Mandated by Congress to award the sales contract by February 1998, the U.S. Department of Energy gave Ryder Scott an April 1997 deadline for completion. To meet that, the firm deployed 51 of its engineers and geoscientists, grouped them into reservoir asset teams and assigned each team to a specific Elk Hills reservoir.

"We agreed that Ryder Scott was one of the best consultants in the world.  ...Ryder Scott's management was excellent to work with and did a thoroughly professional job."

--Gary Latham, U.S. DOE

For some idea of the enormity of the study, the firm’s professionals reviewed hundreds of technical reports from several DOE libraries and selected more than 350 reports to be housed at the Ryder Scott Houston office for reference. Analyzing past work and assembling existing databases took two to three months and allowed the teams to avoid doing unnecessary work already completed by others.

"It was a major issue to determine how much independent work to do vs. using existing work, both from the standpoint of holding down costs and doing the job in the shortest possible time," said Gary Latham, a DOE technical representative involved in the divestiture.

Because of the voluminous amount of well data available on the field, Ryder Scott had to review and carefully select only necessary information to evaluate. Although more than 3,000 wells have been drilled in Elk Hills, the petrophysicists evaluated log data from a few hundred representative "key wells," selecting only those with modern, high-quality logging suites and core data. Before Ryder Scott engineers could work with the digitized performance data from the DOE production data base, the team had to perform quality-control manipulations on the data bases and eventually converted the historical production data from Production Analyst to Aries.

The firm spent more than 40,000 hours (equivalent to more than 13 years of workdays) analyzing the field data and produced a massive three-volume report. The geologists produced about 400 hand-drawn and digital maps. It took 5 CDs to store Ryder Scott’s evaluation and backup data that were presented to potential buyers along with other materials in a pre-bid package.

In the petrophysical analysis of the Stevens zone, the determination of net effective pay was especially challenging because of the complex geological environment. Ryder Scott analyzed data from wells that perforated eight to 10 alternating layers of turbidites and laminated low-permeability silicious shale. The heterogeneous turbidite sand deposition had widely varying thicknesses and the shale intervals were one- to two-inches thick in places.

"You don’t normally see this type of complexity in Gulf Coast areas or in many other producing areas," said Roesle. Ryder Scott treated the lithology of each layer separately to construct a geological model. The firm developed cutoff parameters that it weighed against field performance as an internal check for the true net effective contributing pay.

The engineering analysis of the Stevens zone, as a whole, was difficult because the reservoir has many nonsealing boundaries. The multiple intervals are in natural communication with adjacent ones, so Ryder Scott had to account for cross flow as well as for the operational commingling of pay zones in well-completion programs.

For example, in the 24Z pool, sliding-sleeves were used to allow individual wells to commingle production from one or several intervals. The sleeves and commingling combinations were changed periodically. So Ryder Scott had to carefully review well completions with historical well performance in evaluating which reservoir sections were drained.

Ryder Scott reviewed several reservoir simulations by the DOE on the multilayered Stevens zone. Before developing a depletion plan, Ryder Scott also performed material-balance analysis of the major intervals in the Stevens zone to determine if volumetric estimates of oil in place were consistent with production and pressure performances. The material-balance work was challenging because of the vertically varying PVT properties and the differences in elevation within the reservoirs, said Dean Rietz, manager of the Ryder Scott simulation group.

The DOE’s reservoir simulation of the highly faulted eastern half of the SOZ was technically sound and was used quite extensively by Ryder Scott. The firm refined the model by building and incorporating an improved geological model. However, the work called for significantly adjusting net pay counts. Prior measurements of water-saturation and porosity values in the shallow-oil zone agreed closely with the Ryder Scott study.

"With the refined model, we got a better history match on pressures and performance," said Roesle.

Ryder Scott looked at data from 100 to 200 wells in the eastern SOZ, because it was the most complex layer of the dipping structural anticline. In the DOE model of the SOZ, no provisions were made to predict the influences of the recently implemented gas-injection operations. Thus, the model didn’t match the current production trend. To correct that, Ryder Scott revised the model to incorporate injection operations, which led to better agreement with actual field behavior.

The firm calculated a wide range of oil recovery factors for different zones, because of the various producing mechanisms, such as water flood, gas injection and gravity drainage. In several zones, injected gas has caused the formation of large gas caps thereby reducing relative permeability to oil and trapping much of the in-place oil. Because of the enormous volumes of injected gas, Ryder Scott recommended constructing a pipeline to transport and sell the gas since the original oil rims had shrunk and much of the bypassed oil was unrecoverable even using enhanced methods. Because of secondary gas caps and water encroachment, Ryder Scott estimated the current gas-oil and water-oil contacts by reviewing producing and shut-in well gas-oil ratios and watercut performance, remedial and development-drilling information and other data.

One factor that added to the complexity of the evaluation was accounting for government constraints on spending when examining past development operations. The government’s mandate on Elk Hills was to maximize ultimate recovery, not immediate recovery. Because of the time value of money, private owners would have plowed generated revenues back into field development to accelerate production and associated payouts.

"It was necessary for our staff to appreciate these factors while analyzing the field," said Roesle.

In generating future cash flows, Ryder Scott had to consider the differences in costs under private vs. government ownership. Originally, the firm planned to base its future-cost forecasts on adjustments to historical government costs, specifically extracting out government-driven expenses. But breaking out those costs was virtually impossible, so Ryder Scott used future-cost estimates that compared favorably to costs incurred under private ownership in other California fields with similar types of production.

Throughout the evaluation period, Ryder Scott kept the DOE informed on the status of the study through presentations to Latham and others who were involved. From the beginning, decision-makers in the DOE were free to choose a consultant by relying on "their own background and experience," said Latham.

"We agreed that Ryder Scott was one of the best consultants in the world. In this case, Ryder Scott’s reputation served them well," said Latham. "Ryder Scott’s management was excellent to work with and did a thoroughly professional job."

Currently, the DOE retains Ryder Scott in an advisory capacity. The agency is still involved in a final determination of equity between the government, which sold its 70-plus percent, and Chevron Corp., which owns the remainder. A decoupling agreement guarantees that Occidental’s interests will remain at the percentage set at closing regardless of the outcome of the final split between the government and Chevron.

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