A mathematical model and associated computer program simulate three immiscible phases in two-dimensional geometry. The system, designed for heterogeneous reservoirs producing by any combination of gas and water drive, allows a comparison of alternative producing schemes. Introduction Mathematical simulation of reservoir behavior may be used to help understand reservoir processes and to predict reservoir behavior, thereby leading to the most economically desirable form of exploitation. In addition, simulation can be used as a tool for reservoir description to learn more about the physical nature of the reservoir and the mode of primary recovery. This use is essential in most reservoir studies and represents one of the more significant applications of simulation. Prediction of reservoir behavior provides information concerning displacement efficiency, optimum well locations, and the comparison of alternative producing processes. Since oil, water and gas all producing processes. Since oil, water and gas all commonly occur in many reservoirs, a simulation that takes into account the simultaneous flow of three immiscible phases is a prerequisite for obtaining such information. Furthermore, a simulation that describes this flow in two dimensions provides the capability of evaluating combination gas- and water-drive reservoirs with either an areal or a cross-sectional description. Many problems require such a simulation. The objective of the research described here was to develop a mathematical model and associated computer program for accurate, efficient, and economical prediction of the reservoir flow of three phases in two-dimensional geometry. Several authors phases in two-dimensional geometry. Several authors have discussed multidimensional reservoir simulation of two phases. Gottfried et al. presented an analysis of three-phase simulation in one dimension. Fagin and Stewart and Garrett have discussed the simulation of three-phase flow in two dimensions, but their solution techniques were different from the method discussed in this paper. In particular, previous models and computer programs have usually involved either fewer capabilities or inefficient and less rigorous descriptions resulting in limited applicability. In the following sections, we present a description of the model, an evaluation of the method, and the application to reservoir problems. Additional and supporting material is presented in the Appendix. The Three-Phase Model General Description The three-phase model consists of the mathematical description of the flow of oil, water and gas in a reservoir. Conceptually this description considers flow in all three space dimensions, but in the subject simulator it is assumed that no flow occurs in the third dimension. The model includes the effects on reservoir behavior of fluid and rock compressibility, viscosity, gravity, capillary pressure, relative permeability and gas solubility. Within the permeability and gas solubility. Within the two-dimensional restriction, the reservoir considered may be completely heterogeneous and anisotropic. JPT P. 211

Summary Analysis of performance curves for stripper-oil production before and after the lifting of stripper price ceilings in 1974 indicates production is currently 270,000 B/D higher than the level that would be projected if prices had not increased. By analogy, the deregulation of domestic oil prices should result in over 420,000 B/D of additional lower-tier production by 1985. Introduction The energy crisis has sparked the controversy as to whether the price of oil has any effect on the U.S.'s oil reserve. The nonoil public and, unfortunately, many lawmakers have taken the position that the oil and gas industry is rich and the only function of any price increase is to increase the "obscene" profits. With domestic production exhibiting a declining trend, it remains an uphill battle to educate the public and government that price increases tend to arrest this production decline. Higher prices increase production by allowing the industry to operate marginal wells to lower production levels and by allowing the development of marginally economic reservoirs. Higher prices also allow enhanced recovery processes to be applied to fields which otherwise would be uneconomical. Higher prices allow higher risk prospects to be drilled without causing the exploring company to face "gambler's ruin" and allow deeper and more costly frontier area prospects to be explored. Without adequate economic return, smaller structures and thinner pay zones will remain undrilled. In addition, higher prices for oil and gas allow competitive energy sources to compete for certain ortions of the market, thus reducing some of the pressures on traditional hydrocarbon supplies. The public, including media reporters, generally is not knowledgeable in petroleum economics, accounting methods, and financial evaluation. It is easy for the uninformed to believe that if a company reports a profit of "X" dollars, it has that amount in hand to either invest in new business or pay out as dividends. It seldom is realized that a large portion of expenditures is for items that must, by law, be capitalized and charged off on a unit-of-production basis, so that the entire expenditure is not subtracted from income until field abandonment. Moreover, the public does not understand that earnings can reflect costs of materials and depreciable assets that are grossly understated compared with their replacement cost. Thus, profits alone are not a sufficient indicator of a company's ability to maintain its operations. Analysis of cash flow, rather than book profit, is necessary to determine whether a business is capable of sustaining itself, let alone growing. Cash generation from operations is the underlying determinant of a company's ability to invest in future operations. Cash generation is calculated as the sum of net income and noncash charges (principally depreciation) deducted in determining that net income. Cash-flow analysis relates the generated operating funds to the working capital, the fixed asset requirements of the continuing business, the capital requirements of new business ventures, and financial sources and uses including dividends. Since the flow of funds from operations reflects historical costs, rather than inflated replacement costs, earnings may need to be invested totally just in the maintenance of the current business.

Society of Petroleum Engineers 6200 North Central Expressway Dallas, Texas 75206 THIS PAPER IS SUBJECT TO CORRECTION American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc. Abstract LNG projects under development will send Algerian supplies to Europe and the U.S., Southeast Asia is the major supplier of Japan. Further ventures are planned to export LNG from Alaska, Africa, Southeast Asia, the Middle East and Siberia. Economics are developed for judging their potential attractiveness. Southeast Asian - Japanese trades are shown to be the most viable, followed by Algerian sales to the U.S. Middle East LNG to the U.S. or Europe is not promising. Delays in obtaining FPC authorizations may hinder U.S. import projects. Introduction Many liquefied natural gas (LNG) ventures are under development, but their successful implementation is by no means assured. A number of ambitious schemes have been launched in the past and summarily abandoned later, other proposed projects have langushied for years. Deciding which of the current prospective ventures have the greatest chance prospective ventures have the greatest chance of becoming realities is the subject of this paper. The information on which this study is based comes from the numerous reports on LNG which appear in petroleum industry periodicals, such as Platt's Oilgram News Service, the Foster Natural Gas Report, and Petroleum Intelligence Weekly. Articles from the financial pages of the daily press, especially the New York Times and the Wall Street Journal, were also used. PRESENT STATUS OF LNG TRADES PRESENT STATUS OF LNG TRADES Through at least 1980, LNG will be a growth industry. Currently, worldwide trade amounts to 1.6 billion CF/D, but if projects under construction start up on schedule, this will increase to over 6 billion CF/D by decade's end. LNG is gaining prominence as an energy source in all three of the world's major consuming areas — Europe, Japan and the U.S. Europe In a few years, Europe's indigenous gas production will go into decline, and substantial production will go into decline, and substantial new supplies will have to be imported if the gas industry there is to meet the demands which have now been established. Pipeline imports from Russia and Iran (via an exchange agreement with the USSR) are planned, but Europe has also turned to North Africa for supplies of LNG.

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A forecasting model which projects natural gas production from conventional sources was developed to production from conventional sources was developed to analyze future domestic supplies. The model simulates the dynamics of gas supply systems from exploration through production. The cost of producing new discoveries is also calculated. Two projections of gas production through the year 2000 were developed to bracket the probably range of future supplies. In one case, exploratory drilling was continued at current levels and production fell significantly. In a second case, exploration was expanded until constrained by equipment availability. Production still fell, but eventually leveled off. Production still fell, but eventually leveled off. Production costs calculated for these projections suggest that anticipated future wellhead prices probably provide sufficient incentive to increase onshore probably provide sufficient incentive to increase onshore exploration to the limit allowed by available equipment But anticipated prices are not high enough to make offshore gas exploration commercially attractive. Introduction The present natural gas supply-demand imbalance in the United States has aroused Federal interest in gas production from unconventional sources such as tight production from unconventional sources such as tight sands, shale, coal beds and geopressured aquifers. To provide a rational basis for supporting research and development in these areas, the Department of Energy ordered an analysis of gas production potential from conventional sources. That investigation, which was completed late in 1978, is summarized in this paper. Forcon, a forecasting model which projects natural gas production potential from conventional sources, was developed to assist in the analysis. Forcon simulates the dynamics of natural gas supply systems by modeling exploration, discovery, development of new reserves, and production from existing reserves and new discoveries. FORECASTING NEW DISCOVERIES The model postulates that as exploratory drilling increases within a producing region, cumulative gas discoveries approach the ultimate recoverable resources of the region in an inverse exponential manner. That is, reserves found are related to exploratory footage drilled through the expression: (1) where Gi = cumulative recoverable gas-in-place discovered from some initial year through year i R = present undiscovered recoverable resources Di = cumulative exploratory gas footage drilled from initial year through year i b = scaling constant, in units of reciprocal footage. Such a formulation is compatible with the finite nature of fossil fuel resources, with studies that show that there is a rapid drop-off in size in the world's sedimentary basins from the largest field to the smaller ones, and with the common observation that in general the larger reservoirs in a basin are discovered first. We propose that for mature producing regions, the best indicator of future behavior is a comprehensive analysis of the past. Therefore, we determine the equation of the discovery curve for each region by regressing on historical data of cumulative reserves discovered versus cumulative exploratory footage drilled. An example of such a cumulative discovery curve is shown in Figure 1.