Uncertainty range in production forecasting

It follows that forecasts that deviate from the actual production with hindsight can still be good forecasts if the uncertainty range is properly defined, justified and documented as will be shown by Example 6 on the Production forecasting FAQs. However, forecasts that contradict each other even though they are based on the same information cannot be good forecasts, even if they are made for different purposes see Example 3 of the Production forecasting FAQs.

Low (P90)/high (P10) range

It is customary in the industry to describe this uncertainty in terms of a low (P90)/high (P10) range. This is consistent with both the  Petroleum Resource Management System (PRMS)  and the Securities and Exchange Commission (SEC) . Both define the reserves and resources estimates in terms of P90/P50/P10 ranges :

The range of uncertainty of the recoverable and/or potentially recoverable volumes may be represented by either deterministic scenarios or by a probability distribution When the range of uncertainty is represented by a probability distribution, a low, best, and high estimate shall be provided such that:

• There should be at least a 90% probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
• There should be at least a 50% probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
• There should be at least a 10% probability (P10) that the quantities actually recovered will equal or exceed the high estimate. When using the deterministic scenario method, typically there should also be low, best, and high estimates, where such estimates are based on qualitative assessments of relative uncertainty using consistent interpretation guidelines. Under the deterministic incremental (risk-based) approach, quantities at each level of uncertainty are estimated discretely and separately.

For volume estimates, a low (P90)/high (P10) range is thus unambiguously defined by statistics. The situation is more complex for a production forecast because the forecast is a timeline and not a scalar. This has led to a variety of uncertainty definitions for the forecast used in the industry, and has hampered progress in deriving the best methods, tools and processes for deriving the forecast uncertainty range.

Another important concept of the PRMS is that resources should be “project based” :

The “Range of Uncertainty” reflects a range of estimated quantities potentially recoverable from an accumulation by a project, while the vertical axis represents the “Chance of Commerciality, that is, the chance that the project that will be developed and reach commercial producing status.

Details of project-based reserves classification is given in Guidelines for Application of the Petroleum Resources Management System . Chapter 2 of these Guidelines gives a comprehensive description of how to classify projects and subprojects into resource classes and subclasses, while Chapters 4 and 5 give examples of how to derive the range of uncertainty of a project by deterministic or probabilistic methods, respectively. Finally, Chapter 7 discusses economics and economic limit tests based on production forecasts, as reserves must be economic by definition, and Chapter 10 discusses the impact of production and sales contracts on reserves, including complex PSCs.

Noteworthy books

Society of Petroleum Engineers (U.S.). 2011. Production forecasting. Richardson, Tex: Society of Petroleum Engineers. WorldCat or SPE Bookstore

External links

Production forecasts and reserves estimates in unconventional resources. Society of Petroleum Engineers. http://www.spe.org/training/courses/FPE.php

Production Forecasts and Reserves Estimates in Unconventional Resources. Society of Petroleum Engineers. http://www.spe.org/training/courses/FPE1.php

See also

Production forecasting glossary

Aggregation of forecasts

Challenging the current barriers to forecast improvement

Commercial and economic assumptions in production forecasting

Controllable verses non controllable forecast factors

Discounting and risking in production forecasting

Documentation and reporting in production forecasting

Empirical methods in production forecasting

Establishing input for production forecasting

Integrated asset modelling in production forecasting

Long term verses short term production forecast

Look backs and forecast verification

Material balance models in production forecasting

Probabilistic verses deterministic in production forecasting

Production forecasting activity scheduling

Production forecasting analog methods

Production forecasting building blocks

Production forecasting decline curve analysis

Production forecasting expectations

Production forecasting flowchart

Production forecasting frequently asked questions and examples

Production forecasting in the financial markets

Production forecasting principles and definition

Production forecasting purpose

Production forecasting system constraints

Quality assurance in forecast

Reservoir simulation models in production forecasting

Types of decline analysis in production forecasting

Uncertainty analysis in creating production forecast

Uncertainty range in production forecasting

Using multiple methodologies in production forecasting