Closed-loop production management combines the process of history matching and production optimization together to peri-odically updates the reservoir model and determine the optimal control strategy for production development to realize the goal of decreasing the knowledge of model uncertainty as well as maximize the economic benefits for the expected reservoir life. The adjoint-gradient-based methods seem to be the most efficient algorithms for closed-loop management. Due to complicated calculation and limited availability of adjoint-gradient in commercial reservoir simulators, the application of this method is still prohibited for real fields. In this paper, a simultaneous perturbation stochastic approximation (SPSA) algorithm is proposed for reservoir closed-loop production management with the combination of a parameterization way for history matching and a co-variance matrix to smooth well controls for production optimization. By using a set of unconditional realizations, the proposed parameterization method can transform the minimization of the objective function in history matching from a higher dimension to a lower dimension, which is quite useful for large scale history matching problem. Then the SPSA algorithm minimizes the objective function iteratively to get an optimal estimate reservoir model. Based on a prior covariance matrix for production op-timization, the SPSA algorithm generates a smooth stochastic search direction which is always uphill and has a certain time correlation for well controls. The example application shows that the SPSA algorithm for closed-loop production management can decrease the geological uncertainty and provide a reasonable estimate reservoir model without the calculation of the ad-joint-gradient. Meanwhile, the well controls optimized by the alternative SPSA algorithm are fairly smooth and significantly improve the effect of waterflooding with a higher NPV and a better sweep efficiency than the reactive control strategy.
