The hard pressed Reservoir Engineer is often prone in Engineering studies to ignore e the economic implications of his conclusions. Moreoften than not, basic engineering investigations are turned over the economists for financial analysis. Management in turn use these assessments in order to justify the project in question and to plan the future operations of the Company. If the basic assumptions, even although sound from an Engineering point of view, do not relate the proper economic aspects, serious consequences may result. In this paper, some of the problemsthat occur have been reviewed. Recommendations as to the principles which should be followed have also been described.


Serious problems often arise in determining the economic feasibility of reservoir engineering projects because proper assumptions for usein the financial analyses have not been made. A review of the types of problems that may occur and the magnitude of the effect of such problems has been presented herein. Possible variations in economic return as indicated by theoreticalassumptions versus realistic situations have been demonstrated.


The most common error made by Reservoir Engineers is the inadequate or improper use of thebasic assumptions employed in assessing reservoir projects. Assumptions such as the ultimate increase in reserves may be considered valid from a reservoir point of view but not necessarily from an economic standpoint where factors such as rate of return, payout and profit ratio must be given prime consideration. It is obvious that suchprinciples apply to many types of Reservoir Engineering problems. However this discussion has been limited to waterflooding projects. A number of factors are often improperly considered in making economic feasibility investigations. The most important of these factors have been describe as follows:

  • No allowance is given for the time requiredto perform definitive Engineering studies on the feasibility of instituting a pressure maintenance scheme. These studies are seldom accomplished in less than six months and may take as long as two years to conclude.

  • Sufficient time is seldom allowed to conclude negotiations on the unitization and/orfacilitation of agreements to institute pressure maintenance schemes. Again, seldom can such agreements be concluded in less than six months and as often as not, may require in excess of two years.

  • In order to expedite Engineering studies, steady state type calculations are oftenemployed in assessing the merits of a pressure maintenance scheme. Although such techniques may well indicate a reasonablyreliable estimate of the increase in recoveries, significant deficiencies exist in that an adequate period for response isnot taken into account nor is it likely that the rates of production will reach theoretical levels under actual unsteady state reservoir conditions.

  • The majority of studies only consider initial costs and fail to recognize increasingoperating costs after water breakthrough and the capital requirements for water disposal facilities at that time.

  • The higher end point costs necessitate higher producing rate limits and therefore tend to reduce recoveries over that theoretically possible.

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