Valuation and Subsurface Geology 803 



method of computing allowables can move the recoverable reserve from 

 one lease to other leases. By the rules of oil and gas boards, the Law of 

 Capture can be modified or annulled, and the to-be-produced oil can be 

 moved from one lease to another — just as the President transfers funds 

 from the Justice Department to the Labor Department. Such transfers 

 are not spelled out in the engineering terms of the rule change — but they 

 are there in between the lines, and they become apparent when one an- 

 alyzes the value of various leases. This matter does not come up when 

 an entire field is considered — but one company seldom owns an entire 

 field. 



Other scientific factors which contribute to the recovery factor are 

 the gravity of the oil, its viscosity, the amount of dissolved gas (the vis- 

 cosity goes up as you lose the gas) , the porosity, and the relative perme- 

 ability of the reservoir rock. The rate at which the field will be produced 

 has a bearing on the recovery factor. 



Aside from the engineering angles, the political implications of the 

 situation have some bearing on the recovery factor. An operator's polit- 

 ical connections or antipathies may influence his allowables. The brother- 

 in-law of a member of the Oil and Gas Board seldom gets an unfair allow- 

 able — ^that is a positive factor in the recovery under his lease; it could be 

 a negative factor if you are valuing the adjoining lease. 



It is ascertained that the bottom-hole pressures do not decline in the 

 160-acre lease and that water encroaches into the edge wells. It is con- 

 cluded that there is a fully effective water drive. The producing formation 

 covers a vast area and logically might contain an expanding-water blanket. 

 Other operators in this field consider it to be water drive also. 



The oil is of 35° gravity, and the 500 m.d. permeability is fair. 

 One would expect water drive to be of the lower order of effectiveness 

 and tentatively estimate a recovery factor of 50 percent. The lease is 

 half way up the structure, so it will surely draw some of the oil out of 

 the down-dip leases; some of the oil will be lost to the up-dip leases. 

 Consideration of the amount of oil the reservoir has produced, how far 

 the water has advanced, and how much farther it must come to reach the 

 lease being valued leads one to the conclusion that about as much oil will 

 be gained as will be lost by drainage. Therefore, the recovery factor is 

 left at 50 percent. 



Using a shrinkage factor of 78 percent and a recovery factor of 50 

 percent, 6,503,776 (reservoir oil in place) X 78 percent (shrinkage) 

 X 50 percent (recovery factor) = 2,536,472 barrels of original recover- 

 able oil under the lease. An examination of production records shows 

 that the lease has already produced a total of 289,336 barrels; this deduc- 

 tion leaves 2,247,136 barrels of remaining reserve under the lease. There 

 is also contained in this oil 1146 million cubic feet of gas (2,247,136 X 

 510) ; but, as there is no present means of recompressing this gas (to 

 raise it to pipe-line pressure) and no market for the low-pressure gas, no 



