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.
(1) API gravity (density). Heavy oil (API < ~22°) yields a smaller fraction of high-value light products (gasoline, jet, diesel) on straight-run distillation than light oil, and needs additional upgrading/cracking capacity to convert the heavy fraction to marketable products — refiners discount heavy crude to compensate for that extra processing cost.
(2) Sulphur content (sweet vs. sour). High-sulphur (“sour”) crude, common in many heavy oils, requires additional hydrotreating to meet product sulphur specifications and produces sulphur as a byproduct to dispose of; sour crude trades at a discount to sweet (low-sulphur) crude of the same gravity.
(3) Viscosity / transportability. Heavy oil and bitumen are highly viscous (often too viscous to flow in a pipeline at reservoir/ambient temperature) and typically must be diluted with a lighter condensate (diluent) or heated to move to market — the cost and pipeline capacity consumed by diluent blending is subtracted from the netback price the producer actually receives.
Together these three factors mean a barrel of heavy, sour, viscous crude is worth substantially less at the refinery gate than a light, sweet, low-viscosity barrel, even before transportation bottlenecks (which further widen the differential when heavy-oil pipeline/rail takeaway capacity is constrained) are considered.
