The tracking and management of both resources and reserves estimations are of primary importance for any oil and gas company. When managing reserves data using spreadsheets, organizations face numerous daily challenges in reserves tracking and reporting. This technical paper discusses the implementation and methodology adopted at one of the Middle East’s leading oil and gas companies for a reserves management system free from spreadsheet-based tracking and reporting. The resulting system provides much enhanced security and efficiency in managing reserves, and improves the flexibility of reserves reporting.

The concept of minimum economic field size (MEFS) has been used by explorationists for almost four decades. MEFS is often the only filter to distinguish between a commercial and a non-commercial discovery—far before a wildcat well is drilled—to test a prospect for a working petroleum systems hypothesis. As simple as it gets, the concept started to lose traction in the 21st century as subsurface targets became more and more challenging. In the case of tight hydrocarbons, it is fairly common to observe a P90 case net present value (NPV) to be negative, a P50 case to be positive, and a P10 case to be negative again. The reason for this outcome is that a whole set of full-cycle factors, in addition to the field size, affects prospect commerciality. Their uncertainty ranges can match or exceed resource estimate uncertainty. These factors include, but are not limited to, initial productivity of development wells, estimated eltimate recovery (EUR) per well, decline curve parameters, capital investments, operating costs, and the project phases’ durations. A new way of handling the full universe of risks and uncertainties faced by modern explorers is already available in the new generation of industry-leading integrated prospect risk, resource and value assessment software. Innovators and thought leaders can already substitute MEFS with a commerciality threshold (CT) that neatly mimics board considerations at the final investment decision (FID) stage gate. Others can consider the economic chance of success (ECOS) estimated with a probabilistic full-cycle mindset, as an additional metric valuable for risk management purposes. Using fictional case studies inspired by real-life assessment situations, we discuss the additional value creation by a CT-powered workflow as compared to an MEFS-based one and explain the reasons for the key differences. The discussed workflow does not eliminate nature-specific uncertainties; neither does it reduce the geological risk. However, it helps to better understand human-controlled risks and prepare management exploration decisions with a greater degree of confidence.

Management of oil and gas resources and reserves has always been complex process as the company’s portfolio consists of resource and reserves volumes with varying degrees of uncertainty and maturity levels of projects. Some of the hydrocarbon volumes are from resources that are highly uncertain and require technology imprevoments or breakthroughs. However, for strategy formulation of the country/company needs consideration of all hydrocarbon volumes that can generate value in the future. The prioritization of development strategies for its reservoirs based on rigorous technical and economic assessments while protecting the national interests is a challenging task. Kuwait Oil Company (KOC) has been using multiple systems for both asset and business planning processes that is not optimized for faster turnaround. The proposed integrated and automated reserves management solution provided a structured environment for systematic economic evaluation and portfolio optimization. It facilitates the visualization of key reservoir parameters delivering full understanding of the forecasted reserves, production and economic potential of the entire company. It indentifies gaps between reserves and detailed development plans based on technical and commercial criteria. By Optimizing the project timing and economics results in reduction of budgetary expences, increase in portfolio revenue and greater confidence for the company. Ranking the investment opportunities helps in allocating resources appropriately amongst different projects in a systemic manner to ensure profitability of the company. This approach provides ease to KOC in modeling complex scenarios and quickly evaluate a wide range of different development strategies catering for risk and uncertainty This paper describes current industry challenges in resource and reservoir management, and an integrated approach to reserves, economics and portfolio management envisioned for Kuwait Oil Company (KOC) which will assist in identifying optimal reservoir development options to meet any defined strategic goals. The results and benefits gained after deployment of pilot will also be explained in the paper. This integrated approach for optimization of Asset Action Plans is a unique solution and would prove beneficial for our industry.

Malaysia has introduced a shallow-water enhanced profitability term (EPT) production sharing contract (PSC) in the year 2021 to reward a PSC contractor with equitable returns reflecting the business risk and the opportunity to accelerate development and monetization. This study evaluates the attractiveness of the EPT against several fiscal terms adopted in southeast Asia, including Indonesia, Vietnam, Thailand, and Myanmar. This paper established an offshore shallow-water field development analogue project with a total production volume of 68 MMbbl, capital expenditure (Capex) of USD 530 million, predevelopment operating expenditure (Opex) of USD 36 million, variable Opex of USD 12.5/bbl, floating production storage and offloading (FPSO) rental of USD 61 million/year, and abandonment capital of USD 101 million. High, base, and low scenarios are considered for oil price per barrel as USD 70, 60, and 50, respectively, and production volume scenarios as 78, 68, and 58 MMbbl, respectively. These values with certain fiscal assumptions are input into a fiscal model engine for economic indicators [net present value (NPV), rate of return (ROR), and payback], revenue take, after-tax cashflow, and variables sensitivity calculations to evaluate base, optimistic, and pessimistic cases. In the base case, the attractiveness order of countries based on a higher-positive NPV at 10% and ROR are Malaysia EPT (NPV at 10% = USD 198 million, ROR = 30.4%), Indonesia PSC (2017) (NPV at 10% = USD 149 million, ROR = 28.3%), and Thailand Royalty and Tax (R/T; 1991) (NPV at 10% = USD 32 million, ROR = 14.5%). In the optimistic case, the NPVs at 10% are improved, ranging from Thailand (+271%), Myanmar (+247%), Malaysia (+151%), and Indonesia and Vietnam (+141%) as compared to the base case. In the pessimistic case, all the fiscal terms are unfeasible for ROR at 10%. Myanmar PSC (1993) yields above 10% ROR only when the production is at the base or high scenario with oil price at USD 70/bbl. Vietnam PSC (2013) is unfeasible for positive NPV at 10% even with high oil price under various taxes, including the windfall profit tax. Indonesia has a better NPV at 10% at a low oil price because of the progressive split that subsidizes the operator. Oil price and production volume are the top two sensitive variables except for Vietnam, where capital is the highest. The contractor take is higher in Malaysia, followed by Indonesia, Thailand, Myanmar, and Vietnam at base and high oil price. When the oil price is low, Indonesia generated a higher contractor take than Malaysia. Malaysia EPT is the only fiscal regime that can generate a contractor take that is higher than government take and stagnant around 55% against the 40% in Indonesia. In conclusion, Malaysia EPT provides a better investment return when the oil price is USD 60/bbl and above, while Indonesia gross split is more profitable when the oil price is low. This study provides insights on the potential investment returns by new EPT fiscal terms. The attractiveness and potential margin upside when the oil price is on the rebound paves the way for other southeast Asia fiscal terms.