OIL AND GAS

ASSESSMENT PROCESS

Estimates of undiscovered oil and gas resources are developed by studying the basic elements of the geology of offshore areas to determine the geologic history and the likelihood that oil and gas has been generated from organic materials in the basin sediments and then migrated into geologic structures or traps to form local accumulations, which are the targets for exploration. Using the results of these geologic studies, the quantities of oil and gas that may be contained in a province or a basin or in smaller areas within a basin, are numerically appraised by comparing the geology and geologic history of the area being appraised with similar areas in which the quantities are essentially known because these so-called analog areas have been heavily explored. Resource appraisal is a very complex procedure because the reliability of the results depends upon knowledge of the geologic factors that control the process of oil and gas generation, accumulations, and entrapment; the specific geologic processes which have operated in the past; their effectiveness in the area being appraised; and the ability of the appraisers to apply meaningful analogs based on an understanding of geologic similarity between unexplored and explored regions. The geology and geologic history of the offshore frontier areas of the United States are not known in sufficient detail to allow exact appraisals of the quantities of oil and gas which will occur. Consequently, the appraisers indicate the uncertainty about the petroleum geology of an area or tract by appraising not only the quantities of oil and gas that may be contained there but also the probability at which these quantities may actually occur. Results of the resource appraisals are often reported in the form of graphs or distributions which reflect the uncertainty of the appraisers regarding the quantities of oil or gas that may occur (see fig. 3A).

At any specific probability level, these quantities are described as the least quantities that will occur at that level of probability; larger quantities are appraised at lower probability levels. In the analysis of frontier or essentially unexplored provinces or basins, the resource appraisals are made in two steps. First, the area is appraised under the condition that oil and gas occurs in commercial quantities. These estimates are called conditional estimates. This assumption cannot be made with certainty in frontier areas in which no petroleum has been discovered to date. Therefore, in the second step, the conditional estimates are modified by assigning a marginal probability or basinwide risk to the event "commercial oil found" and "commerical gas found" (Spur and Bonini, 1973). These marginal probabilities are then applied statistically to the conditional estimates to produce unconditional assessments (Miller and others, 1975) of the oil and gas that may occur in a basin (see fig. 3B).

Having normalized the assessments in all basins to the event "commercial petroleum found," it is now possible to aggregate, using statistical probability techniques, those assessments for a measure of the future petro

leum expected to be discovered in the offshore. The assumption is made that the individual basins are independent of one another in terms of their oil and gas potential. As a result, probability-based resource appraisals of several areas or for the entire United States offshore can be aggregated and presented as a single probability distribution representing the amounts of oil and gas thought to be discoverable in very large areas. Similar methods are used to estimate resources and to evaluate specific tracts within the basin. The major difference between basinwide appraisals and tract appraisals or evaluations is the level of detail that is applied to the geologic engineering and economic analyses. In tract evaluation where small areas are evaluated, the geology must be analyzed in much greater detail to

estimate such things as the apparent size of the trap and the quality of the reservoirs at that site. These parameter estimates are combined, using statistical probability techniques, to estimate the quantities of the oil and gas that may be discoverable at a specific site. Also, during the evaluation of tracts, emphasis is placed on tractspecific engineering and economic studies to determine the value of the resource thought to be contained under the tract being evaluated. Even at this scale of geologic investigation there still remains much uncertainty regarding the magnitude of the oil and (or) gas resources that may occur beneath the tract(s). The initial tract evaluations, made under the assumption that oil and gas does occur, are reported in terms of conditional probability distributions similar to those shown in figure 3A. In a manner similar to basin appraisal, tracts must be risked for the event that oil and gas does not occur in the specific structures or, more correctly, in the apparent traps being assessed; the concepts and procedure are the same as for determining marginal probability in basin appraisal. Through experience, we know that all structures are not traps, and, therefore, a specific tract may not contain oil and gas. In tract analysis, the geologic evidence at the specific site or analog data are employed to estimate the risk that oil and gas will not be found. The tractspecific risks that are estimated are similar to the basin marginal probability and, therefore, are applied to the conditional assessment to derive the unconditional assessment for each tract. Parallel to basin aggregation procedures, tracts are aggregated using statistical probability techniques to derive conditional probability-based resource estimates for a number of tracts together; for example all of the tracts that might be for sale in a forthcoming lease sale. In tract aggregation, different tracts may be geologically related; for example, tracts might have a common source for the generation of oil and gas, or they might be located over the same trap. Consequently, the interdependence between the occurrence of oil and gas on different tracts must also be assessed before the results can be aggregated statistically.

Ideally, if all of the potential traps could be identified for the entire basin and then analyzed using tract analysis and aggregated together, the resulting appraisals should approximately equate to the resource numbers derived from basin appraisal. The fact is that these two approaches sometimes yield what are, or what appear to be, inconsistent results. In part, it is this process that stimulates both the basin appraisers and the tract evaluators within the Survey to reevaluate the underlying geologic data and assumptions and to seek new data to develop new concepts about oil and gas occurrence in individual basins or basin areas.

The ultimate amount of oil and gas to be discovered in a petroleum province will never be known with complete certainty until all of the oil has been discovered. As the exploration process continues, new geologic and petroleum-resource data developed from drilling and other exploration methods are used to develop new hypotheses regarding sites or basins in which petroleum is likely to occur. In the exploration of a basin, geologists hold different opinions or concepts as to where and how much oil and gas may be found. It is these

multiple hypotheses that cause explorationists to look in a variety of places for oil and gas. Because of the exploration activity that ensues from pursuing current exploration concepts, new data are acquired, new concepts are developed, and old ones are sometimes discarded. Also, the multiple exploration hypotheses give rise to apparent differences between basin appraisals and tract evaluations within a basin.

How does the Survey deal with the problem of geologists holding different perceptions, concepts, and opinions about the amounts of oil and gas that will be discovered in frontier offshore areas? This problem is approached in different ways in basin and tract assessment. In basin assessment, regional or area geological experts are asked to present details about the petroleum geology and the results of specific studies designed to appraise the geologic factors that control accumulations of oil and gas in the area to be appraised. Multiple hypotheses are usually expressed in these discussions, and the relationships between known analog areas are also discussed. The geologists on the appraisal team are resource experts who have a variety of professional backgrounds so that they can contribute their petroleum experience to these discussions. Each geologist on the appraisal team formulates his own judgments and is asked to develop his own resource estimates. These individual estimates are then reviewed and discussed. In some cases, new estimates are made, especially if new information is brought forward in these discussions. In this way, multiple hypotheses and varying opinions are brought together through individual assessments. These assessments are then either averaged or statistically aggregated to develop the basin or tract assessments.

In tract evaluation, groups of tracts are assigned to different teams of geologists. The differences of opinion within a team is one of the factors that influences the ranges given the distributions for the various geologic parameters. Statistical probability techniques are then applied to the distributions to arrive at a distribution of resources for the tract. A committee of experts conducts a review to insure consistency between teams regarding the methodologies employed and the use of analog data. Geologists from the Conservation Division usually meet with Geologic Division geologists before an updated basin appraisal is made. At these meetings, geologic data for the area are reviewed and differing exploration concepts are discussed. In this way, economic information and geologic concepts from Conservation Division tract-evaluation studies feed back into the Geologic Division basin-appraisal programs. These meetings also are useful in identifying new data that is critically needed to improve the resource appraisals of the area.

The data collected by the Geologic Divison's programs and the results of their geologic studies are published. Because of the scale of the basinwide programs, regionally spaced seismic data are collected as input to the basin-appraisal program. Public data collected in the basin-appraisal programs are used to develop public documents in support of the Department of the Interior's leasing program and nationwide assessments of oil and gas resources.

The Conservation Division, for the most part, collects the proprietary data developed by industry. Because of the very large volumes of data needed to make the specific tract evaluations, seismic data is collected by groups of companies to reduce the costs of data acquisition in the exploration process. This data can be acquired from industry by the Conservation Division but by law cannot be published or made public to protect the companies' investments in collecting the data. In addition, offshore Federal regulations require that exploratory development and production-well data on Federal leases be held confidential by the Government for 2 years after the well is drilled and completed or abandoned or until the lease expires, whichever occurs first. Industry is also permitted to drill continental offshore stratigraphic test wells before a lease sale is held. Often this is the only rock sample data available to both industry and Government in frontier offshore areas. Rock samples from these wells can be used to investigate properties of potential reservoir rocks and to make assessments of the source rocks and the oil and gas generated in frontier basins. These data can be publicly released 60 days after the issuance of a lease within a 50-geographical-mile radius of the well. The Conservation Division has the responsibility to release this data. Because of the critical need for this kind of data in both the basin- and tract-assessment programs, the Conservation and the Geologic Divisions sometimes carry out cooperative studies of these wells and publish their data and interpretations together.

The scope of the Geologic Divison's basin-appraisal program also requires investigation of areas that are not now of current interest for offshore oil and gas exploration. These are principally areas in deep water along the continental slope and rise. Valuable data in these programs are collected and interpreted years before a lease sale is scheduled for some areas. This information may

Bottom sediment grab sampler.

Figure 4 shows the flow of information into the various decision points built into the offshore leasing process. It is important to note that a large amount of information is generated for, and taken into consideration during, the offshore leasing process, especially in frontier areas.

The Department of the Interior has the following major clear-cut objectives which guide its leasing program: 1. Orderly and timely resource development.

2. Protection of the environment.

3. Receipt of fair market value.

These obligations constitute policy guidelines that control governmental schedules, decisions, and goals of leasing the offshore public lands. These objectives are all influenced by the resource-appraisal and evaluation activities of the Survey.

The initial step in the leasing process is the selection of general areas that are thought to be desirable for oil and gas leasing and that do not possess overwhelming environmental problems. Information on the geology, petroleum potential, and geological hazards of the various frontier areas is furnished by the Area Selection Program carried out within the Survey. The areas are arranged in sequence by priorities determined by weighing and balancing a number of sometimes conflicting considerations. Even though the leasing schedule is the first step in the leasing process, it must be based on a large amount of preexisting information, as indicated in figure 4. To make a 5-year schedule that is logical, data must be gathered and interpreted by the Area Selection Program well in advance of the scheduled sale dates. The

leasing schedule is used to determine the timing and initiation of individual sales procedures. The environmental appraisal is constantly updated as additional data are gathered and analyzed. It is the responsibility of the Survey to input any new resource or geologic hazards data it has which might influence changes in the schedule. Changing conditions in the domestic energy supply and distribution situation are also considered when publishing or revising proposed leasing schedules. Prior to the call for nominations, the Survey submits the Resource Report on the general call area to BLM. It is the purpose of this report to discuss the petroleum geology of the area as a basis for oil and gas appraisal and to emphasize geologic features of the basin used to predict occurrence in a general area where tracts might be nominated by industry. In frontier areas, this is a difficult task because the data available may not be sufficient to make these kinds of predictions. This portion of the Resource Report is prepared by either the Branch of Atlantic-Gulf of Mexico Geology or the Branch of Pacific-Arctic Geology, depending upon the location of the offshore area. Simultaneously, the Resource Appraisal Group of the Oil and Gas Branch begins to gather data to prepare estimates of the undiscovered recoverable resources. Although estimates were prepared for the Area Selection Program, they may have to be updated based on new information acquired since the leasing schedule was prepared. The Conservation

REGIONAL RESOURCE POTENTIAL EVALUATION

(SURVEY)

Division Regional Office involved is also contacted to determine the input on which they have based their work in the general call area. The appropriate Branch of Marine Geology also prepares a section on environmental and geologic hazards for the Resource Report. All of this input is taken into consideration in recommending modification to the general call area. After all of the geologic data is assembled, the Resource Appraisal Group makes an oil and gas assessment of the call areas proposed in the Resource Report. This assessment data is transmitted to the Conservation Division Branch of Offshore Evaluation so they can prepare a section for the Resource Report on the infrastructure requirements for oil and gas development. The completed Resource Report is transmitted to BLM, which issues the call for nominations.

The call for tract nominations constitutes official notice to the public and the oil and gas industry of Government's intention to hold a lease sale in a given area. An additional purpose of the call for tract nominations is to obtain an indication of the amount of interest that exists for leasing or deleting each of the individual offshore leasing tracts included in the proposed sale area. The calls for tract nominations are usually issued for large contiguous areas that may include several million acres and numerous lease tracts which usually contain about 9 square miles or about 5,760 acres.

REGIONAL ENVIRONMENTAL
ASSESSMENT AND HAZARD
EVALUATION
(SURVEY)

DRAFT EIS (BLM)

PUBLIC HEARINGS

NOTICE

OF SALE (BLM)

TRACT EVALUATION (SURVEY)

FEDERAL TRACT
SELECTION

(SURVEY AND BLM)

SECRETARIAL
(BLM)

DECISION DOCUMENT

The call for nominations results in the identification of tracts which industry believes have economically attractive resource potential. It may also result in some of the tracts being considered for deletion from the sale on environmental grounds. Comments are requested both for and against the sale from any interested person or group. Thus, information may be gained about tracts that warrant additional study because they are desirable for leasing, or other specific tracts may require additional environmental appraisal or be eliminated from consideration for leasing because of particular environmental value or unusual environmental conditions. The majority of individual tracts within any proposed sale area generally do not have particularly high value for resource potential or unusual geologic hazard potential or do not warrant unique or special environmental consideration.

After receiving lists of tracts nominated for oil and gas leasing from interested oil companies as well as information on tracts submitted by the public and other Federal, State, or local agencies, specific tracts are selected for possible leasing. The tracts thus selected are judged by BLM and the Conservation Division not only on the basis of internally generated resource potential, environmental, technological, and economic information but also utilizing knowledge gained from replies to the call for nominations.

The selection process is complex and includes consideration of an evaluation of the number of nominations per tract; the need to initiate leasing in wildcat areas in terms of industry development capability, competition, and timely future availability of resources to consumers; tract leasing history; nomination patterns; consideration of the proper mix of tracts by water depth and distance from shore; the need to develop prospective geologic structures and trends; the need to protect tracts in imminent danger of drainage; consideration of which tracts are most promising for establishing production; and possible environmental impacts or possible conflicts with other uses of offshore areas which could result from the development of specific tracts under consideration. Some tracts may be deleted during the tract selection process because of overriding environmental considerations. The list of tracts selected for leasing is published so it is publicly available prior to the issuance of the draft environmental impact statement (EIS).

This next component of the leasing procedure involves the preparation of the EIS for each lease sale under the provisions of the National Environmental Policy Act (NEPA) of 1969. The statement actually comes in two steps; a draft EIS is prepared, which is then subject to open public hearings on its validity, factuality, and objectivity. Following the public hearings, a final EIS is prepared that includes consideration of all pertinent subjects and comments brought up in the hearings that were not addressed in the draft statement.

The Survey input for petroleum geology to the draft EIS is very similar to that in the Resource Report. There are sometimes long time delays in the preparation of the Resource Report; consequently, modification at this time may be necessary as new data or interpretations are available. Because the draft EIS identifies specific tracts to be offered for sale, the oil- and gas-resource

estimates, geologic hazards, and environmental considerations portions of the Survey input to the draft EIS must be redone to focus on the sale area. The Conservation Division Regional Offices prepare the resource estimates for the sale area and provide tract specific hazards recommendations for inclusion in the final EIS. All of the considerations used in the basin-resource appraisal are available to them through the Resource Report, other published reports, and unpublished data of the Geologic Division.

The draft EIS is prepared by BLM as lead agency because they are responsible for the sale. During the preparation of the statement, BLM receives scientific guidance and assistance from the Geological Survey, National Oceanic and Atmospheric Agency, and many other Federal agencies with specialized knowledge; as indicated in figure 4, it is an interagency document. During the construction of the draft statement, numerous contacts are usually made with State and local officials and agencies, the academic community, environmental organizations, and private research groups. The contacts help BLM reach a maximum understanding of the environmental and economic concerns of the local citizens and to gain an understanding of how they view the issues involved.

The draft EIS, when completed, is submitted to the Council on Environmental Quality and made available to the public for consideration. Not less than 60 days after publication of the draft EIS, a public hearing is held, usually at a city in the vicinity of the proposed sale. Notice of the date and place of the hearing is published in the Federal Register, and a press release containing the pertinent information is also sent out. Comments submitted to the hearing are considered in the preparation of the final EIS.

Following consultation and coordination with other concerned Federal agencies, the draft statement is submitted to a review process. Comments and contributions received during the public hearings as well as any recent information not previously studied are considered, then incorporated in the final EIS. The final statement is submitted to the Council on Environmental Quality and is made available to the public.

After the final EIS is completed, a Secretarial Issue Document, which summarizes the factors associated with the proposed sale for the use of the Secretary of the Interior in making a final decision regarding the sale, is prepared. The decision is made not less than 30 days after the final statement is submitted to the Council on Environmental Quality. The Secretary considers the environmental, resource, economic, technical, and socioeconomic information available from the draft statement, public hearings, final statement, and the Secretarial Issue Document. He weighs all of the suggested alternatives and may seek any additional information he deems pertinent to arrive at the decision. If the decision is made to hold the sale, tracts to be offered for lease are selected, and leasing terms determined. Tracts may be withdrawn from leasing at any time up to the time of the sale, should previously unknown environmental data warrant. Just prior to a lease sale, teams of geologists,