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The Alpha Prospect Exploration Game is a sophisticated exercise in petroleum exploration, one that allows you to learn some of the methods that are actually used in the search for petroleum in the real world.
During the game you will interpret subsurface geology, generate prospects, buy leases, and drill wells while competing with the other students as if each of you represented an independent oil company. Before the game is over, someone will achieve "ExxonMobil" status. There will also be a few "Anadarkos" and "Dominions", as well as a "Mom and Pop's Oil Company" or two, and perhaps and "Enron" You will find the game to be very interesting, competitive, and fun.
The area that you will be exploring is similar to an actual part of an oil-producing basin in Texas. As you begin the game, you will know very little about the geology of the area. But as wells are drilled and oil fields are discovered, you will develop an understanding of the geological units that produce and why they do so.
If you are successful in this game, you can be confident that you would have been successful in exploring this area when it was originally developed in the 1940's and 1950's. Even more importantly, you will gain the confidence and experience you will need when you begin real-world exploration after graduation. Good luck, and good drilling.
There are only two oil-productive formations in this game. These are:
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The Siluro-Devonian dolomite which will be productive along the updip limits of the reservoir rock where it has been truncated beneath an uncomformity. |
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The Ordovician Reef limestone which will be productive whenever a closed reef buildup or "high" can be found. |
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Note the relative positions of these formations in this type log. Click on the picture to see a larger scale version. |
1. You will receive three blank copies of the area base map. The first step in the game is to plot all the data from the Preliminary Data Sheet onto the base maps. You will be making three separate subsurface maps:
- Structure map on top of the Siluro-Devonian dolomite
- Isopach map of the Siluro-Devonian dolomite
- Structure map on top of the Ordovician "Reef" limestone
After you have plotted the data, contour your maps with the idea of delineating drillable prospects. A 100 foot contour interval is suggested for the Ordovician limestone structure map, a 50 foot interval for the Siluro-Devonian structure map, and a 25 foot interval for the Siluro-Devonian isopach map. Contour lightly with a soft pencil and get a large soft eraser. You will need it to modify the map as more data becomes available after every round.
Oil shows are very important in helping delineate prospects. Oil recovered on a drill-stem test (DST) is the only type of show used in this game. The following cases are possible:
| DST Result | Interpretation |
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Oil well |
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Oil and salt water. Dry hole near an oil field |
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Salt water. Dry hole |
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Impermeable reservoir. Dry hole. No conclusion can be drawn about proximity to an oil filed. |
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Not tested. |
Drilling "updip from a show" is as good advice for this game as it always has been in the industry.
You can download a copy of the base map as a pdf file. It is in two 11 x 17 pieces:
2. After you have generated a prospect, it is necessary to obtain a lease on the mineral rights of the land before a well can be drilled. You may acquire leases on acreage by bidding in a competitive, sealed bid lease sale. Your beginning budget is $2 million, which is to be used both for lease acquisition and for drilling. Submit your cash bids through the Bid on Spot screen after you have logged into the Game. Each lease block is 640 acres (one square mile section). A royalty of 20% is reserved. You may bid on as many as 4 sections per week.
The wells and lease blocks are plotted using the township/range system of coordinates that is used in the western USA. If you are not familiar with this system learn about here: township/range.
When you submit your bids, indicate the formation that you wish to test and also the location of the well within the section . Only standard 160 acre locations can be drilled at the center of each quadrant of the section: NE, NW, SW or SE.
3. The highest cash amount bid for each section wins the lease. If your bid is successful, the wildcat well will be drilled immediately on the specified location and your financial statement will be debited for lease costs and well costs. If you do not win the lease your money is returned. When submitting bids, be careful to consider potential well costs in addition to lease costs.
You cannot spend more money for leasing and drilling than you have. The minimum bid for any lease is $1000.
4. Well costs are as follows:
Sil-Dev well (4000 ft)
Reef well (8000'ft) Dry hole $150,000 $250,000 Oil well $300,000 $450,000
5. After each round of bids you will find a list of all your succesful bids under Current Holdings after you log in. If your wildcat well is a dry hole, it is plugged and abandoned, you lose your lease and well costs, and the lease reverts to the Bureau of Minerals Leasing. So the parcel will not appear on the Current Holdings list, and will available for future bidding.
6. If your wildcat is completed as a producing oil well, then you own the lease and it is considered to be HBP (held by production) for the remainder of the game.
On each 1-square-mile tract that you hold by production, you are allowed to drill one development well per week.
No additional lease costs are involved with development wells, however, the same well costs are applicable.
7. Each successful oil well will be encouter a specific amount of "net pay" in feet. "Net pay" is the net thickness of productive reservoir rock. Total oil reserves for a productive well are calculated by the following formula:
Reserves(bbl) = Net pay(ft) x 50 bbl/acre-ft (recovery factor) x 160 acre (drainage area)
The reserves are calculated and posted for each well in the Current User Holdings. This information is only available to the player who made the discovery.
8. Immediately upon the completion of a successful oil well, your reserves will be sold, in the ground, at the discounted price of $10.00 per barrel. Royalty retained by the mineral owner and leasing and drilling costs will also be subtracted at this time.
Net income($) = [(Recoverable Reserves (bbl) x $10.00/bbl) x 0.8] – lease costs(for wildcats) - drilling costs
The 0.8 factor is to account for the 20% Royalty.
The status of your finances is displayed right after you log in.
You should carry out a rough economic assesment of your prospect to figure out how much money is it reasonable to bid for a parcel. The Net Pay of the Pennsylvanian Reefs ranges from 0' (no reef buildup) to about 300' for the thickest part of the best reefs. In most cases the Net Pay is a fraction of that maximum value. The biggest reefs extend over several sections. The Net Pay of the Siluro-Devonian Dolomite is up to 50'.
Remember that once you have made a discovery you can drill three more development wells in that section, so the cost of your bid could be spread out over four wells.
9. The game lasts for about 6 rounds. Each week you bid online and the results of all the wells drilled until that moment appear on the List Dry Wells screen. After each round you must update and reinterpret your maps in order to develop prospects for the following round.
At the end of the game, the student who has accumulated the most money is the winner.
10. Bankruptcy is possible in this game. If you find that you have spent all your money unsuccessfully, consult with your professor. You may be allowed to borrow money or merge with another company. You may also be demoted to rig hand and sent to an offshore platform in the North Sea, so try to avoid the situation.
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The first step in beginning the game is to plot all the available data from your Preliminary Data Sheet onto your base maps. Check this link if you need to learn how the township/range system works.
Be careful about locating the wells on your maps. It is very easy to transpose township and range, and plot the well in the wrong section, or plot it in the wrong location within the section. This type of mistake has happened even to real oil companies. Some years ago, a large independent oil company spudded a well in central Oklahoma in the correct section and the correct township, but in the wrong range. The well was exactly six miles from where it was supposed to be. The well was drilling below 4000' before anyone recognized the error. Fortunately for the oil company, the tract they were drilling on was unleased and they were able to quickly lease it before the well reached total depth. Amazingly, the well was completed as an oil well and resulted in the discovery of a new field. You may not be so lucky, however, so be as careful as possible when plotting the data.
Contouring is an art which is best developed by practice. You will gain such practice in this game by erasing most of your map each week and recontouring as new data becomes available. This task is often done by computer now. However, computer generated contours can be very unrealistic, so it is very important to learn the process by hand in order to be able to evalute map produeced by computer.
Be sure to observe the rules of contouring:
Most people space their contours evenly in areas of sparse data, however you may find it necessary to show variable dip rates in the vicinity of "Reef" buildups or other anomalies.
Be imaginativeand optimistic when you contour. If your map shows only regional dip, you will have no prospects.
A prospect is a geologist's idea of a petroleum filled trap which is documented in some manner by interpreted geologic data. Of course, each geologist has his or her own idea of what constitutes a prospect. And while one's own interpretations cannot be doubted, all other geologist's prospects are carefully scrutinized and thoroughly criticized.Hopefully by this process only the best prospects move into the leasing stage.
The sequence of steps in prospect generation are as follows:
1) Collect all available geologic data.
2) Make the necessary subsurface maps.
3) Look for anomalous geologic situations. Most petroleum traps are located in areas where anomalies occur. Structural highs, changes in regional dip, and missing reservoir rocks are examples of the type of anomalies which often control the location of oil fields.
4) Evaluate oil shows. The recovery of oil on a drill-stern test (DST) or shows in drill cuttings may be indicative of a nearby oil field. Shows usually do not indicate the size of the field since the show half a mile downdip from a tiny field may be similar to the show half a mile downdip from Prudhoe Bay. Nevertheless, any oil show near a prospect is encouraging.
5) Depict the trap on your map by using the most favorable interpretation of the data that is possible.
An example of prospect generation and testing is shown in the following figures. Click on the figures to see a larger version.
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In figure 1 all the available data is plotted on the map. The data points are the subsea tops of the Siluro-Devonian dolomite. If the reservoir rock was not found in a well, it is plotted as "not present". In one well there is a show of oil. |
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The interpretation of the data is shown in figure 2. The updip limit of the Siluro-Devonian dolomite is tentatively placed about halfway between the wells with dolomite and the wells with none. Structure on top of the dolomite is also contoured. According to the interpretation, the area are above the -6050 contour should be productive. The proposed location was staked 1/4 mile updip from the well with the show of oil. |
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Figure 3 shows the final map after the prospect is fully developed. The 21-SW well was drilled and was found to be a discovery well. Four additional wells were drilled within the confines of the field and three dry holes were drilled which delineated the field's limits. This is a realistic example of the type of prospects that are drilled every day in the oil business. You should be able to generate similar prospects on your own maps. |
In the USA, undeveloped minerals beneath the surface of the land, such as oil and gas, are owned by the mineral owner. The mineral owner may not be the same person as the surface owner, since the mineral estate and the surface estate may be legally separated. Almost everywhere else in the world all minerals are owned by the respective government. The result in the United States has been a sharing of part of the wealth from oil resources over a broad base of mineral owners.
Before a well can be drilled on any tract of land, a contract must be signed between the oil company and the mineral owner. This contract is usually in the form of a lease. The lease specifically allows the oil company to go on the property in order to search for, develop, and produce oil and gas. Other details such as duration of the lease, amount of the royalty, legal description of the property, compensation for damages, and surface restrictions are also included in the lease.
State and Federal lands and waters also contain a mineral estate. These minerals are managed by government agencies for the greatest public good (hopefully).
In certain unusual situations the oil company may also be the mineral owner. In the Permian Basin of west Texas, ChevronTexaco owns millions of acres of mineral in fee. These minerals are located in checkerboarded sections along the original right-of-way of the old Texas Pacific Railroad. These lands were granted to the railroad in the late 1800's as incentive for extension of track through the area. The surface was sold long ago, but the minerals were reserved by the Texas Pacific Land Trust. Texaco acquired the minerals in the early 1960's prior to its merger with Chevron. This is a particularly advantageous situation for Texaco since the company simply had to wait until someone drilled a successful well near one of their sections, whereupon they immediately had acreage to develop.
The costs of the lease to the oil company are divided into three parts; the lease bonus, the royalty, and the rental. In order to obtain a lease from the mineral owner, it is almost always necessary to pay a lease bonus. This is paid as additional incentive for the mineral owner to sign the lease. The amount of the bonus is highly variable. In wildcat areas with no nearby production, lease bonuses may be as low as $1 per acre. In areas where there is established production, bonuses usually average $25 to $100 per acre. A $26,000 per acre bonus was paid on a tract offsetting a reef discovery in Alberta.
The royalty clause in a lease specifies how much of the value of the oil production from the property is reserved by the mineral owner. Typically, the royalty clause will stipulate that 1/8 or 3/16 of the value of the production will be returned to the mineral owner. Occasionally the royalty will be as high as 25%, or in the case of some government leases, as high as 50% to 70%. Obviously, the larger the royalty reserved by the mineral owner, the smaller the percentage of the production retained by the oil company. High royalty rates may damage the economic viability of marginal projects.
Rentals are paid by the oil company to the lessor in order to maintain the lease. Rentals are usually paid on an annual basis and are usually a small cost, only a few dollars per acre. However, if the rentals are not paid, the lease ceases to be valid.
In order to simplify the process of obtaining leases in this game, it is assumed that all the minerals are owned by the state government and that the leases will be taken by competitive bidding. Bids are submitted for leases on 640 acre tracts and the highest bid will win that lease.
How should you bid? Early in the game and in wildcat areas the bidding will be quite low. Later in the game, however, when attractive acreage has been outlined by successful drilling, the bids may rise to very high levels. It will be part of your strategy to decide whether to slug it out in the high lease-cost areas near established production, or to drill high-risk wildcats where lease costs are much lower.
In the real world of petroleum exploration, the land aspect is as important as the geology. One shouldn't forget that no matter how good the prospect, the well cannot be drilled until the lease is taken. And if someone else has the lease already, it will usually take a considerable amount of money to convince him to turn it to you. Don't forget, you can drill the well without the geology, but you can't drill it without the land.
Last Update Feb 15, 2005