Overview
	2006 Assessment Results
	2006 Assessment Maps
	Historic Review and Table
	Methodology
	Reports to Congress

Resource Assessment Methodology

Estimating Undiscovered Technically Recoverable Resources

The available methods of estimating oil and natural gas resources for an area are many and differ significantly. The MMS has two primary methods.

(1) number and size assessment and
 
(2) subjective methods.

Number and size assessment models require information on the number and size of accumulations discovered in a region. Consequently, discovery process models provide reliable results only in mature areas with a significant number of discoveries. The subjective methods rely less on historical records of exploration efforts and discovery records and more on descriptive geologic characteristics of a province, basin, or play. The quantities of undiscovered oil and natural gas are then estimated by quantifying volumetric reservoir variables and estimating the number of accumulations expected to exist. In both methods, a thorough analysis of the subjective probabilities (risks) of occurrence of variables leading to the formation, migration, trapping, and preservation of hydrocarbons at a play, basin, or province level is critical.

The main steps of the general methodology utilized by the MMS for assessing oil and natural gas resources on the OCS are listed below. These steps comprise the basis of the software package utilized by MMS with the acronym GRASP, i.e. Geologic Resource Assessment Program.

	Compile play data
	Generate pool size distribution from probabilistic distributions of volumetric reservoir parameters.
	Generate a number of pools distributions.
	Determine individual oil, natural gas, and mixed pool sizes by rank.
	Establish individual pool size rank conditional to discovery data.
	Generate play potential resources distribution.

In recognition of the differences in the extent of data and information available among the OCS areas (attributable mostly to the degree of past exploration and development activities), some variances in the use of GRASP modules and procedures were incorporated. The frontier and conceptual plays, in which available data are sparse and good analogs are not identified, are analyzed through the subjective method using GRASP (see Chart 1) (26.24 KB PDF). In this method, individual distributions of input variables are subjectively prepared and, through GRASP, ranked pool size distributions are generated. Most plays in the Alaska OCS and the Pacific OCS were analyzed this way. In the case of frontier plays for which the assessors feel confident that an analog exists, such as in the Atlantic OCS, the analyst can generate a pool size distribution from the statistical parameters of the appropriately scaled ranked pool size distribution of the analog plays and can estimate the play resources using GRASP.

For established plays, such as those in the Gulf of Mexico and in southern California where significant amounts of pool data are available from discovered fields, a pool size distribution curve for a play can be generated from the distribution of discovered pools. (see Chart 2) (49.15 KB PDF).

The estimates of undiscovered oil and natural gas resources attributed to basins, provinces, regions, or other areas are derived by statistically aggregating the play-level resource distributions of the plays of that area.

Estimating Undiscovered Economically Recoverable Resources

Generally, the number of pools and their sizes for each trial from the geologic modules are the basic geologic inputs into the economic module of GRASP. The costs of exploration, development, and transportation, as well as tariffs based upon logical exploration, development, production, and transportation scenarios, were estimated for each OCS play, or other operational subarea where activities, costs, or other circumstances warranted. The latest version of the model will be adjusting the costs of exploration and development activities to the projected increases of oil and gas prices. The adjustment factors at each oil and gas price point  on the price supply curves are applied to a base set of costs for the following categories exploration wells, delineation wells, development wells, subsea wells, platforms, production equipment, oil and gas pipelines, and operating costs.

Estimates of economically recoverable resources are then derived for a specific price by (1) subjecting the distributions to multiple computer iterations simulating the development of the hydrocarbon accumulations associated with the areas; and (2) determining a discounted-cash-flow analysis for the area’s resources using specified economic parameters. The resources that would exceed the economic hurdles are then totaled and become one data point on the price-supply curve. The process is repeated for numerous prices, and a continuous distribution curve is then generated.

The Gulf of Mexico, Atlantic, and the Pacific contain stacked plays (i.e., plays overlie other plays at different depths). In determining the economic viability of such plays, assessors needed to consider the concurrent exploration, development, and production of possible pools in these plays. Otherwise, the estimates would be overly conservative. The current estimates of undiscovered economically recoverable OCS oil and natural gas resources were developed using the following parameters.

	Fixed oil and gas prices (no real price changes)
	Discount rate -after tax rate of return
	Percent royalty rate
	Percent tax rate
	Percent inflation rate
	Cost of exploration,
	Cost of development
	Cost of transportation including tariffs
	Development scheduling scenarios

For results of the assessment refer to 2006 Resources

Chart 1. Subjective Method  (26.24 KB PDF)

Chart 2. Discovery Method  (49.15 KB PDF)