Study On Dynamic Economic Evaluation Of Petroleum Reserves

As we all know, oil is the important strategic resource, and the oil industry is the pillarindustry of the national economy and social development. Recently the strategic pattern of "fullyutilizing the both domestic and international markets and resources" has been formed, and threeleading oil companies such as Petrochina have listed overseas successfully. Therefore, it is anurgent and essential problem about how to evaluate oil reserves economically and how to make theresults conform to the globally accepted rules. The scientific dynamic economic evaluation of oilreserves is the premise of enhancing the connection of the intemational standards, is the safeguardof the implementation of scientific resolution of oil companies, and the strengthen of the riskprevention, paving the way for the deep reforms of oil companies, and thoroughly change theconcept of emphasizing on technical reserves instead of economic reserves. Consequently, thispaper has better global theoretical research value and practical value.The international authorities focus on the economical evaluation of the proved reserves,including proved developed reserves and proved undeveloped reserves. Therefore, the dynamiceconomic evaluation of oil reserves in this paper concentrates on proved developed reserves andproved undeveloped reserves.This paper carries on the research by adopting the following methods: First, the methods ofthe quantitative analysis and qualitative analysis in order to embody the scientificalness ofdecisions and the complexity of oil resources. Second, the methods of the standardized analysisand empirical analysis. This paper sets up the theoretical model on the basis of QuantitativeEconomics, Technical Economics, Mathematics, and Complex Analysis. It combines the modeland cases, thus making the model theoretical and practical. Third, comparative analysis methods.This paper emphasizes both the theoretical methods and comparatives of empirical results. Forexample, the comparison of NPV value between the model of expanding DCF-NP and thetraditional method on the same oil area, the comparison of the soft computing and the hardcomputing and so on. Fourth, the methods of the macro-scope and micro-scope. The body of thispaper on the dynamic analysis of oil reserves is to make micro-economic evaluation and the macroproduction forecast, the micro-economic evaluation lays emphasis on the research of one orseveral specific blocks, and the macro production forecast focus on the research of the whole oilfield; Fifth, system analysis. The dynamic economic evaluation of oil reserves in this paper basedon the concept of large system, lays emphasis both on the micro-economic evaluation of somespecific oil fields and micro-development planning of the oilfield enterprises, thus the mainstructure of this paper is macro forecast and micro evaluation. At the same time, in some specificresearch, especially during the process of the model constructing, it's not only to analysis andfigure out question solely, but to make the object in a system background, construct indicators andchoose index from the system aspects, in this method, it embodies the oil field characteristic andthe influence of non-artificial factors to Economic indicators, what more, it reflects the influence of social factors besides it 'self objectively, which the two factors is objective existence andinfluent the Economic indicators together.The innovation of this paper reflects in the following mainly:First, it has constructed the dynamic economical evaluation of proved undeveloped reservesDCF-NPV expanding model ,which model can dived the economic life period into exploration anddevelopment phase ,output rising period, phase stability and output reducing period, it reflects thechanging of the oil price under fixed ratio ,the output of the oil in a phase stability ,the reducingphase with exponential decline, the development cost remains unchanged in the period of thePhase Stability, the characteristics of the increasing under fixed ratio during output reducingperiod, to objective evaluate the influence generated by the changing of the time value of capitaland altering factors during the economic life period.Second, it has set up the analytical model of the dynamic economical evaluation of provedundeveloped reserves lower limited output (reserve), which reflects that the economic lowerlimited output varies with the impact factors instead of stabilizing during the analytical period.Third, the soft computing method is initially adopted in the study of correlation betweeneconomic indicators and impact factors which gives us more accurate analytical results than thosefrom traditional hard computing method (e.g. regression analysis). Moreover, the study of thecorrelation of economic indicators and multiple factors based on soft computing method is thestudy which has never been anglicized by predecessors.Fourth, Radial Basis Function of Nearest Neighbor-Markov (RBFNN-Markov)forecasting model based on soft computing and hard computing method is put forward in theprocess of oilfield production macro predication. The model is a brand new attempt in the field ofproduction macro predication, and gets more accurate results than those of the traditionalproduction predication method (Gray Model).Major chapters are organized as the following:Chapter 1 is the preface including subject-selecting background, the necessity andsignificance for studying, the main research contents and the research approaches, as well as themain innovative points.Chapter 2 is the summary of the economic evaluation of domestic and international oilreserves. First of all, the paper introduces grade scales of domestic and international oil reserves,compares grade scale of domestic oil reserves and that of international oil reserves, advocates theimprovement of domestic oil reserves grade scale and makes domestic grade scale conform to theinternational standard. Then, the paper demonstrates development situation of economicevaluation of projects at home and abroad. Last, the paper outlines economic evaluation methodsof domestic and international oil reserves, as well as the in adequacies the dynamic embodiment ofeconomic evaluation methods of domestic and international oil reserves in the value of capital andtime, the dynamic correlation between variance factors and economic indicators, the applicabilityof economic evaluation methods. The inadequacies mentioned above are the focus of this paper.Chapter 3 is the research on the theoretical base of oil reserves dynamic economic evaluation.The paper proves the value embodiment of mineral resources in the aspects of value theories such as labor value, rent, utility value, and scarcity value of resources, as well as compensation value ofexhaustible and breakage resources. It lays the solid theoretical foundation for the followingresearch on economical evaluation of oil reserves.Chapter 4 is about the dynamic economic evaluation of proved undeveloped oil reserves. TheDCF-NPV expanding model on the basis of several assumptions and DCF-NPV is set up, with thefollowing factors considered, such as the stochastic fouctuation of oil price, decreasing of oilproduction and increasing of oil development cost .The assumptions include: first, the economiclife period is divided into exploration and development period, the middle period, the stableproduction period, the production declining period. The output include the output of the oil instable production period, the output in the production declining period, suppose the output in thestable phase remains unchanging, the output in the production declining period declinesexponentially; second, suppose the oil price increases under a fixed ratio; third, suppose thedevelopment cost remains unchanging in the stable production period, the cost decreases under afixed ratio in the production declining period; fourth, suppose a year is the interest bearing period,that is compound interest is calculated every year; fifth, suppose the relative tax rate remainsunchanging in the calculating period. The expanding DCF-NPV model embodies both the featuresof oil industry and the dynamic features of oil reserves economic evaluation. The model is morepractical and operable than the traditional DCF-NPV model based on the determined parameters.According to the founded expanding model, economical evaluation of the applicability of oilreserves development can be calculated and control decisions can be made to get the maximumand investment limit of the following factors such as interest ratio, price and cost as well as todefend the risk and decide the investment based on the current reserve scale. At last a case in aspecific oilfield will be presented to prove the applicability of the expanding model.Chapter 5 deals with the research on dynamic economic evaluation of proved developed oilreserves. Proved developed oil reserves refer to the remaining recoverable reserves. Economicalevaluation of the development refers to economical evaluation of the remaining recoverablereserves. Economical evaluation of proved developed oil reserves focuses on the analysis of thenecessity and applicability of additional investment (cost), the management policy and decisionsapplied in the enterprises, while the evaluation of the remaining recoverable reserves is usuallydemonstrated by the well production in the unit time. Therefore, the paper focuses on the output.The author demonstrates the concept of the economic lower output and defines the connotation ofthe economic lower output, which refers to the minimum output to ensure that the enterprise gainthe profit under the current technical and economic situation. The paper sets up the minimumreserve scale model and the analytical model of dynamic economic lower output under thesituation when capital, time, price, value and cost change under fixed ratios. Compared with thetraditional static analytical model, the dynamic model can reflect operational security rate, theinfluence on the economic lower output by the alteration of price, cost, and discount rate and theoperational risk tolerance to provide basis for decision making for the further additionalinvestment in the well development. At last a case of a specific oilfield will be presented to provethe superiority and practicality of the dynamic model through the comparison between the results of the traditional static model and the dynamic model discussed in the paper. At themeantime, it demonstrates the economic lower output varies in the life period with the closecorrelation with the impact factors. Therefore, various factors should be considered whencalculating the economic lower output in order to evaluate the recoverability of oilfield projectsmore objectively.Chapter 6 is about the study of the correlation between the lower output and the impactfactors based on the automated neural network (ANN). It is the continuation of the chapter 5. Thepaper selects the crude oil price, oil layers depth reservoir area and recovery rate as the impactfactors which influence the lower output by the means of the soft computing method (ANN), thereal situation and the accessibility of materials. The factors can be divided into external factors andinternal factors. The paper adopts the soft computing method to study the correlation betweenprice, depth and lower output, thus getting the model about those factors. At the same time, itcompares the results of the soft computing analysis with traditional regression analysis to provethat the former method is more accurate. On the basis of the correlation study of single factor, thepaper adopts soft computing method further to study the correlation between the lower output andexternal factors, internal factors to reflect the complexity, correlation and indivisibility and toenhance the predictable and controllable ability.Chapter 7 is about the research of Jianghan Oil Field macro-preserve--prediction studies. Asfor the oil industry, the macro prediction of the output of the oil has great significance inExploration and Development planning and production planning. It offers the decision -support forthe reasonable task planning, development and avoidance of blind investment. It ensures that theannual recovery abide by the established development model to reach the strategic goal ofsustainable development in the long run. The paper initially combines the soft computing method(RBFNN) with the hard computing method (Markov) and takes Jianghan oilfield for example toconduct macro predication of the output in the following years. Meanwhile, it proves that model ismore accurate in output macro predication by comparing the method in this paper with thetraditional GM (1,1). The result proves that the model is explainable, practical and operable inmacro prediction.Chapter 8 is the conclusion and the recommendation on scientific and reasonable reserveseconomic evaluation. It includes: first, collection, arrangement and perseverance of historicalstatistics should be strengthened; various analytical index should be regulated to pave the way forsuccessful evaluation. Second, current discount rate should be raised to evade risk. Third, currentsecond gear oil price system should be reformed and different price standards should be adopted indifferent evaluation projects. Fourth, straight-line depreciation method and accelerateddepreciation method should be altered to speed up return of capital and ensure the developmentfund. Fifth, current tax system of guillotine principle in cutting stock should be changed andclassification tax system should be adopted. In addition, the application of soft computing methodin the exploration and management should be emphasized.