RULES-OF-THUMB

by John J. Arps

ALL RIGHTS RESERVED COPYRIGHT'1981 BY

ENERGY PUBLICATIONS

A DIVISION OF I-lARf":OIIRT RRACE' JOVANOVICI-l

BOO Davis Building P.O_ Box' 589 Dallas, Texas 75221 (214)748-4403 Second Printing 1981

TABLE OF CONTENTS

PETROLEUM ENGINEERING RULES-Of-THUMB

Pipeline and Borehole Volumes (#1) page 1

Temperature Correction on Mud Resistivities '.' (#2) page 1

Salinity from Resistivity (#3) page 1

Solution Gas-oil Ratio " (#4) page 1

Oil Formation Volume Factor " (#5) page 2

Gas Formation Volume Factor (#6) page 2

Production Index (no skin effect) (#7) page 2

Rate of Natural Water Influx from Large Aquifer (#8) page 2

RESERVOIR ENGINEERING RULES-Of-THUMB

Monthly Decline from Annual Decline (#1) page 3

Reserves from Decline (#2) page 3

Gas Reserves (#3) page 3

Oil Reserves (#4) page 3

ECONOMICS RULES-OF-THUMB

Interest (#1)page4

Prime Rate vs. Inflation Rate (#2) page 4

Rule-of-Three (#3) page 4

Rate of Return from Decline and PII RatiO (#4) page 4

Deferment Factor from Decline and Discount Rate (#5) page 5

Screening Rule for Proposed Capital Projects Based on

Minimum Requirement of 20%lYear Rate of Return (#6) page 5

Rate of Return from PII Ratio (#7) page 5

1

PETROLEUM ENGINEERING RULES-Of-THUMB

1. PIPELINE OR BOREHOLE VOLUMES:

"Diameter in inches squared

equals

barrels per thousand feet (2.9% high)."

IIDiameter in inches squared and divided by two equals

cubic meter per kilometer

or liters per meter (1.3% low)."

2. TEMPERATURE CORRECTION ON MUD RESISTIVITIES:

"Mud resistivity is inversely proportional to temperature in degrees Fuhrenheit plus 7."

3. SALINITY FROM RESISTIVITY:

"Salinity in parts per million sodium chloride

is equal to

10,000 divided by electrical resistivity at 320 F. in ohm meters {or 5,000 for 720 F)."

4. SOLUTION GAS-OIL RATIO:

"For oil saturated at normal hydrostatic pressure,

the number of cubic feet of gas dissolved in a barrel of oil

equals about

10% of the depth in feet."

2

5. OIL FORMATION VOLUME FACTOR:

"Oil formation volume factor

equals

approximately 1.05 plus 5% for every lOOCFjBbl. in so l ut i on."

6. GAS FORMATION VOLUME FACTOR:

"Gas fcrma tf on vol ume factor

equals

approximately 17 divided by reservoir pressure in psia.1I

7. PRODUCTION INDEX (no skin effect):

"The productive index in barrels per day per psi differential equals approximately

the number of darcy feet divided by the oil viscosity t1mes the oil formation volume factor."

8. RATE OF NATURAL WATER INFLUX FROM LARGE AQUIFER:

"Rate of water influx in barrels per month per foot of sand per mi 1 e of front

for a constantly dropping pressure of one psi per month

equals approximately

the square root of porosity in percent

times the penneabil i ty in darcies times the number of days."

3

RESERVOIR ENGINEERING RULES-OF-THUMB

1. MDNTHL Y DECLI NE FRDr4 ANNUAL DECLI NE :

llFor low decline rates

the monthly decline percentage

equals approximately

one-tenth of the annual decline percentage.1I

1% Per Month ~ 11.4% Per Year 3% Per Month = 30.6% Per Year 5% Per Month ~ 46.0% Per Year

2. RESERVES FROM DECLINE:

IIRemaining reserves

are equal to

(annual production rate minus economic limit production rate) divided by annual decline rate (as a decimal fraction}."

3. GAS RESERVES (Not applicable when sands are lenticular or need fracturing);

"One mi 11 ion cubi c feet per acre- foot per mile of depth (porosity 20%, interstitial water saturation 25%; hydrostatic pressure) or 50 Mef per percent porosity per acre-foot per mile of depth. II

4. OIL RESERVES:

Recovery factor in barrels per acre-foot per percent porosity:

Condition Solution-gas Drive Wa-terdrive
Minimal 5 10
Average 10 2.0
Maximal 20 50 4

ECONOMICS RULES-Of-THUMB

1. INTEREST:

"Money at compound interest will approximately double in value

in a number of years equal to 72 divided by the interest percentage."

2% - 36 Years 8% - 9 Years

12% - 6 Years

2. PRIME RATE VERSUS INFLATION RATE:

"Since 1950 in the U.S.A. the cost of risk-free money has

been 3 percent per year plus the rate of inflation."

3. RULE-OF-THREE:

"Since 1945 in the U.S.A.

the Petroleum Industry performance has shown:

Exploration cost;; Development cost:: Operating cost"

4. RATE OF RETURN FROM DECLINE AND P/I RATIO:

"For a cash flow stream following constant percentage decline:

DCFROR = Decline X Profit " Investment

5

5. DEFERMENT FACTOR FROM DECLINE AND DISCOUNT RATE:

For a cash flow stream following constant percentage decline:

Def. Factor = • Dec~ine

Decllne + Dlscount Rate

6. SCREENING RULE FOR PROPOSED CAPITAL PROJECTS BASED ON MINIMUM REQUIREMENT OF 20%/YEAR RATE OF RETURN:

For short life production (5 years or less) - l~ times money back

For medium life production (10 years) For long life production (20 years)

For very long life production (30 years)

- 2 times money back

- 3 times money back

- 4 times money back

7. RATE OF RETURN FROM PROFIT/INVESTMENT RATIO:
For short life production (5 years) - 40 times P/I ratio
For medium life production (10 years) - 20 times P/I ratio
For long life production (20 years) - 10 times P/I ratio
For very long life production (30 years) 5 times P/I ratio