24-Pet-B3 Petroleum Geology · May 2016
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
National Exams, May 2016 — 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); Economides & Nolte, Reservoir Stimulation; 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.
Four widely-cited historic oil-price spikes: (1) the 1973 Arab oil embargo (OPEC members' embargo following the Yom Kippur War); (2) the 1979 Iranian Revolution followed by the 1980–88 Iran–Iraq war, which removed a large volume of Iranian and Iraqi export capacity; (3) the 1990 Gulf War (Iraq's invasion of Kuwait), which took both countries' exports off the market simultaneously; and (4) the mid-2000s emerging-market demand surge (rapid industrialization of China and India) that pushed prices from the ~$20–30/bbl range to over $140/bbl by 2008.
Transitions cause prices to spike because both oil supply and demand are highly inelastic in the short run: new production capacity, pipelines, and refining configuration take years to build, and most demand (vehicle fleets, industrial processes) cannot switch fuels quickly. When a transition suddenly removes supply or adds demand faster than the market can physically respond, price is the only variable left to clear the market, and it can overshoot as traders price in the fear of further disruption on top of the physical shortfall itself.
