The economic environment of waterflood operation in Western Canada has undergone substantial changes in the past few years, and the derivation of operation strategies to minimize exposure to ongoing expenses after abandonment is becoming increasingly important. The factors contributing to the economic endpoint for a waterflood scheme are discussed, and techniques are suggested for evaluating the probable future profit status of each facet of the operations, including the impact of equipment replacement and repair expenses and escalation of damage payments with time. A risk strategy approach to prediction of pool abandonment time is suggested for an example waterflood scheme.

The Problem

The purpose of the following discussion is to review the development of new concepts in economic evaluation of waterflood pressure maintenance schemes as they near depletion. Conventional economic analysis procedures based on average per well revenues, royalties and expenses no longer give an adequate appraisal of the economic viability of each well when repairs are required, nor define its appropriate economic limit. Furthermore, the impact of changes in government regulations regarding royalty and incentives on the economic limit for a scheme cannot be appraised accurately on an average well basis.

The process of making decisions regarding operating criteria in a depleting waterflood project thus becomes very complicated, and to date has been handled on a well-by-well, "rule of thumb" basis by the field operating personnel. This technique has been generally successful, but the increasingly slim profit margins between increasing operating expenses and decreasing operating revenues make more definitive "rules of thumb" a necessity.

The development of the calculation techniques to solve the above problem began with discussion of operating objectives with field personnel. The decision-making procedure at the well operation level was simulated, and data requirements were defined. The calculation system was expanded into a computer program to develop forecasts of future operating performance and after-tax profits within the constraints of the predicted economic climate and existing regulations.

The Simulator

The development of the simulator for economic analysis of waterflood schemes as they near depletion is an extension of the reservoir engineering principle that the ultimate economic oil recoveryis the sum of the recoveries from each well in the roject. This principle implies that optimum recovery can be achieved only if wells are abandoned when they no longer contribute significantly to the operating profit of the project. The calculation procedures in the model are, therefore, aimed at defining the economic limit and ultimate recovery for each well according to a specified set of operating constraints. Comparison of the effect of varying the constraints then yields an assessment of the probable impact of changes in the economic or operating criteria on ultimate recovery, producing life and project profits.

Production Forecast

The production forecast procedure presumes that the waterflood operation is at a mature stage in all producing wells, with declining oil rates and increasing water production prevalent throughout the project. All potential production benefits available from well recompletions and stimulations or from changes in injection allocation are assumed to have been exhausted.

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