horizontal     oil companies in prospect
                     wells. This proposal is being considered by        evaluation and strategic
                                                                        planning. These models
                     Congress, but no action has been taken yet.
                                                                        provide unique analytical
                     Working with the National Petroleum                capabilities that many
                     Council on its new study of the potential          operators do not have
                     of the domestic natural gas industry to meet       on their own. Independent
                     expected increases in future gas demand.           and small operators, in
                     DOE will provide modeling and quantitative         particular, may not have
                                                                        the resources to develop
                     analyses as requested to support that study.
                                                                        such capabilities.

                                                    OIL & GAS MODELING AND ANALYSIS PROGRAM

• Professional organizations,   Analytical Models
  such as the Petroleum
  Technology Transfer           Fossil Energy’s suite of
  Council, Independent          analytical models comprises
  Petroleum Association of      the following:
  America, Interstate Oil and
                                • TORIS – Total Oil Recovery
  Gas Compact Commission,
                                  Information System –
  National Petroleum
                                  couples engineering
  Council, and others, also
                                  models with detailed
  rely on these models. DOE
                                  economic models to
  analytical systems have
                                  estimate potential
  significant applications
                                  economic recovery over
  in technology transfer
                                  a wide range of extraction
  and resource evaluation
                                  technologies and economic
  for less sophisticated
                                  criteria. The system’s
  operators, particularly
                                  extensive databases
  small independent
                                  of geological reservoir
                                  properties, production
• Other Federal agencies use      levels, and engineering
  these models to manage          criteria support detailed
  Federal lands with oil and      analyses. TORIS results
  gas resources. For example,     are used to focus DOE’s oil
  evaluations conducted for       RD&D programs on poten-
  the Department of the           tially high benefit areas, to
  Interior ’s Bureau of Land      develop budgetary insights
  Management supported            to support program devel-
  formulation of an effective     opment, and to assess the
  transfer payment strategy       effectiveness of reaching
  to increase oil production      DOE’s RD&D goals
  from Federal lands. The         and objectives. TORIS
  evaluations resulted in         is operated by DOE’s
  royalty reduction for           National Petroleum
  marginal oil leases and         Technology Office
  heavy oil production.           in Tulsa, Oklahoma.
• DOE also has used its         • OSAM – the Oil Supply
  models to advise the            Analysis Model – provides
  Environmental Protection        quick, yet accurate, results
  Agency on the costs and         in analyzing different
  benefits of proposed            policy options. OSAM
  environmental regulations       relies on TORIS for its
  affecting the petroleum         basic data on production
  industry.                       and economics. This
                                  modeling system is
                                  operated by ONGPT
                                  at DOE Headquarters.
                                                                                              MODELING &


                                              • GSAM – Gas System                       to support DOE’s gas
                                                Analysis Model – is                     policy initiatives. GSAM
             FE continues to maintain and       a comprehensive system                  is operated by the Federal
                                                for analyzing natural gas               Energy Technology Center
             improve its analytical models,     exploration, extraction,                (FETC) in Morgantown,
                making them increasingly        storage, distribution, and              West Virginia.
                                                utilization characteristics.
                effective and responsive to     Like TORIS, GSAM                    • OPRA – Oil Program
                                                contains engineering                  Resource Assessment –
                     changing requirements.
                                                models coupled with                   is a program metrics model
                                                detailed economic models              used to estimate potential
                                                to estimate recovery and              benefits of specific oil-
                                                utilization of natural gas            related RD&D projects.
                                                over a wide range of                  This comprehensive
                                                technical and economic                modeling system enables
                                                conditions. GSAM results              DOE to evaluate its
                                                are used to: focus DOE’s              progress toward achieving
                                                RD&D related to gas                   stated goals and objectives.
                                                supply to potentially high            OPRA is operated by
                                                benefit areas; develop                DOE’s National Petroleum
                                                budgetary insights to                 Technology Office in Tulsa,
                                                support program devel-                Oklahoma.
                                                opment; and assess the
                                                effectiveness of reaching
                                                DOE’s RD&D goals and
                                                objectives. GSAM also
                                                provides modeling and
                                                analytical capabilities

                                                            Oil and gas models are used for RD&D program
                                                                      direction and policy support.

                                                                OIL & GAS MODELING AND ANALYSIS PROGRAM

Strategies for                           The original modeling system            In addition, new data
                                         focused solely on enhanced              and data sources must be
the Future                               oil recovery technologies in            discovered to advance oil
                                         the lower-48 States. As funds           and gas operations analyses.
F   ossil Energy has been
    developing oil and gas
models since 1984, and will
                                         and information have become
                                         available, models have been
                                                                                 Modeling and database activ-
                                                                                 ities are in the forefront of
continue to maintain and                 expanded and refined to                 technology development
improve the models, making               include the entire domestic             because much of the data
them increasingly effective              oil and gas industry. Future            necessary to improve the
and responsive                           upgrades will include the               modeling system do not exist
to changing requirements.                coverage of offshore regions,           at this time.
Model maintenance includes               as well as capabilities in
updating geologic, technical,            exploration, environmental,
regulatory, and cost data on             and refining technologies.
a regular basis.

                                        Six Success Stories

                             Support To Other Federal Agencies and Congress

    Assessed the remaining oil resources in Federal       Analyzed the costs and benefits of proposals
    offshore properties in the Gulf of Mexico for the     for royalty relief for heavy oil wells and marginal
    Minerals Management Service and identified the        oil wells on Bureau of Land Management lands.
    need for further advances in technology to ensure     This resulted in the promulgation of new regula-
    that these resources are fully recovered in an        tions, giving royalty relief for heavy oil wells
    environmentally safe manner before they are           and the extension of royalty relief regulations
    prematurely abandoned.                                for marginal wells.
    Working with the Bureau of Land Management            Analyzed heavy oil royalty relief provisions
    to develop performance standards for their Federal    proposed by Congress and testified before the
    onshore oil and gas leasing program. These new        House Committee on Energy and Mineral
    standards will give BLM detailed information on       Resources on these results. This resulted in
    how its leasing program will affect current and       the Committee supporting the royalty relief
    future oil and gas production, royalty collections,   regulations ultimately passed by the Bureau
    other State and Federal revenues, jobs, and other     of Land Management.
    economic parameters.
                                                          Provided analysis to Congress on the costs and
    Supported the Department of Treasury and the          benefits of repealing the Federal Tax Code transfer
    National Economic Council by assessing the            rules relating to the use of percentage depreciation
    costs and benefits of various proposals to provide    allowances by independent producers. This led to
    tax relief for marginal wells, and to revise the      the simplification of these rules in the Tax Code.
    tax accounting treatment for geological and
    geophysical expenses. These proposals have
    not been adopted as yet.
                                                                                                                        MODELING &



                                                                                                                        OFFICE OF NATURAL GAS AND PETROLEUM TECHNOLOGY

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