Oil Initially In Place (OIIP) Explained

Oil Initially In Place (OIIP), also known as oil in place (OIP), refers to the total estimated volume of crude oil present in a reservoir before any extraction. Understanding OIIP is crucial in evaluating the economic feasibility of oil field development, as it provides insight into the reservoir's potential. However, only a fraction of OIIP can be recovered due to geological factors and technological limitations, making it essential for oil companies to analyze the recoverable portion in the context of current oil prices when deciding where and when to drill.

Basics

Oil Initially in Place, or OIIP, is the initial estimation of the total volume of crude oil present in an underground reservoir. It is important to note that OIIP is different from oil reserves, as it represents the entire quantity of oil potentially available, regardless of whether it can be extracted. Calculating OIIP involves assessing various factors, including the porosity of the surrounding rock, water saturation levels, and the net rock volume of the reservoir. These factors are determined through a series of test drills conducted around the reservoir.

Variations and Terminology

• Stock Tank Oil Initially in Place (STOIIP): This term refers to the same volumetric calculation as OIIP, emphasizing that the estimated volume is measured under surface temperature and pressure conditions, rather than the compressed volume inside the reservoir due to geological pressure.
• Original Gas in Place (OGIP): OGIP is the analogous volumetric calculation applied to natural gas reservoirs.
• Hydrocarbons Initially in Place (HCIIP): This generic term is used when conducting volumetric calculations for both oil and gas to estimate the content of a potential drilling site.

The Significance OIIP

Determining Oil Initially in Place plays a pivotal role in the analysis carried out by industry analysts when evaluating the economic viability of oil field development. OIIP provides valuable insight into the reservoir's potential, making it a critical data point. However, it serves as just the beginning of the decision-making process preceding drilling or securing a lease.

Assessing Total Reserves

Oil Initially in Place offers oil companies an estimate of the total volume of oil beneath their leased areas. In a hypothetical scenario where all the OIIP could be recovered, companies would systematically start drilling at their largest reservoirs and progressively move to smaller ones, aiming to maintain fixed drilling costs throughout. In reality, only a portion of the oil initially in place is recoverable due to geological formations and technological constraints.

Evaluating Recovery Potential

The analysis of OIIP serves as the trigger for assessing the recoverable portion using current technology. Understanding how much of the OIIP can be extracted is crucial. This estimation allows the oil company holding the lease to make informed decisions based on current market conditions and technology capabilities.

Market Dynamics and Decision-Making

If, for instance, a company determines that it can only recover 50% of the OIIP with existing technology, it might opt to move these reserves into probable reserves and save them for future development. This decision frees up resources that can be allocated to drilling more productive reservoirs. However, the economic feasibility of drilling and production is also influenced by global oil prices. If oil prices rise significantly, the previously uneconomical reservoir may become financially viable, leading to production.

Conclusion

Oil Initially in Place is a fundamental concept in the oil and gas industry, representing the estimated total volume of crude oil present in a reservoir before any extraction. Understanding OIIP is vital for assessing the economic feasibility of oil field development. While OIIP provides valuable insights into a reservoir's potential, it is essential to recognize that only a portion of this resource can be recovered due to geological factors and technological constraints. As a result, oil companies must carefully analyze the recoverable portion in the context of current oil prices when making decisions regarding drilling and production. This ongoing evaluation is a critical component of effective lease management and decision-making in the dynamic world of oil exploration and production.