Establishing minimum economic field size and analyzing its role in exploration-project risks assessment: A practical approach

Stigliano, H.; Singh, Virendra; Yemez, I.; Izaguirre, Elena

doi:10.1190/tle35020180.1

Cited by 6 publications

(1 citation statement)

References 11 publications

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“…Therefore, following discovery, appraisal is used as essential step in deciding whether and how to develop a field. The minimum required resources or Economic Threshold Limit are estimated using standard discounted cash-flow model in which a relation between technically recoverable resources and NPV is established for the full project life cycle considering the most likely development scenario and minimum field size (Peacock and Jennings, 2014;Stigliano et al, 2016). During appraisal a series of activities such as drilling appraisal wells, geologic and seismic studies, 3D reservoir modelling and simulations etc.…”

Section: Introductionmentioning

confidence: 99%

Optimal Subsurface Appraisal: A Key Link to the Success of Development Projects-Few Examples

Singh¹,

Yemez²,

Izaguirre³

et al. 2017

American Journal of Applied Sciences

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During exploration and production phases, the life of a hydrocarbon field can be distinguished by five main stages: Exploration, appraisal, development, production and abandonment. Of particular interest is the appraisal stage, where billions of dollars are spent across the oil and gas industry on data gathering activities with a view to reducing subsurface uncertainties towards optimizing reservoir development and management. However, very limited attention is often paid to assessing the Value of Information (VOI) during data acquisition requirement planning, before requesting for such information. Appraisal, when conducted optimally, leads to informed sequential decisions resulting in a development plan that optimizes cost, hydrocarbon recovery and attempts to maximize Net Present Value (NPV). On the contrary, suboptimal appraisal, either in the form of under, or over appraisal, impacts project economics. Individual oil and gas companies use their own strategies, procedures and metrics to optimize subsurface appraisals and safeguard profitability and hence there are no industry standards. The capital intensiveness of the industry and emerging low oil price regime has necessitated scrutiny on every dollar spent on data gathering in the current business terrain. Appraisal should be optimized by way of case specific activity of data acquisition to ensure project deliverability under maximum residual uncertainties achieved by minimum appraisal cost. To ensure that the appraisal strategy is value driven, an effort has been made to briefly recapitulate the different components of appraisal strategy necessary for appraisal framing and evaluation workflow. The appraisal locations selection and their sequencing combines uncertainty reduction, probability of success with VOI technique to determine the number of appraisal wells, their sequence of drilling and their justification that is based on economic merit. The effectiveness of this systematic approach has been illustrated through some real field examples. This workflow along with periodic look-back analysis, during appraisal to development phases, has proven to be highly useful for (1) improving the understanding of geological model; (2) assess VOI from appraisal; (3) reduce subsurface uncertainties and (4) improve decision quality and whole cycle project economics.

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Section: Introductionmentioning

confidence: 99%

Optimal Subsurface Appraisal: A Key Link to the Success of Development Projects-Few Examples

Singh¹,

Yemez²,

Izaguirre³

et al. 2017

American Journal of Applied Sciences

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Petroleum exploration portfolios generated with different optimization approaches: Lessons for decision-makers

LaCosta

Milkov

2022

Journal of Petroleum Science and Engineering

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Minimum Economic Field Size and Probability of Success of Conventional Hydrocarbon Discoveries, in the Light of the New Open Uruguay Round Framework

Ferro¹,

Rodríguez²,

Tomasini³

et al. 2020

SPE Latin American and Caribbean Petroleum Engineering Conference

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Recently, it was announced the first oil recovered in surface onshore Uruguay, in Norte Basin. Additionally, operators and Uruguayan National Oil Company (ANCAP) have identified many prospects, which are almost ready to be drilled, at different water depths offshore Uruguay. Therefore, it is relevant to know the minimum volume of hydrocarbons contained in hypothetical conventional discoveries, necessary to make the projects economically feasible in the light of the new Open Uruguay Round fiscal regime, both onshore and offshore. The prospective resources distribution was calculated for several prospects, which were identified with 2D and/or 3D seismic, and are located onshore and offshore at various water depths. The probabilistic cash flow analysis including forecasts for production, capital and operating costs, product prices and the new fiscal regime was conducted in all cases to define the breakeven oil prices and the Minimum Economic Field Size (MEFS). Finally, the Net Present Value, the probability of geological success and the probability of development were considered to complete the expected monetary value and the probability of commercial success calculations. Many aspects can be taken away from this work. Firstly, as a general trend, the MEFS and the breakeven oil price required for the prospects increase with water depth, reflecting the rise in expenditures. However, specific prospect parameters may cause a separation from this clear trend. Likewise, the decision to sell or reinject natural gas has a significant influence on project profitability. Additionally, the probabilities of geological success, in the abscense of productive analogues in the south Atlantic, are still low in all cases, reinforcing the status of frontier exploration of the Uruguayan sedimentary basins. Hence, with the objective to overcome this weakness and encourage exploration, the minimum government take established in the new Open Uruguay Round regime is fairly low. In conclusion, projects onshore and offshore could be equally profitable and successful, requiring higher size of discoveries and price of products as water depth increases. However, because of the remarkable difference in investment and costs, onshore opportunities fit for smaller companies’ portfolios and ultradeepwater prospects are almost exclusive for the majors. This paper presents new and useful information to geoscientists, engineers and managers of International Oil Companies (IOCs) evaluating exploratory projects in Uruguay, as it includes the novel fiscal regime in force. Finally, it proposes an innovative methodology to calculate the MEFS, breakeven oil prices and the probability of commercial success from the stochastic model.

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Establishing minimum economic field size and analyzing its role in exploration-project risks assessment: A practical approach

Cited by 6 publications

References 11 publications

Optimal Subsurface Appraisal: A Key Link to the Success of Development Projects-Few Examples

Optimal Subsurface Appraisal: A Key Link to the Success of Development Projects-Few Examples

Petroleum exploration portfolios generated with different optimization approaches: Lessons for decision-makers

Minimum Economic Field Size and Probability of Success of Conventional Hydrocarbon Discoveries, in the Light of the New Open Uruguay Round Framework

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