24-Pet-B3 Petroleum Geology · December 2015
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
National Exams, December 2015 — 98-Pet-B3, Oil and Gas Evaluation and Economics (3 hours, closed book, approved non-programmable calculator only). The exam's own cover page is titled "Oil and Gas Evaluation and Economics" and every question is property valuation / reserves & production economics / DCF-NPV screening content — no geology anywhere.
Reference texts: Thompson & Wright, Oil Property Evaluation; Canadian Oil and Gas Evaluation Handbook (COGEH), Vol. 1 (Society of Petroleum Evaluation Engineers, Calgary Chapter); National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (Canadian Securities Administrators); SPE/WPC/AAPG/SPEE Petroleum Resources Management System (PRMS); Ahmed, Reservoir Engineering Handbook.
The exam's own instructions ask for only 7 of the 10 short-answer questions and note the Cash-Flow/Future-Value tables are graded by column; for "choose N of M" exams, every item below is answered in full as a study resource. Questions 1–10 correspond to the exam's printed Short-Answer items 1–10; Questions 11–20 correspond to the printed Multiple-Choice items 1–10; Question 21 is the Future Value table; Question 22 is the Cash Flow table.
Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.
(1) API gravity (density). Heavier oil (lower API) yields a smaller fraction of high-value light products (gasoline, diesel, jet fuel) and a larger fraction of low-value residuum when run through a simple refinery, and needs more complex, capital-intensive upgrading (coking, hydrocracking) to convert it into the same product slate as light oil — refiners discount heavy crude to compensate for that extra processing cost.
(2) Sulphur content (sour vs. sweet). High-sulphur “sour” crude requires additional hydrotreating/desulphurization capacity to meet fuel-sulphur specifications and is more corrosive to process equipment; refiners without that capacity either cannot run it or discount it relative to low-sulphur “sweet” crude.
(3) Viscosity. Heavy and extra-heavy oil / bitumen is highly viscous at pipeline temperature and will not flow on its own; it must be blended with a lighter diluent (or heated) to meet pipeline specification, and that diluent cost (plus the fact diluent occupies pipeline capacity without itself being sold as bitumen) further erodes the netback price the heavy-oil producer actually receives.
All three combine to explain the persistent heavy-light price differential (e.g., Western Canadian Select vs. WTI) seen in market quotes.
