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108

PRODUCTIONPRACTICEAND TECHNOLOGY

"MER"-A

HISTORY I.

ABSTRACT

The history of the developn~entof the concept of MER IS reviewed pr~nc~pallyinsofar as the contr~butions of various API comm~tteesare ~n'olved. The present' use of "n~aximu~nefficient rate" 1s described, as well

The current Interest In MER, and ~tsuse In estab- l~sh~ngallowables In two states, warrant a renew of the developments whlch have contnbuted to the present concept~onsof that term by the petroleum industry

as some of the cor~fus~o~~III definition whtch IS prevalent. The d~sagreement cortcernlrlg leg~tin~atefuture use of MER'S is br~eflyintl~cated.

croachment of water The same author recomnlends

production at such a vate as to result in a nllnimum gas-oil raticrin order to conserve gas Thls same papel first nlent~onsthe posslbil~tyof restr~ctlngpro- ductlon to rates which will deplete a field In about 20 to 25 years This, in effect, suggests the use of reserves as a factor in allocation, but, to thls writer's knowl- edge, reserves have nowhere been directly used In an inter-pool prorat~onformula or plan A progress report dated 1938 dealt largely wlth well spacing under restricted product~on,but IS ~nterestlng because of suggestions made by both legal and tech- nical cornm~tteesw~threference to rate of production. The Legal Subcoinmittee on Well Spacing, in the report t~tled"Legal Phases of Well Spacing," sug- gests to regulatory bod~esand conservation agencies, among other things, to "fix a top allowable for each field at such a point that physlcal waste wlll be avoided and the reasonable market demand will not be exceeded " In a companion report by the Special Study Com-

mittee on Well

Spacing, "Englneering

Under recommended procedures "The production In all pools should be controlled, or sufficiently cur- tailed, to prevent the loss or wastage of any native reservoir energy inherent in the oil, gas, and water

approach the max~lnumultimate re- from the pool It is recommendei the

inaxinlunl rate of a pool's production be specified

El~lgineering Prlnc~ples In Production of

Reservo~r It is generally agreed that the maxlmurn

vute at whlch a pool can be pvduced efficiently and econom~callycan be determlned (Here 1s one of the

"maxlmum rate of

first definite statements using'

This covery of oil

Under

The overproduction which followed the d~scoveryof Sen~~nole,Oklahon~a,Hendricks and Yates, Texas, In 1927, Oklahonla City, Oklahoma, Hobbs, New Memo . deep sands at Santa Fe Springs and Long Beach, Call- forn~a,In 1928, and East Texas 11.1 1931, resulted In many restr~ctedor shut-ln wells and fields At first pipe-l~ne01%market outlet determlned each operator's opportumty to d~sposeof his oil Then came plpe-line proration and, finally, state regulated proration as we know ~t. During 1929 the practice of tubing new wells to con- serve gas energy was greatly stimulated'" We fre- quently forget that th~snow un~versalprocedure has had important effects on rates of production

production

proratron was affect~ngreservoirs in various

It

-.

recogn~zed that

restricted

and Economic

I Phases of Well Spacing," the following statements are

was

soon

under

ways, and to understand these effects better and the~r pertinent to this revlew

ultimate economlc inferences, petroleum engineers and geologists ~ntens~fiedtheir studles of the types of con- trolling drlves, pressure behavlor, res~dualsaturat~on, etc Thus the reservoir engineer was created! Studies of reservoir performance under restricted flow led to the enumeration of factors involved In ob- ta~n~ngmaximum ultimate recovery In 1933 a Topical Committee on Allocation of Pro- duction was appointed by the Central Committee on Drllllng and Production Practlce of the D~vlsionof Production of the Alnerlcan Petroleum Institute A progress report2 coverlng 1933 and 1934 is largely a study of, and expression of oplnion on, factors lnvolved In fax proration between wells and tracts within a pool To a lesser extent, factors whlch would Insure "max~mumeconoinlc recovery" were d~scussed

I efficient production" In the literature )

In May 1941 the same API technical committee, now renamed "Specla1 Study Committee on Well Spac~ng and Allocation of Production," Issued another progress report ' Slgnlficant port~onsof that report are quoted because they are ~mportantm the development of the Idea of a myage of rates In efficient production. In hstlng criteria used In measuring operating efficiency, "quantity and rate of oil production" were mentioned first A rather full discussion of the importance of restriction In rate is followed by th~sparagraph

"The

slgnlficant

part In the foregoing is einbodled

produce

effic~ently~f

In the vlew

that all fields wlll

Gertnalne to our

subject are d~scuss~onsby

T

V

Moore In thls early progress report of control of pro- duct~on rate to prevent premature and uneven en-

* The Btlnntlc Refining Co , Dnllns. Trxns

? Presented nt Twenty-seventh Annnnl hleet~ng.Cli~cngo.Ill, Noy 11. 1947. presiding. Jolrn E Sl!crkorne, UIIIO~011 Co of Cnliformn. R'llittlrr, Calif, and R U Garrett, Arknnsns Fuel 011 Co . Sl~rcrcl~ort.Ln

Flgures rt.ft.r to REFERENCES on 1,

110

restricted

Although

varlat~on In effic~ency of extract~on, nevertheless, ~t

should be a factor wherever determinable"

In summing up factors whlch may be properly used

in allocation between states, areas, and pools, the com- mlttee hsts, among others, "range of eficzent rates of

product~on"

' A progress report Issued by thls same API com- lnlttee In 1942, and published In book form, has been widely c~rculated Thls report enlarged upon that of the previous year Under conclus~ons,"~telnNo 3, 1s "Product~onrate IS one of the most Important factors governing 011 recovery, and productlon at excessive rates con~monlycauses waste " Under the head~ng,"Principles Apphcable to Allo- cation among Pools,? Item No 2 is of ~nterest " Pools should be restricted at least to rates wh~chw~ll

perm~tthe use of the ~r~ost-efic~elztproduczn.g lwactzces "

Much of the lnater~alunder "D," "Restnction to Prevent Waste,"' is d~rectly-related to the present discuss~on,and 1s repeated verbatim "Productlon rate 1s the most Important controllable factor In the pre- vent~onof waste, and no pool should be allowed to produce at so hlgh a rate as to cause waste It has been argued that there is an opt~munlproduction rate at whlch each field will produce a maslmum amount of 011

It is doubtful that thls is true In any case, englneer-

ing skill has not yet developed sufficiehtly to perm~t the determlnatlon of the opt~mumrate wlth the accu- racy required for allocat~onpurposes It 1s true that

a rate can be determined, for most fields, at wh~ch waste would occur due to an excess~veproduct~on rate, but there 1s a wlde range of rates In wh~ch effic~entoperation 1s poss~ble,and w~th~nth~srange ~t is not posslble to select the exact point of maxllnum recovery, even ~f such a polnt ex~sts For example, it

may be shown that; for a certaln field, product~onIn excess of 100,000 bbl dally will result in waste, but ~t

1s doubtful that conclusive proof could be offered as to

whether a rate of 40,000 bbl daily would yield more 011

ultnnately than a rate of 60,000 bbl dally "Each field should be produced at a rate not to exceed that mh~chwould bring the field up to the threshold

of waste If th~srate 1s more than the field's fair share

of the reasonable market demand, the rate should be reduced to that wh~chwould perinit the field to produce

only' I~Sfalr share" Thioughout thls period there had been prevalent w~thlnthe industry the idea that there mlght be an optlnluln rate for each reservoir, i el a slngle and unlque production rate which would Insure maxllnuln effic~ency and ult~inaterecovery The quoted para- graphs of progress reports made by techn~calgroups show how the concept of a range of effic~entrates crystallized It is only a short step from that concept to the conslderat~onof the maximum of that 'angel hence, ~ncrx~nzxnzefficient rate, or "MER "

w~th~na

proper range of

produc~llgrates

l~ttleor no

th~srange may be w~$e,wlth

Italics are the wrlter's

Use of

MER

In 1942 the ~etl!oleumAdininlstrat~onfor War and the Product~on Coinm~ttee for Distr~ct V adopted

"maxnnum efficient rate" for use In ~nter-poolalloca- t~on In Cahforn~a The engineering subcolnlnlttee appo~nted-lacklng any guidance-adopted the follow- ing tentative definlt~on "The maximum efficient rate for an 011 pool 1s defined as the highest dally rate of product~onthat can be susta~nedby a field or pool for a per~odof slx ~nonths ~vithoutjeopardizing maximum pract~cable ultlnlate recovery fl-om the reservolr " Although first used as cezltt~grates, later usage was as a proportion~ngfactor In allocation between pools of the state At the present time pools are classified

111 various categories and, dependent on such class~fi- cat~on,are In some cases allocated on the basls of MER lo During the war the Subcommittee on Reserves and Developn~entof PAW Productlon Comm~ttee,District

111, conlmonly called the

MER's for Texas fields, and these were used by the Texas Ra~lroad Comln~ss~onIn ~nak~ngallocations How the Ivy comm~tteearrived at ~tsestimates of lnaxlmum efficlent rate is "restr~cted" ~nformat~on. Its personnel of emmeat engineers and geologists, supplied with all posslble reservolr ~nformation, un- doubtedly had most ~nterestlngsessions Thelr com- bined judgment probably obviated the need of a rlgorous definltlon As yet there 1s no such commonly accepted definl- tlon Th~s1s easy to understand when it is renlem- bered that no simple slngle sentence defin~tloncould adequately Include all the manlfold factors and con- notat~ons~nvolved "Maxlmum effic~entrate" 1s en- tw~nedIn reservolr behav~orwhlch, III turn, depends 011 individual well behavlor and the methods used In

"Ivy con~nnttee," established

coinpleting wells, the character~sticof the reservolr fluids, type of dr~ve,spaclng of wells, etc

nevertheless

Less

understandable or excusable, but

prevalent, is the confusion concerning the meanlng of the lnltials MER Such interpretations as m.ost efficient rate,u nLL)rznz.zL?tLeffic~entrate, maximum eficzel~eyrate

are corrupt~onsof the intended meaning Sustained effic~ent rate and opt~inuin efficient rate have only added to the confusion Suggested as clar~ficationhave been "maximum rate of efficient product~on" or "max~inumrate of efficlent and economic product~on." These Inore clearly reflect the concept developed through the years, as illustrated in previous paragraphs

Connn~sslonis now askmg for

test~monyupon which to base MER's for Texas fields Such testimony y~eldsw~dely ranglng values, 1nd1- catlng that an accurate engineering determlnat~onof MER 1s not yet universally ava~lableto the ~ndustry This certainly is not surprising The determinat~on of MER, as or~glnallyconceived, depends on the method of reservoir product~on Frequently ~t1s a sumnlat~on of efficient well rates based on proper productlon prac- tice for the type of colnpletlon used Involved, too, are relat~veprices of oil and gas as ~vellas the actual market prlce, operating costs, and whether un~t~zation and/or pressure maintenance are 1x1 effect Further- more, any determination of MER would be valid for a

The Texas Railroad

110

PRODUCTIONPRACTICEAND TECHNOLOGY

short t~meonly The state of depletion, the type of drive which has become operat~ve,the number of wells, the change In the percentage of the varlous reservolr flu~dsproduced-all require per~odicrevlews, and result In an everchanglng MER All of the sclence and art known as "reservolr eng~neering" IS ~nvolvedin the determ~nat~onof MER Its determination IS not only current, but recurrent

I

ened to Include yearly est~matesof our eficzent 'pro- duct~vecapaaty " Such polnted prompt~ngby a federal agency may result In all 011-produc~ngstates adoptlng fact-find~ng procedures wh~chwould yield ~nfornlationon MER of pools wlthin thew respective boundar~es The value of such summations wlll be dlrectly proport~onalto the vahdlty of the ~ndlv~dualestlnlates of each pool's MER

Future Use

There IS d~sagreelnentamong engineers and spec~al- ~stsconcerning the proper use of MER's, even on the assumption that they can be accurately determined for each field for a specific time Interval Many believe that MER's should be used only as celllngs wh~chshould not be exceeded In allocating productlon except In case of emergency such as war Below that ceil~ng,such recommended factors as acre- feet, depth, market demand, etc (see Standards of Allocc~tzon9 should determine allocat~on Others believe MER's can legitimately be used as a proport~onmgfactor In the dlstrlbut~onof allocations, much a's has been done In Cahforn~a As long as demand IS h~ghand restrict~onnot strln- gent, no great violence IS done to either theory, Inas- much as fields will produce elther to capac~tyor close to them MER If severe restrict~on should again become necessary and fields should be prorated In some proportion to thew MER, then undoubtedly many wlll questlon and object to such use Thus far ~honly the two states, California and Texas, has recognition been glven to MER as such Many other states with conservat~onand regulatory bodies analyze testlnlony and other collected data before settlng pool rates, In order to avold productlon at excesslve rates Thls IS true of such states as Arkansas, Kansas, Okla- homa, and others Where operators through engineering coinnnttees or field associat~onsdetermine pool rates In states wh~ch have no comprehensive conservation law, they are now commonly uslng the reservoir englneer~ng~ndicated previously herein as necessary In the determ~nat~on of MER Thls IS so at Rangely, Colorado, and Elk Basln, Wyom~ng,as well as in many other pools. Secretary of the Interlor Krug, in an address to the Amencan Petroleuln Inst~tuteIn Chlcago, March 1946, ind~catedhls department's interest In MER In such statements as- "It IS particularly ~lnportantfrom a securlty view- point to know the maxz?n?Lmeficzent productzve capaczty of the 011 wells and fields now In operation", and "The natlonal est~matesof our ~nax~mulnefficient product~oncapacity stopped wlth V-J day, but they should be cont~nued, Valuable as has been the

estimate of proved oil reserves

~ttells only part

of the story It tells how much 011 we may have In proved underground reserves, but ~tdoes not tell us the

nzaxzmz~mrate at which that oil can be produced effic~ently. The annual 011 ~nventoryshould be broad-

ACKNOWLEDGMENT

Past and present members of the API Specla1 Study Cornnuttee on Allocation of Product~onand Well Spac-

lng, w~thwhom the author has had the pr~vllegeof serv- Ing for many years, have contributed dlrectly and In- directly to the paper here presented It IS ~lnposslbleto name each one who, by d~scuss~onor helpful comment, has asslsted 111 the accurnulat~onof ~nforlnationcon-

tained hereln

Thanks are also due The Atlantlc Refin-

lng Colnpany for permlsslon to publish thls paper

REFERENCES

H C Al~ller.Frtiictlon of Natrtral Gas 2n thc Productron 01 017, 11 rrlrort of the U S B~lrenrlof hllnes In ccloperatlon n~lth the Anierican Petroleun~Il~st~trlte,prlbllslied by the Amerlcan Petroler~mInnt~t~~te.NPW York 11929) Esseifttnl ~~tgc~r~crt;~~Fnctors-?,;'tire Allocatzon of Prodtrc- trolr. Rrr~sedProgress Report all11 S~ecialPapers by the Top~cal Committee on Allocntlon of Prorlrlct~onof tlie Central Con~nl~t-

tee on Dr~lllnnand,Product~on Practice.

Ch~cago,111, Oct

36

t 1933) :~ndDZl1.l~. Texas Nnr 14 11984) Progress RCports of dIPacrrca~zPctrolcrci~~I~istitrrte Cotnniit-

tees 011 Well Spncr~rg,s~rblii~ttetlto BPI 8th m~d-yearmeeting, Wich~ta,Kans , RIoy (193s) rProgrcss Rcport 0th thc Stlrtl~of Sta~idardsfor the Alloca- tloi~of 011 Prodectrot~AIIIOI,~Stntcs, Areas, atid Pools, Amen-

can Petroleun~Institute, Alny (1941) 5 ~Ttflirdnrdsof .4llocat1otr of 011 Prodrcctron Wathtn Pools and dwo11g Pools, by the Specla1 Study Colnmlttee and Legal Ad- vlsory Con1mltt1.e on Well Spnclng and Allocation of Product~on of the c'entml Conlrnlttee on Drlll~ngand Product~onPractice.

API

leum Inst~tute(1949)

D~visionof Prorlr~ct~on,pnbllshed by the Amencan Petro-

Vhrd

TIbrd : 1,

8 Ibrd

Sect

63

.D 64

11.

p

7

eE~rgr~ieerr~rgRrrlcs Goner~~lfiatire Establrshsic~rt of Pool Classrficatrons Afnx~mrta~Bfflcrc~ttltatcs Afontklu UER Dccllne Rates, and 1i;tm-poo2 Dlstrrhrctron S'c1i~drtlt.s. by Conservation Comni~tteeof Cnl~forn~n011 Prorlucers. Jr~ne96 (1946) 10 Personal communrcat~ons R E Loeck. Standarrl 011 Co of

Cal~fornia,Oct (1046), R W French, Soh10 Oil Co, Jan

(1947)

11 011 Gas J 46 [lo] 40, July 19 (1047)

DISCUSSION

Don R Knowlton (Petroleum Consultant, Oklahoma C~ty,Okla ) (written) Mr Kraus should be con- gratulated on preparing a very excellent paper on a

subject that has caused considerable confusion in the industry durlng the past few years As Mr Kraus po~ntsout, certa~nAPI comn~ittees as early as 1933 discussed factors Involved In obta~n~ng 'Lmax~~n~meconomic recovery" from 011 reservoirs Production rate IS one of the ~mportantfactors, be- cause excessive rates of withdrawal unquestionably

cause waste

of detern~~natlonof effic~entproduct~onrates When we went to war the Petroleum Admlnistrat~on for War was charged wlth the respons~blhtyof deter- nlllllng how our petroleum resources could, w~thmini-

mum use of crit~cal materials, be made available

Much cons~derat~onwas given to methods

In sufficient quantities to wln the war whether the wlnnlng took 2, 3, or 10 years We, in PAW, sponsored the deterinlnatlon of maxlmum efficlent rates of pro- duction from fields as a crlterlon of how rapidly 011 could be withdrawn from exlstlng pools to meet the presslng current needs wlthout dangerously sacrlficlng productive capaclty that might be just as urgently needed 111 later years before the war had ended Before and during the war perlocl the country was plagued with an epidemic of alpl~abetlcal symbols spawned m Washington, and used as abbrevlatlons for all manner of tltles and agencies "Maximum effi- cient rate," accordingly, became MER, and those inltlals, as used by PAW, represented a rate of produc- tlon whic11, disregarding economics, correlative rights between fields to share market demand, and any and all other factors, should not be exceeded currently in the ~nterestof havlilg 011 with which to fuel the final wlnning punches of the war

It was not my oplnlon then, nor is ~t now, that MER should be accepted solely as a valld factor In peacetime allocation of production between pools Theo- ret~cally,~f an entire pool were under one ownership and all phys~cal,chemical, inechamcal, geological, and economic factors and featuies were accurately known, it would be poss~bleto state that, for a lllnited current perlod of time, and by operating methods 111 use at the time, a certain amount IS the maxlmuin "efficlent" rate of production froin such reservoir To my illlnd we would do well to conslder MER as a temporary espedient employed durlng the war perlod, and to refocus our attention on the truer objective of "inaxlinum economic recovery" The ~nltlalsof this phrase are also MER, but, as abbreviations pernlit confusion of intent, let us wrlte and thlnk of the three words rather than the three letters Thls suggested expression of object~ve substitutes the word "economlc" for the word "efficlent" In the old phrase Economlc carrles the more accurate connota- tlon, because efficiency 1s a feature to be desired only to the extent that ~t results In econonuc benefit to all partles ~n Interest Froin an oil reservolr, productlon efficiency 1s pro- portlonal to the ratio of the amount of 011 produced to the loss In reservoir energy Strictly speaking, then, maxinlunl efficlent rate IS that rate at whlch the least

of

loss 111 reservolr energy is experienced per barrel

011 pioduced For a pool having a sllghtly effectlve water drlve thls rate might lndlcate product~onof 1 bbl per day per well for 100 years to recover the oil For a gas-dnve pool the nlaxlinum efficient rate is obviously that rate at which producing gas-oil ratlo equals the solutlon gas-011 ratlo This, too, IS apt to be a rate too low to be econonllc

The nlaximum economlc recovery results froin a pro- duction rate wh~chwlll give greatest total profit from investment In the properties The suggested espresslon substitutes the word "re-

one factor

affecting ultimate recovery, and other factors, such as

covery"

for the word "rate"

Ratk 1s just

return of gas or water to maliltain or sustaln reservoir energy, are much more Important From a practical standpoint, I think ~t IS Important

to recognize that MER's as now used by the regulatory

bodies In the varlous states, are'serving a very useful purpose Rather than belng too critical as to them engineering exactness, let us first find a suitable sub-

stltute

P P Manion, Jr (Stanollnd 011 and Gas Company,

) (written) * Mr Kraus has concisely

Tulsa, Okla

sketched the development of the concept of a lnaslinum efficlent rate of production Hls paper should clarlfy the meanlng of MER This IS of considerable importance now that we have reached a demand for oil In excess of our supply We need to know the maximum rate at which our oil-producing reservoirs can be efficiently produced Mr Kraus polnts to the presence of some confusion as to the meaning of MER The Regulatory Practlces Commlttee of the Interstate 011 Compact Commission had recently stated that "the term has become asso- elated wlth the broad general meaning of 'that maxl- nluin rate of 011 production froin a field, which, if exceeded durlng the trine perlod contemplated, wlll cause such changes In reservoir fluid conditions as to result In a loss of ultllnate 011 recovery ' " More brlefly, ~t may be defined as the highest rate of productlon wlthout waste, when waste means "the use of reservolr energy for 011-producing purposes by means or methods that unreasonably Interfere with obtalnlng from the common source of supply the largest ult~materecovery of oil . (From Oklahoma statewide rules ) Although'n~anyMER's cannot be determined at thls tline as precisely as nught be desired, I feel that in general the establlshinent by the state regulatory body, of MER's for fields above the stripper stage and after

a hearlng of Interested operators, IS hlghly desirable Such actlon tends to prevent wasteful production rates and aids ~n glvlng some Idea of the natlon's productive capac~tywhlch, among other things, IS useful in estl- matlng future production Inasmuch as MER's are not statlc, they must be redetermined periodically (about once a year should be often enough)

E G Dahlgren (Interstate 011 Compact Commission,

Oklahoma City, Okla ) Mr Manlon has commented on the report of our Regulatory Practlces Commlttee, whlch

was made at our Great Falls meetlng last August thought ~t m~ghtbe of ~nteresthere to quote another port~onof the ibeport, as follows "Generally ~t may be sald that the requirements to be considered by the regulatory bodles In fixing MER are as follows "That the oil withdrawal rate be such that water drive, where effectlve, be allowed to advance evenly wlthout entrapment of 011 In less permeable areas

I

'Presented

Tulsn, Okla

by John R

Evans,

Stanolind

011 and

Gas

Co,

" That the field outl~ut,where possible, be llmlted to the rate of water encroachment, whether natural or artlficlal "That, in the absence of re-injectlo11 of reservolr gas, gas-011 ratlos be held to a mlnlinum and, where govern- ing factors permit, the oil be produced only froin the lowest gas-011 ratlo wells "That, in those fields where recovery 1s alded by gravlty segregation, the withdrawal rates be so adjusted as to favor such segregation

AND TECHNOLOGY

"That due consideration of reservolr perineablllty be given in order that production rates and other factors may be adjusted to suit those expulsion pecullarlt~es which are attributable to permeabilities " I also should hke to stress the fact that our state regulatory bodles are keenly Interested in thls problem, and are anxious to work wlth the men In the industry In order to solve these problems I am sure I can speak for all of them, and that they wlll appreciate your cooperatlon whenever possible