Petroleum Project Economics 05

Petroleum Project Economics Econ210D

Presentation 5

Incremental Project AnalysisDate

1

Multi-developmental Scenarios

• Multiple potential developments of field

during production

• Each has a different effect on operations

and cashflow

• Which one(s) to choose?

2Incremental Project Analysis Date

Types of Developments

• Projects to boost production through an

increase in hydrocarbon recovery.

• Measures to achieve cost savings

• New development phases such as the

commissioning of gas production from a

hitherto oil producing field3Incremental Project Analysis Date

Incremental Cash Flows

• To make an economic evaluation of a new

development pertaining to a oil or gas

field, incremental cash flows are

considered.

• These are the changes in cash flows

associated with the new development.

4Incremental Project Analysis Date

Incremental Cash Flows

• Apply NPV and IRR to incremental cash

flows.

• Submit the economic evaluation and

recommendation to the management

team.

• A decision is made.5Incremental Project Analysis Date

Oil and Gas Recovery

There are three levels of hydrcarbon recovery:

• Primary recovery

• Secondary recovery

• Tertiary oil recovery

6Incremental Project Analysis Date

Primary recovery

• Primary recovery, where reservoir energy is

used to produce oil and gas. The average

recovery of this stage is about 15 to 20% of

OOIP.

7Incremental Project Analysis Date

Secondary Recovery

• Secondary recovery, where energy is given to

reservoir by injection of water or gas recovers an

additional 20 to 25% OOIP.

8Incremental Project Analysis Date

Tertiary recovery

• Tertiary oil recovery, which historically follows

secondary recovery, recovers an additional 15 to

20 % OOIP over secondary.

9Incremental Project Analysis Date

Expected Oil Recovery Factors ( % OOIP)

Primary Methods

Liquid and rock expansion

5

Solution gas drive 20

Gas cap expansion 30

Gravity drainage 40

Water influx 6010Incremental Project Analysis Date

Expected Oil Recovery Factors ( % OOIP)

Secondary Methods

Gas re-injection Up to 70%

Water flooding Up to 70%

11Incremental Project Analysis Date

Expected Oil Recovery Factors ( % OOIP)

Tertiary Methods

Thermal (Steam, Combustion, Hot water)

Up to 80 %

Miscible (CO2, HC gases, N2, Flue gas)

Up to 80 %

Chemical (Polymers, Surfactants)

Up to 80 %

12Incremental Project Analysis Date

Tertiary Recovery Methods

• Thermal recovery, by adding heat to the reservoir fluids to make them more mobile.

• Gas injection for miscible sweep of the oil, is achieved by injecting flue gases or CO2 ,which dissolve in the oil, reducing its viscosity and increasing its mobility.

• Chemical injection, either using polymers to “thicken” the injected water to increase its viscosity and so improve water-flood efficiency, or using surfactants, to improve the mobility of the oil droplets by reducing the surface tension. 13Incremental Project Analysis Date

Multi-developmental Scenarios

• Horizontal wells

• Infill drilling

• Workovers

• Additional compression

• Additional steam

• Waterflood

• Alkaline-Surfactant-Polymer flood

• Microbes in wellbore14Incremental Project Analysis Date

Home Work

• Using the data in the following slide,

together with the data from presentation 4

calculate incremental the cash inflow and

total cash outflow.

• Using the incremental cash flows

determine: Payback, NPV and IRR.

15

16

Year Oil Production MMbbls Oil Price ($/BBL) Total Capex $m Total Opex $m

1986 0 15.0 -30 01987 0 19.2 -22 01988 0 16.0 -112 01989 0 19.6 -110 01990 0 24.5 -77 01991 2 21.5 -10 -1.41992 4 20.6 -7 -2.81993 8 18.5 -4 -8.41994 15 17.2 0 -19.61995 14 18.4 0 -15.71996 14 22.2 0 -13.31997 12 20.6 -57 -11.31998 9 14.4 -23 -9.61999 10 19.3 0 -10.62000 9 30.3 0 -92001 8 25.9 0 -7.82002 7 26.1 0 -6.82003 6 31.1 0 -4.72004 5 41.4 0 -3.32005 0 56.5 0 0