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ACKNOWLEDGEMENTACKNOWLEDGEMENT

I would like to express deep sense of gratitude to Mr. K.V. Mohan Rao (Centre Director-UPES), Mr.G.M. Rao (Dean-COMES) for providing me the opportunity to do the project work in O.N.G.C.

Rajahmundry.

I would like express my gratitude to Mr. J.A. Kumar (General Manager-HR), S.K. Panigrhy (Head-

STI) for allowing me to pursue my project work at the O.N.G.C. (Rajahmundry Assets).

It is a matter of great pleasure for me to express my sincere gratitude to Mr. M.S. Gauma (GGM-

Reservoir, Subsurface Manager Rajahmundry Assets)for allowing me to pursue my project work in

his department.

I would also like to take the opportunity to thank my mentor Mr. P. Bharadwaj-CG (External Guide)

as he has spared his time and imparted his valuable knowledge to me along with Mr. M. Karthik

(Internal Guide) for his valuable guidance throughout the course of my project.

Last but not the least, I would also like to thankMr. P.S. Goswami & Mr. ShashiShekhar for their

valuable support during the training period. I convey my heartiest gratitude to them for sharing their

vast knowledge and expertise acquired through long years of experience in O.N.G.C. which has helped

me in gaining insight into the subject.

In the end thanks to all that directly or indirectly helped in the course of this project.

(PUNEET MAHAJAN)


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INDEX


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INDEX

S.No. Page No.

Acknowledgement (i)List of Tables (vii viii)

List of Figures (ix)

Company Profile (x xvi)

Abstract (xvii xviii)

Objectives of the Project (xix xx)

Research Methodology used in the Project (xxi xxii)

Limitations of the Project (xxiii-xxiv)

Chapter 1 INTRODUCTION (1 3)

1.0 Introduction (2 3)

Chapter 2 RESERVES ESTIMATION METHODS (4 13)

2.0Introduction 5

2.1 Data Used in making Reserve Estimates 6

2.2 Reserve Estimation Techniques (6 11)

2.2.1 Analogy Method 8

2.2.2 Volumetric Method (8 11)

2.2.2.1 Benefits of Using Volumetric Method 9

2.2.2.2 Calculation of the Reserves by

Using the Volumetric Method (9 11)

2.2.3 Decline Curve Analysis 11

2.2.4 Material Balance Method (11 12)

2.2.5 Reservoir Simulation (12 13)

Chapter 3 FACTORS EFFECTING RESERVES ESTIMATION (14 17)

3.0 Judgmental Factors in Reserve Estimation 15

3.1 Economic Considerations (15 16)


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S.No. Page No.

3.1.1 Developed Gas Fields 15

3.1.2 Developed Oil Fields (15 16)

3.1.3 Successful Exploration Efforts 16

3.2 Effect of Operating Conditions 16

3.3 Reservoir Limits (16 17)

Chapter 4 ERRORS IN DECLINE CURVE TECHNIQUE

OF RESERVES ESTIMATION (18 26)

4.0 Errors in Decline Curve Technique of Reserves Estimation 19

4.1 Data Readings used for the Econometric Model 19

Case 1 (20 22)

4.2 Using six Initial Production and Pressure Data for Developing of the

Econometric Model for Decline Curve Estimation Method (20 22)

Case 2 (23 25)

4.3 Using Eight Initial Production and Pressure Data for Developing of the

Econometric Model for Decline Curve Estimation Method (23 25)

4.4 Comparison of % Error in Prediction for the Two Cases (25 -26)

Chapter 5 ECONOMIC BENEFIT OF EARLY OGIP ESTIMATION (27 41)

5.0 Economic Benefit of Early OGIP Estimation 28


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S.No. Page No.

Case 1

5.1 General Assumptions 29

5.2 Capital Expenses Assumptions 29

5.3 Operational Expenses Assumptions 29

5.4 Tax Law Assumptions 29

5.5 Scenario 1 - The Appraisal Well Is Drilled 6 Months after

the Exploration Well 30

5.6 Cash Flow after Taxes & Net Present Value of the Scenario 1 (31 32)

5.7 Scenario 2 The Appraisal Well Is Drilled 1 Year afterthe Exploration Well 32

5.8 Cash Flow after Taxes & Net Present Value of the Scenario 2 33

5.9 Comparison of the NPV of the Scenario 1 & 2 34

Case 2

5.10 General Assumptions 35

5.11 Capital Expenses Assumptions 35

5.12 Operational Expenses Assumptions (35 36)

5.13 Tax Law Assumptions 36

5.14 Scenario 1 - The Appraisal Well Is Drilled 6 Months after



5.16 Scenario 2 The Appraisal Well Is Drilled 1 Year after



5.18 Comparison of the NPV of the Scenario 1 & 2 40


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S.No. Page No.

Chapter 6 CONCLUSIONS & RECOMMENDATIONS (42 44)

6.0 Conclusions and Recommendations (43 44)

Chapter 7 REFERENCES (45 46)

7.0 References 46

Annexure 1 (47 53)

Annexure 2 (54 65)

Annexure 3 (66 82)


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LIST OF TABLES

S.No. Page No.

Table 1:- Comments on Estimation Methods 7

Table 2:- Formulas for the Estimation of Reserves by Volumetric Method 9

Table 3:- Model Parameters for Reserves Calculation by Volumetric

Method of Estimation 10

Table 4:- Calculation of the Reserves by Volumetric Method of Estimation 10

Table 5:- DataReadings Used for the Econometric Model 19

Table 6:- Econometric Model for Six Production and Pressure Readings 20

Table 7:- Predicted Production and Error in the Predicted Production 20

Table 8:- Econometric Model for Eight Production and Pressure Readings 23

Table 9:- Predicted Production and Error in the Predicted Production 23

for Eight Readings 23

Table 10:- Comparisonof % Error in Prediction for the Two Cases 25

Table 11:- CFAT & NPV of the Scenario 1 31




Table (A-1.1):- Decline Curve Data of well number (XXX) of

K.G Basin (O.N.G.C) (48 53)

Table (A-2.1):- Capital Expenditure for the scenario 1 & 2 55


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GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGS.No.

Page No.

Table (A-2.2):- Depreciation on the Capital Expenditure for the Scenario 1 & 2 (55 59)

Table (A-2.3):- Revenues & Revenues after the Royalty and Payment of

Profit Oil for Scenario 1 60

Table (A-2.4):- Operational Expenses for Scenario 1 61

Table (A-2.5):- Operating Profits for Scenario 1 62





Table (A-3.1):- Capital Expenditure for the scenario 1 & 2 67

Table (A-3.2):- Depreciation on the Capital Expenditure for the Scenario 1 (67 - 71)

Table (A-3.3):- Revenues & Revenues after the Royalty and Payment of 72

Profit Oil for Scenario 1



Table (A-3.6):- Depreciation on the Capital Expenditure for the Scenario 2 (75 79)





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LIST OF FIGURES

S.No. Page No.

Figure 1: Magnitude of uncertainty in reserves estimates 5

Figure 2: Measures of central tendency 12

Figure 3: Percentiles 13

Figure 4 Actual v/s Predicted Production 21

Figure 5 Percentage Error in Prediction 22

Figure 6 Actual v/s Predicted Production 24

Figure 7 Percentage Error in Prediction 24

Figure 8 Comparison of Percentage Error in Prediction Case 1 v/s Case2 25

Figure 9 Comparison of NPV of Scenario 1 & 2 34

Figure 10 Comparison of NPV of Scenario 1 & 2 40


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COMPANY PROFILECOMPANY PROFILE


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COMPANY PROFILECOMPANY PROFILE


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VISION


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To be a world class Oil & Gas Company integrated in Energy Business with dominant Indian

Leadership and Global Presence.

MISSION

WORLD CLASS

1. Dedicated to excellence by leveraging competitive advantages in R&D and technology with

invovled people.

2. Imbibe high standards in business ethics and organizational values.

3. Abiding commitment to health, safety and environment to enrich quality of community life.

4. Foster a culture of trust openness and mutual concern to make working a stimulating and

challenging experience for our people.

5. Strive for customer delight through quality products and services.

INTEGRATED IN ENERGY BUSINESS

1. Focus on domestic and international oil and gas exploration and production business

opportunities.

2. Provide value linkage in other sectors of energy business.

3. Create growth opportunities and maximise share holders value.

DOMINANT INDIAN LEADERSHIP

1. Retain dominant position in Indian Petroleum sector and enhance Indias energy availability.


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BOARD OF DIRECTORS

CHAIRMAN & MANAGING DIRECTOR

R S Sharma

Chairman & Managing Director

FUNCTIONAL DIRECTORS

Dr. A K Balyan

Director (HR)

A K Hazarika

Director (Onshore)

D K Pande

Director (Exploration)

U N BoseDirector (Technology & Field

Services)

D K SarrafDirector (Finance)

Sudhir VasudevaDirector (Offshore)

SPECIAL INVITEE GOVERNMENT NOMINEES

R S Butola

Managing Director, OVL

S Sundareshan

Addl.Secy. MOP&NG

Govt. of India

L M VasAddl. Secy. DEA

Ministry of Finance,

Govt. of India


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ORGANIZATIONAL STRUCTURE OF ONGC


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OIL AND NATURAL GAS CORPORATION LIMITED

The story of oil exploration in India is the history of ONGC itself. India is endowed with 26

sedimentary basins, spread over a geography of 3.13 million square kilometres; offshore basins

comprise of 0.39 million square kilometres, Onshore 1.39 & Deepwater 1.35.

ONGC has discovered all the producing basins in independent India. Only one old basin discovered

before independence existed when ONGC was formed in 1956.

Commissioned on 14th august 1956, as a statutory body, ONGC was converted into a public limited

company from 1st February 1994, reinventing the potential of the Company in a progressive economic

regime.

Today, ONGC is Indias most valuable company, leading all Indian companies in terms of market

capitalization (over 41 billion US Dollars), Net Worth (11 billion US Dollars) and Net Profit (3 billion

US Dollars). Currently recognized as Asias Best Oil & Gas Company, ONGC also leads to all Indian

companies in Forbes 2000 list of global mega-corporations. ONGC is a Fortune-Global-500 corporate,

and ranks 15th among global integrated oil and gas companies.

To achieve organizational growth with stability, ONGC is pursuing business growth options by

entering into Joint Ventures and partnerships with companies having niche strength.

ACHIEVEMENTS OF ONGC

ONGC is in the select league of Global Oil Majors, producing over 1 million barrels

of Oil Equivalent per day contributes around 80% of domestic production.

ONGC also produces 3.2 million tonnes of Value Added Products (VAP) including

LPG, C2, C3, Naphtha, HSD, Jet fuel and SKO.


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100% QHSE (quality, Health, Safety and Environmental Management) certifications

of operational installations, considered unique in world.

10 world-class institutes, as knowledge centre for innovation and technology.

CORPORATE RECOGNITIONS AND AWARDS

GLOBAL

Ranked no.1 E&P company in Asia (3rd in the world) as per Platts 250 Global Energy

Companies list for 2007.

The only Indian company to feature in the Worlds Most Admired Companies 2007

list by Fortune Magazine(May 2007), securing 9th position in the Mining, Crude Oil

Production industry.

Received Golden Peacock Award for Excellence in Corporate Governance in 2007, a

3rd time.

NATIONAL

Biggest Wealth Creator for the period 2001-2006, instituted by M/s Motilal Oswal

Securities Ltd., 3

rd

time in a row.

Ranked as the Most Respected PSU in 2007 Business World IMRB Survey (October

2007) for the 2nd consecutive time.

Received Amity Excellence Award, instituted by Amity International Business

School, for excellence in Corporate Governance.


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ABSTRACT


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ABSTRACT

Tight gas reservoirs present unique challenges to a reservoir engineer. Due to the low permeability,

these reservoirs require a significant amount of time to reach pseudo-steady state flow, making it

difficult for the reservoir engineer to predict the original amount of reserves present. If the amount of

reserves is unknown, the real viability of projects cannot be assessed or, in the best case, will be

evaluated pessimistically. This may result in the assignment of capital to projects other than tight gas

projects, or in the development of projects that might not be as lucrative. For several years, engineers

around the world have tried to predict the original gas in place (OGIP) for tight gas reservoirs. Decline

curves and material balance methods were found to have serious drawbacks when applied to scenarios

where permeability is low.

In the project work, the data used for the analysis of the declining curve was procured from the

O.N.G.C. and is the data of the wells of gas in the K.G. Basin. Regression method was used for the

analysis of the errors in the prediction of the reserves by the decline curve technique. The data of the

K.G Basin was also used for the analysis of the economic benefits of the early OGIP estimation. Two

cases are taken for the analysis of the economic benefits of the early OGIP, in both of the cases two

scenarios were built and NPV of both of the scenarios were calculated and compared.

This work also shows the impact that an incorrect estimation of initial reservoir characteristics may

have on the estimation of OGIP and on the estimation of the NPV of the projects. The results show the

drainage area estimation; permeability and porosity are key factors for better estimates.


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OBJECTIVES OF THE PROJECT


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OBJECTIVES OF THE PROJECT

Objectives of the project at hand can be divided into:-

1. Primary Objectives

2. Secondary Objectives.

PRIMARY OBJECTIVE

To study the Early Prediction of Reserves in Tight Gas Reservoirs

SECONDARY OBJECTIVES

Along with the primary objective, the project also achieved several other {secondary} objectives.

1. Reserves Estimation Techniques for Gas Reservoirs.

2. Identification of the Errors in the Reserves Estimation Techniques.

3. Economic Benefits of the Early Estimation of OGIP.


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RESEARCH METHODOLOGY USED IN

THE PROJECT


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RESEARCH METHODOLOGY USED IN THE PROJECT

RESEARCH DESIGN

It is the plan, structure and strategy of investigation conceived so as to obtain answers to research

questions. It is the overall scheme or program of research that guides the investigator in the process of

data collection, analysis and interpretation. It helps the researcher to understand the whole picture

before he embarks on the actual study. It gives the chance to the researcher to revise and improve on

his intended procedure before he actually undertakes the study.

DATA

Primary data was collected through face-to-face interaction while the secondary data was collected

through various sources viz. internet, literature, reports, etc

Primary data: - Primary data is one which is collected by the researcher him/herself for the purpose

of a specific inquiry or study. Such data is original in character and is generated by surveys conducted

by individual or research institutions. In this particular survey the Primary data collected is by the use

of the Interviews technique / interaction sessions with the executives of the geology department from

Oil and Natural Gas Corporation, Rajahmundry. Printouts of the necessary data for the project were

provided by the O.N.G.C personnels.

Secondary Data: - Secondary data can be defined as data that has been collected earlier for some

purpose other than the purpose of the present study. Any data available to the researcher prior to the

commencement of the research project is secondary data. For this project secondary data was procured

from O.N.G.C Limited, Rajahmundry and from the internet.

Importance of data: - Data constitutes the subject matter for analysis. One cannot draw inferences

without analyzing the data. The relevance, adequacy and reliability of the data determine the quality of

the study. In the above case the primary data has been taken from the Oil and Natural Gas Corporation


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Limited executives. The secondary data been taken from the Oil and Natural Gas Corporation Limited

and from the internet which ensures adequacy and reliability of the data used in the project.

LIMITATIONS OF THE PROJECT


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LIMITATIONS OF THE PROJECT

1. Several assumptions were taken into consideration to calculate the economic benefits of

Early Prediction of Reserves in Tight Gas Reservoirs. Such as the assumed market price

of the gas; if the price of the gas changes then it will affect the NPV of the project.

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