The business of upstream oil and gas industry is a complex process that involves multidisciplinary participation. Producing crude oil and natural gas from the subsurface reservoir rocks to the point of the selling terminal requires stage by stage processes that costs several hundreds of millions of dollars to the operating companies. Because of the capital intensive nature of upstream investments, every required process is challenged of its economic impact or benefits it will have on the project's net present value (NPV). The techniques applied in determining the economics of these processes and their selection criteria are addressed in the book. This book guides the reader through these strategic processes, and presents the participants involved in the business of upstream oil and gas prospecting and the conditions that dictate the field development and investment decisions by investors. It also reveals the shared interests and relationships that exist between international oil companies (IOCs) and national oil companies (NOCs) in the exploration and exploitation of their hydrocarbon resources and reserves. This text will serve the purpose of teaching and learning to those in the energy and financial sectors, as the methods, tools, and techniques discussed throughout the chapters will equip students, tutors, experts, and professionals with the necessary skills and knowledge of Exploration and Production (E&P) projects and energy financing and investment. The principles of project management as it applies in upstream oil/gas projects are discussed as well. And the criteria for project ranking, selection, and budgeting which are sine qua non to project financing and execution are well documented in this book.
Author(s): Menglan Duan, Mac Darlington Uche Onuoha
Publisher: EDP Sciences
Year: 2021
Language: English
Pages: 284
City: Paris
Engineering Economy in Upstream Oil & Gas Field Development
About the Authors
Preface
Acknowledgement
Bidding and Petroleum Fiscal Instruments
The Invitation to Bid
Procedural Form of Bidding
Contractors' Participation to Bid
Block Award
Concessionary License Agreement
Contractual Agreement
Production Sharing Contract
Service Contract
Joint Venture Agreement
Exploration & Reserve Estimation
Discovered Resources
Basics of a Petroleum System
Geophysical Methods for Oil & Gas Exploration
Magnetic Surveys
CSEM Seabed Surveys
Gravity Surveys
Seismic Surveys
Volumetric Estimation of Hydrocarbons in Place
Recoverable Resources (Reserves)
Proved Reserves
Unproved Reserves
Appraisal and Field Development Planning
Field Appraisal
Comprehensive Field Development Data
Geological and Reserve Data
Geographical Location of Inspira Field
Cross-Sectional Maps of Inspira Reservoirs
Net to Gross Thickness of Inspira Reservoirs
Bulk Volume of Inspira Reservoir Rocks
Gas Initially In Place (GIIP) of Inspira Field
Reservoir Data
Reservoir Structure
Reservoir Temperature
Reservoir Pressure
Fluid Contact
Gas specific gravity (γ_g)
Gas density (ρ_g)
Gas isothermal compressibility (C_g)
Gas solubility in water (R_SW)
Water isothermal compressibility (C_W)
Water viscosity (μ_W)
Water Saturation (S_W)
Permeability (K)
Relative Permeability (K_r)
Formation compressibility (C_f)
Reservoir Drive Mechanism
Recovery Factor (RF)
Estimated Ultimate Recovery (EUR)
Reservoir Performance Prediction
Reservoir Simulation and Production Forecast
Optimal Well Location
No. of Wells; Drainage Radius; Optimum Flow Rate; RF
Drilling Program and Well Completion Design Plan
Pressure and Fracture Gradient of the Field
Reservoir Pore Pressure
Fracture Pressure
Casing Depth Selection
Drilling Fluid Selection
Cement Design
Casing Selection
Bit Size and Selection
Drill String
Wellhead Selection
Blowout Preventer (BOP)
BOP Design Calculation
Drill Time and Cost Estimation
Tangible Cost
Intangible Cost
Production Period and Abandonment
Production Period
Abandonment Planningplanning
Technological Requirement & Challenges
Safety and Environmental Policy
Production Operations, Workover and Maintenance Plan
Production Operations
Productivity Index (PI)
Inflow Performance Relationship (IPR)
Vertical Lift Performance (VLP)
Choke Performance (CP)
Workover Activity
Maintenance Plan
Economic Analysis of a Typical Upstream Development Project
Basic Concepts in Economic and Financial Analysis
Economic Evaluation Indicators
Net Present ValueNet Present Value (NPV)
Payback PeriodPayback Period (PP)
Profit-to-Investment RatioProfit-to-Investment Ratio (PIR)
Annual Equivalent (AE) Value Analysis
Internal Rate of ReturnInternal Rate of Return (IRR)
Incremental IRR Analysis
Mutually Exclusive Investment IRR Analysis
Drawbacks of Internal Rate of Return Internal Rate of Return (IRR)
Minimum Rate of ReturnMinimum Rate of Return (MROR)
Multivariate Sensitivity AnalysisSensitivity Analysis (SA)
Cash Flow Diagram (CFD)
Patterns of Cash Flows
Common Types of Cash Flows in Engineering Investment Project
Classification of Cash Flow Elements
Dynamics of Cash Flow Diagram on IRR Calculations
When There Are No Sign Changes
When There Is Only One Sign Change
When There Are Two or More Sign Changes
Practice Problems for Cash Flow Analysis
Discounting
Time Value of Money and Economic Equivalence
Return to Capital
Notations
Interest Calculation
Simple Interest
Compound Interest
Nominal and Effective Interest Rate
Continuous Interest
Interest Rates That Vary With Time
Economic Equivalence
Interest Factors
Single Payment Compound Amount Factor (F/P, i%,N)
Single Payment Present Worth Factor (P⁄F,i%,N)
Uniform Series Compound Amount Factor(F⁄A,i%,N)
Uniform Series Present Worth Factor (P⁄A,i%,N)
Uniform Series Sinking Fund Factor (A⁄F,i%,N)
Uniform Series Capital Recovery Factor (A⁄P,i%,N)
Depreciation and Salvage Value
Some Factors in Asset Depreciation
Depreciable Property
Cost Base
Salvage Value
Depreciable Life
Methods of Depreciation
Straight-line Depreciation (SLD)
Declining Balance Depreciation (DBD)
Sum of Years Digits Depreciation (SOYD)
Declining Balance and Straight Line Depreciation (DBD & SLD)
Unit of Production Depreciation (UOPD)
Taxable Income
Case Study: Application of Economic Tools for Upstream Oil & Gas Project Evaluation
The Case Study (Data Presented Here Are not Real but Used for Exercise)
Geological Data
Reservoir Simulation Data
Drilling and Well Completion Data
Production Data
Quality, Health, Safety, and Environment (QHSE) Data
Economic Data
Analytical and Computational Procedures
Government and Contractor's Petroleum Fiscal Agreement
Determination of Discount Rate for the Future Earnings of this Project
CAPEX, OPEX, and Depreciation Calculations
Gross Revenue Determination
Net Present ValueNet Present Value (NPV) Calculation
Economic Results of the Case's Feasibility Analyses
Executive Meeting of CNPC Governing Board
Investment Decision and Project Selection
Capital Budgeting and Rationing
Project Ranking
Comparison of Project Alternatives
Classification of Alternatives
Methods of Comparing Alternative Investments
Discount Rate
Present Worth
Rate of Return
Benefit--Cost Analysis
Identification of Relevant Benefits and Costs
Quantification of Benefits and Costs
Selection of Best Alternative
Uncertainty Evaluation
Inflation
Market Interest Rate (i)
Real Interest Rate (d) (Inflation-free)
Inflation Rate (j)
Actual Dollars
Constant Dollars
Approaches to Economic Analysis under Inflation
Cash Flows
Discount Rate for Time
Project Management in Upstream Oil & Gas Field Development
An Overview of Project Management
Process Groups in Project Management
Project Initiating
Project Planning
Project Executing
Project Monitoring and Controlling
Project Closing
Work Breakdown Structure (WBS)
Design Proposals
Project Budgeting
Project Risk Plan, Assessment, and Management
Step 1: Itemize the Risk Factors
Step 2: Determine the Probability of Risk Occurrence
Step 3: Evaluate the Damage Impact of the Risk
Step 4: Mitigation or Prevention of the Risk
Step 5: Institute Contingency Plans
Step 6: Institute the Trigger Point
Role of Project Manager and Team Management
Project Quality Management
Bibliography
Index
