petroleum project economics 02

8/20/2019 Petroleum Project Economics 02

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Petroleum Project

EconomicsEcon210D

Presentation 2


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• Geological structure maps

• Well logs

• Core data

• Reservoir fluid sample data

• Reserve estimates

• Production forecasts

2

Petroleum Engineering

Analysis


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Life Cycle of a Hydrocarbon

Field• Exploration

• Appraisal

• Development

• Production

• Abandonment

3


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Decline Curve Analysis

• ool in forecasting production over life offield!

•Decline curves are c"aracteri#ed b$ t"reemain factors%

&!'nitial production rate

2!"e curvature of t"e decline3!"e rate of t"e decline

(


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)


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Factors affecting Decline Curve

• Formation !arameters

Porosit$* permeabilit$* t"ic+ness* fluid*saturation* viscosities* relative permeabilit$*

reservoir si#e* ,ell spacing* compressibilit$*producing mec"anisms - fracturing!

• "ell bore !arameters

.ole diameter* formation damage* liftingmec"anism* solution gas* free gas* fluid level*completion interval - mec"anical conditions!

/


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Cas# $nflo%s

• Revenue from selling output 0oil and gas1

•Proceeds from sale of assets

• Disposal or salvage value at t"e end of t"e

investment


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&evenue

• Production

• Price

P&'D(C)$'* P&$CE &E+E*(E 4

5


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Cas# 'utflo%s

• '!erating e,!enditure 6 costs ,"ic"

arise on routine basis and are incurred to

carr$ out da$ to da$ operations

• Ca!ital e,!enditure 6 cost of setting up

facilities to enable operations to ta+eplace! "ese cost are not incurred on a

da$ to da$ basis!7


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E,!enditure

• 8perating Expenditure

• Capital Expenditure

'!eratingE,!enditure Ca!italE,!enditure )otalE,!enditure9 4

&:


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'!erating E,!enditure

8perating Expenditure 6 t"e cost of runningever$da$ operations%

•Production costs

•ransportation costs

•General and administrative costs

•;aintenance

•'nsurance

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Production Costs

• Costs incurred to operate* support and

maintain ,ells and related e


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-eneral and Administrative

Costs

"ese costs include%

• =alaries

• raining

• 8ffice stationar$*

• 'nformation tec"nolog$

• 8ffice rental

&3


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Ca!ital E,!enditure

Capital Expenditure includes all costs and

expenditure* ,"ic" are incurred in carr$ing out%

•Exploration

• Appraisal

•Development• Abandonment activities!

&(


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E,!loration E,!enditures

Exploration costs are incurred to%

'dentif$ areas t"at ma$ ,arrant examination

Examine specific areas t"at are considered to

"ave prospects of containing oil and gas

reserves* including drilling explorator$ ,ells

&)


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A!!raisal E,!editure

Appraisal costs are incurred to %

• Carr$ out stratigrap"ic tests!

• Drill appraisal ,ells carried out to determine t"e

p"$sical extent* reserves and li+el$ production

rate of a field!

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Develo!ment Activities

Development costs are incurred to %

• Drill and e


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Abandonment E,!enditure

Also called decommissioning costs are incurred to%

&!Plug and abandon ,ells

2!Dismantle ,ell"ead* production and transportfacilities

3!Remediate and restore producing areas

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1. -eological / -eo!#ysical Costs% =eismic acectors*subsea templates1

Rig costs

Casing and tubing

Drilling fluids

?ogging - coring

Completion treatment

Pumping e


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. Develo!ment costs @lo, lines

=eparators

reaters

Production storage tan+s

Pipelines

8ffs"ore platforms

atural gas c$cling and processing plant Compressors

Po,er generation units*

Waste disposal s$stem2:

Ca!ital E,!enditure


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. Abandonment costs 3 occur at t"e end of t"e pro>ect!

Comprises of plug costs

site restoration costs ,"ic"

2&

Ca!ital E,!enditure


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)angible Ca!ital E,!enditures

"is refers to amounts spent on various

+inds of e4ui!ment or !#ysical

structures suc" as%

• Pipelines*

• Platforms*

• All ot"er =tructures and e


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$ntangible Ca!ital E,!enditures

"ese are intangibles expenses ,"ic" offer no resale

0salvage1 value and includes%

•=eismic costs

•?abour expenses before productions begins

•Drilling rig cost and drilling C"emicals

•Drilling ;ud

•Grease etc23


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2(


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2)


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2/

)#e Entire Life Cycle


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*et Cas#flo%

• "e net value of Cas" 'nflo,s and Cas"

8utflo,s!

• Cas" 'nflo,s minus Cas" 8utflo,s!

2


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5ey Petroleum Project

Parameters

Parameter Fields Estimate

Recoverable Reserves 160 mbo

Field Life 20 years

Oil Price $82 per bbl

Total CP!" $#00 millo

OP!" per bbl $% per bbl

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$nflation

• 'nflation can be defined as a sustained

increase in prices!

• "e rate of inflation is stated as apercentage!

• "is represents t"e rate of c"anges of pricesbet,een t"e current and previous $ear!

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$nflation

• 'f t"e inflation rate is &2 percent t"en t"is

means t"at if t"e price of an item ,as

B&:: last $ear t"en t"e price in t"e current

$ear ,ould be B&&2!

3:


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$nflation

• =ince life of field of an oil or gas operation

usuall$ spans a number of $ears* price

increases are encountered!

• "erefore in t"e forecasting of costs* inflation

needs to be factored into t"e estimates!

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$nflation• 'f production expenses are currentl$ B2!): per barrel* t"en

appl$ing an estimated inflation rate of percent over t"e

next ) $ears ,ould give t"e follo,ing estimates!

YearProduction Costs per barrel in

US$

2010 $2&'0

2011

2012

201#

201(

201'

( ) 68.2$07.0150.2 1 =+×=

( ) 86.2$07.0150.2 2

=+×=

( ) 06.3$07.0150.2 3 =+×=( ) 28.3$07.0150.2 4 =+×=

( ) 51.3$07.0150.2 5 =+×=32


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Home "or6

• 8btain estimates of all costs relating to t"e

life c$cle of an oil or gas field!

• =ee slides && to 2& for a brea+do,n of t"e

items!

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petroleum project economics 02

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