Case Studies

To BOE, or Not To BOE…

In order to properly compare production and resource potential between different petroleum fluid phases, gas and liquid volumes are normalized to the same unit—the barrel of oil equivalent (boe). Oil and condensate volumes require no adjustment, but natural gas has historically been subjected to a 6:1 ratio based on thermal equivalency (6 mcf of gas produces the same amount of heat energy as 1 barrel of oil).  

 

In the past, a 6:1 ratio was also suitable on an economic (price) basis.  Under contemporary pricing conditions this relationship is, to put it mildly, optimistic. In terms of monetary value, a more appropriate mcf:boe ratio would be 20:1, and even this is conservative under current spot pricing.

Figure 1

 

From an exploration and development standpoint, the effect of a ratio change can be demonstrated on 3-month cumulative production maps of an area in western Canada with mixed gas and liquids production.  On the 6:1 ratio map, there are two well-defined high producing zones in the central portion of the subject area (figure 1).  The westernmost “hotspot” comprises dry gas wells, while the eastern one produces gas with a high liquids rate.  Using the 20:1 ratio, all of the cumulative values drop substantially, but the east hotspot maintains its relative high standing and same basic areal extent (figure 2).  The western hotspot is severely reduced, and is matched by a sparsely drilled, liquids-rich area to the southeast that appeared rather ordinary on the 6:1 ratio map.

Figure 2

 

Not with standing other related factors such as the chronic under-reporting of natural gas liquids in public production data, using an economic-based BOE ratio can result in attention being directed toward areas that are outshone by less desirable, albeit prolific, dry gas production under an energy-based 6:1 ratio.

References

About the Author(s)

The author

Chris Podetz has been a geologist at CDL since 2017 working as an Exploration Analyst. He has written and researched over 100 articles for the Discovery Digest on a wide variety of plays and areas within the WCSB, with a current focus on the Montney, Clearwater, and Cardium. Other industry interests include lithium development potential in BC, Alberta, and Saskatchewan. Chris' previous experience includes stints as a petroleum geologist for Mapan Energy and Encana, geomechanical consulting with Advanced Geotechnology (AGI), gold exploration and resource delineation near Rankin Inlet, NU and a term as a shipper/receiver for Co-op Home Health Care in the mid-2010s. He obtained a Bachelor of Applied Science degree in Geological Engineering from Queen's University in 1997.

The author

Bio coming soon.