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Energy Navigator claims improvement in unconventionals forecasting

Thursday, January 24, 2013

Energy Navigator of Calgary claims that it has developed a method of forecasting production for unconventional reserves that is "much more accurate" than traditional methods.

The forecasts from the new method are "consistently accurate to within a few percentage points," the company says.

By comparison, traditional forecasting methods usually have an error of more than 50 per cent, the company says.

The company has undertaken "thousands of hours of research", it says.

"The new method will help oil and gas companies, investors and the financial community to make development and investment decisions with much greater clarity and confidence, improving the prospects for return on investment."

The calculation method has been incorporated into Energy Navigator's "Value Navigator" software, for asset management.

The methodology was tested by evaluating dozens of fields with known results in Canada and the US, comparing predicted production with actual production.

"These back-casting studies matched actual field results almost perfectly," Energy Navigator says.

Unconventional reserves don't respond the way traditional reserves do, so why would we continue to use traditional forecasting and management methods that are simply not valid for unconventional reserves?" says Boyd Russell of Energy Navigator.

Operators typically try to reduce operating costs if they find that production rates are not as high as anticipated, he said.

But this might be the wrong approach, because the problem was due to an inaccurate prediction of production, not costs which are too high.

'Our industry is very good at spending wisely,' said Mr. Russell. 'But capital and operating costs represent less than 20 percent of the overall equation in determining NPV. Even cutting costs in half won't save you if your forecast is off.'

Further information is online at www.energynavigator.com/unconventional. Their research and forecasting methodology is published in a technical paper (SPE 158867) available through the Society of Petroleum Engineers website at www.spe.org.



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