Businesses whose primary service is to make reserve calculations have a number of things to keep in balance. (1) As professional engineers they have to comply with professional ethics standards, (2) they have to apply all available data to conduct their evaluation using best practices, (3) lastly there is some consideration as to what the client is wanting to learn and its impacts. It is my opinion that this last point is where the wiggle room is. Happy clients mean repeat business. A happy client is one who thinks the appraisal was fair or advantageous for their needs. An unhappy client is one who believes the appraisal was erring in an unfavorable direction, and this opinion is more likely to occur when the client loses money or opportunity as a result of the outcome.
So that said, let's consider some very basic reservoir engineering calculations to determine reserves.
First you have to determine how much void space is in the earth that might contain HCs. That's very straight forward. You figure out the volume of the reservoir rock and multiply it X the average porosity. For a very simple case just assume a cylindrical reservoir with homogenous properties.
Void Space Volume = H X Area X Porosity. Porisity, phi, is determined from open hole logs as is H.
Next, determine the HC volume within the pore space.
HC in place = Void Space Volume * (1-Sw), where Sw is the water saturation or fraction of the void space filled with water. The rest of the void space if filled with HCs. Sw is determined from open hole logs.
Lastly, determine the reserves or in this case, resources. Let's ignore for the moment whether they are proved, probable or possible reserves or resources.
Reserves or resources = HC in place X recovery efficiency. Recovery efficiency can vary signficantly. In gas fields the highest recovery efficiciencies occur in pure depletion drive reservoirs. Abandonment pressure also has a large impact on recovery efficiency. The AP is determined by economics. E.g., use of various lift methods and compression can reduce abandonment pressure and significantly increase recovery.
So in this simplistic exercise we have 5 variables which the reservoir consultant has to come up with. Now in the real world this is a whole lot more than 5 because you have local variations of these properties (excluding Re) throughout the reservoir. But lets assume it is all homogeneous.
The variables again are: H, reservoir thickness, A, reservoir area, average porosity, Sw water saturation, and recovery efficiency.
Now assume the actual reserves or resources are 10 TCFE. But if the consulting appraiser selects values for all of these 5 variables that are e.g., 98% of the actual values, then his calculation will be = to (0.98)^5 = 90% of the actual. What if his values were 97%? Then his calcuation is now 86% of the actual. How about 95%? Then his calcuation is 77.4% of the actual. What if on average his values are as low as 92% of actual? Then his calculation is only 65.9% of actual. So in this simple example, errors in variables less than 10% below the actual values can result in underestimating the reserves by 34.1%. Get the picture?
You can play with these numbers as well as I can. It's very easy to see how compounding errors result in huge differences in numbers. And these variations may all be "reasonable" to a degree between different appraisers, such that no fault can be found. Some errors may be higher and some lower. But in general terms that is what is involved. I did not include abandonment pressure. I presume that value is the same for all appraisals to date for OSH or IOC, but you never know until you check. If they are not the same, then that is a big red flag.
Hard rock, like in PNG, is far more difficult to assess reserves vs. sandstone for a number of reasons. I have no doubt that appraisers may have easily varied by as much as 10% in at least one variable. Areal extent is the most difficult to ascertain. Hence the plan to drill A7 and the need for all the production tests.
I've never done appraisals but I know that these variables are all subject to some degree of opinion. At the same time OSH, I presume, was paying for these appraisals. The appraisers knew that a high number would mean OSH would be out a good bit of money. So they are sensitized from the beginning to ensure their opinions and judgement do not unnecessarily wander to the higher end of the range of possibility. They can do all this and be well within ethical practice if they believe they can defend their analysis. That's my opinion.
I would think for this rank exploration area, that 3 appraisals would be reasonable. If they are not within a certain predefined % of each other, then you throw out the extraneous value and average the other two. Otherwise average all 3. But using only 2 seems faulty if accuracy is your objective.
I have a concern that when the one who controls all the data (dreaded IOC management) and is paying for the appraisals and has an incentive for a lower number, that a lower number will result. You can see how easy it is to deliver this.
