TAMINGA A FIELD DEVELOPMENT PLAN

CHEN 30232 - Petroleum Engineering Design Project

GROUP 4
George Severns 7831730
Intesar Mahmood 7884676
Mike Lacey 7965749
Thomas Armstrong 7300454
Diana Sultanova 8187881
Henna Ashfaq

Statement of Responsibility

This document is the joint responsibility of all group members signing below.
All group members have contributed to the production of this document; it is
their original work and has not been copied or adapted from other sources.

George Severns

Intesar Mahmood
Mike Lacey

..

Thomas Armstrong ..
Diana Sultanova

Henna Ashfaq

CONTENTS

Executive Summary.... Page 1

1. Development Concept ...Page 2
2. Exporting Options......Page 3
3. Field Maps..... .Page 4
4. Drilling Program...Page 6
5. Subsea Infrastructure...Page 7
6. Project Schedule .......Page 11
7. Production Profile......Page 12
8. Facilities. ..............Page 15
9. Environmental Impact Assessment....Page 16
10. Project Economics......Page 17
11. Economic Risk & Sensitivity..Page 18
12. Risk Analysis & Mitigations......Page 25
13. Contingency & Data Requirements....Page 27
14. Possible Future Development .........Page 28
Appendix....Page 30
References..........Page 33

EXECUTIVE SUMMARY

Fluvial sandstone reservoirs are a significant reservoir type that account for up to 30% of global remaining
hydrocarbon reserves. Since the development of the North Sea province commenced in the early 70s, numerous
large discoveries have been made in fluvial strata, all presenting unique complexities in terms of field development.
The Taminga A field is an offshore fluvial discovery in the UK sector of the North Sea, covering a total area of
approximately 17000 acres (10 km by 7 km.) As with any field development, the ultimate goal is to develop a plan
which maximises ultimate recovery within the confines of economics and physical limits.
The asset is a medium crude oil reservoir with a small gas cap, and with an average reservoir pressure close to
bubble point. Strategies were designed with maintaining the pressure above bubble point as a key priority, and
water injection as the principle method to achieve this.
The final optimized plan proposes a 20 year depletion plan, implementing a pattern drive water injection strategy,
potentially leading to recoveries of up to 27% equating to a cumulative oil production of 700 million bbl and 0.7 tcf
gas. The CAPEX required is estimated to be approximately US$ 4.5 bln, predicting a gross revenue of $38 bln of which
profit is expected to be $11 bln after tax and operating expenditure. The payback time is expected to be 5 years.
Economic evaluation and sensitivity analysis shows the project to be robust, presenting relatively low financial risk;
with a positive NPV and high IRR across a significant range of discount rates. Due to lack of well test data the
principle risks to the development remains to be production rate deliverability.

Proposal
The Taminga A field 20 Year development plan consists of:
-

ANADARKO steel jacket platform located at the centre of the field

Layered drive strategy incorporating 9 Production wells, 12 Water Injection wells

Integrated subsea satellite system with individual wells tied back to platform through 2 manifolds

Artificial lift enabled 30 km subsea oil pipeline and 40 km gas pipeline linking platform to facilities on
mainland

1. DEVELOPMENT CONCEPT

The Taminga A Field consists of an anticlinal reservoir with a dome shaped trap, and a major fault (assumed to be
sealing) to the south, as a result of which reservoir volumes are compartmentalized between a large footwall
(Segment 1) and a smaller hanging wall (Segment 2). The main field development strategy focuses on initially
producing Segment 1 as it holds the most volumes (Table 2).

Development Strategy

The field is to be developed using 9 producing wells and 12 water injection wells, the locations of which are shown in
Figure 3. The drive mechanismTable
is a 1water
floodAassisted
aquifer drive. The injectors are placed in a peripheral
Taminga
Field Data
pattern to provide peripheral pressure support and raise the oil-water contact. The wells are to be drilled in three
sections, the
central
section from
the
platform and
a north
and
south
cluster,
to be drilled
from a
semisubmersible
drill
ship.
This
drilling
schedule
is
outlined
in the project
Reserves
schedule (Figure 6). Produced gasTable
is to2 be
sold asData
economic analysis showed this result in a higher NPV for the
project than reinjection. Segment 2 is a prospective area and currently has no distinct plans as the sealing capacity of
the fault is still unknown. Once real data an understanding of dynamic field behaviour has been established it will be
possible to decide the best course of action with regards its development. If the fault is non-sealing then there will
be natural flow and will not necessitate further development in the short term.

2. EXPORTING OPTIONS

There are two main export options available for oil: pipeline, tanker and one for the gas: pipeline. The development
proposes separate pipelines for oil and gas. Economic evaluation of the export options prove pipelines to be ideal for
both fluids, requiring the least capital expenditure, construction time, OPEX and export tariff costs. Furthermore
pipelines allow the option for choosing capacities to optimise infrastructure use and enables faster, reliable and
continuous hydrocarbon delivery to downstream point of sale.

PIPELINE
30 km 100-200 Mb/d Oil Pipeline
40 km 100-200 MMscf/day Gas Pipeline

STORAGE VESSEL SHUTTLE TANKER

Maximum capacity 1 MM barrels Oil only
2 Years Construction

Oil Pipeline: $120 million -- 90 day construction

Gas Pipeline: $160 million 120 day construction

Total Cost: $400 million

Shuttle Tanker costs: $6/bbl

Total Cost: $280 million

Export Tariff Costs: $5/bbl , $0.50/mscf
Provides long-term infrastructural options.
Large volume transportation
Secure supply, unaffected by weather

May be affected by weather

Tanker capacity is a limiting factor

3. MAP OF FIELD

Flank Fault

Segment 2

Main Fault

Segment 1

Figure 2 Taminga A - STOIIP map

Figure 1 Geomodel of the Taminga A field
17300 Acres
10km x 7km

Well Locations Map

Producers
P1 E
P2 N
P3 W
P4 W
P5 SE
P6 SE
P7 SE
P8 E
P9 E
Water Injectors
I1 NE
I2 N
I3 N
I4 W
I5 SE
I6 SE
I7 N
I8 E
I9 E
I 10
I 11
I12 SE
Platform

Coordinates
X
Y
5614
8143
3658
7801
2154
6910
1554
5065
2587
1776
4050
2481
5135
3362
5714 5836
5978 6793
X
Y
6544 9206
5112 10131
2524
8936
839
6981
3472
1267
5480
2212
4772
7647
6364
4037
5045 5348
2406 4098
3919 6620
3156 2790
4417 6397

I2 N
I1 NE
I3 N

GOC

P2P2NN

P1 E
OWC

I7 N
I4 W

P3 W

P9 E

I11

P2 N

I8

I9 E

P4 W

P8 E

Perforations in zones of oil saturation and high

permeability with distance maintained from fluid
contacts to maximise sweep without causing edge
water coning or gas encroachment.

I10

P7 SE

I3 N

I6 SE
Producer

I12 SE

P6 SE

Water Injector

P5 SE
Platform (not to scale)

I5 SE

Manifold North and South

Figure 3- Well locations map

Platform coordinates chosen with consideration to drilling

departure, flowline costs; limiting all wells to within 5 km of
the platform.

4. DRILLING PROGRAM
The drilling schedule has been planned through a systematic basis, with preserving reservoir pressure and long term
reservoir management in mind.
A total of 9 Producers and 12 Water Injectors are to be drilled via both the platform and the semi-submersible
drilling rig. The wells drilled by the semi-submersible rig are to be tied back to the platform through central flowlines
from two manifolds, one in the North and one in the South.

DESIGN

TIME

The peripheral producers are to be drilled initially in order to minimally affect the gas cap, followed by
peripheral water injectors. More injectors are to be drilled initially in order to sustain reservoir
pressure once later producers come on stream. Dynamic simulation indicates that this method
prevents the formation of a pressure sink at the centre of the field.
Drilling is expected to be completed within 3 years by 2019. All wells are within 5 km of the platform
and require approximately 90 days completing each. This project schedule (Figure 6) takes into
account the time required for post hook-up testing and data acquisition (cores, MWD, logs). The first
producers (P9, P2) are expected to come on stream in January 2017 after the hook-up phase.
The total drilling expenditure is expected to be approximately $ 1.2 bln

ECONOMICS

Opting for a semi-submersible drilling rig increases costs, however reduces the time required for
drilling completions (3 Years) and subsequently shortens payback period as it enables simultaneous
drilling of multiple wells (via platform and semi-sub).
In comparison platform drilling all wells requires 4-5 years for drilling completions and delays payback
with increased financial exposure. In the larger scale of costs considering full CAPEX, a semisubmersible does not incur significant added expenses and is justified by the time benefits.
A full breakdown of drilling expenditure is displayed in Figure 4
ERD (extended reach) was not considered due to the relative field structural simplicity and all wells
being less than 5 km from platform. ERD involves added technical complications in terms of
engineering design which is not necessary considering field simplicity. (Jahn et al 2008).

Wells
PLATFORM DRILLED
P3
P4
P8
P9
I4
I8
I9
I10
I11

Distance km

Drilling Cost

1.97
3.16
1.44
1.6
3.63
3
1.2
3
0.5

$54,000,000
$61,000,000
$47,000,000
$50,000,000
$63,000,000
$59,000,000
$44,000,000
$59,000,000
$45,000,000

Total

$482,000,000

Dep. Distance
1.9
1.1
2.1
1.4
1.3
1.6

Drilling Cost
$64,000,000
$58,000,000
$66,000,000
$61,000,000
$60,000,000
$62,000,000

Total

$371,000,000

Dep. Distance km
1.8
1.4
1.1
2
0.5
0.9

Drilling Cost
$64,000,000
$61,000,000
$59,000,000
$65,000,000
$56,000,000
$57,000,000

Total

$362,000,000

SEMI SUB DRILLED

MANIFOLD NORTH

I1
I2
I3
I7
P1
P2

MANIFOLD SOUTH

I5
I6
I12
P5
P6
P7

Total Drilling Expenditure

$1,215,000,000

Figure 4 Drilling Expenditure

5. SUB-SEA
The proposed subsea infrastructure is satellites, with individual wells tied back to the rig production facility through a two
manifolds, North and South. The decision is based on preliminary economics suggesting it to be the infrastructure
requiring the least CAPEX and construction time, thereby reducing financial exposure.

Platform

Semi-submersible

Umbilicals and pipelines back to Platform

Taminga Cluster South

PLET S
I12
II

Taminga Cluster North

PLET N

P2

P1

P7
II
I6
II

P5
II
I5
II

P6
II

I3
II

I7
II

I1
II

I2
II

Figure 5 diagrammatically represents the facilities and subsea infrastructure of Taminga A field. 12 wells are connected to
satellites and tied back to north and south manifolds as part of clusters. The remaining wells are tied back straight to the
platform shown above.

Infrastructure

Flow Lines

Umbilicals

UTA

Production
Jumper

Satellite

Artificial lift pump

Pipe line end

terminal (PLET)

Manifold

Subsea infrastructure For clusters, minimum requirements

Description/Function
Connect the wellbore to the platform and surface facilities.
They transport the hydrocarbons, oil/gas and water to and
from the seabed and the platform.
Flowlines can be from simple steel lines to multiple bundles
within a larger pipe. It is general practice to insulate
flowlines to avoid problems associated with temperature
fluctuations in fluid.

Cost
$5million/Km
This cost is driven by
material, diameter,
coating and length.

Supplies seabed facilities with electrical power, as a $1.4 million/km

minimum allow control and transfer data signals from the This cost is driven by
surface to seabed. Essential in the control of powering length, type.
subsurface facilities water injection, manifold valve control,
EOR
The umbilical termination assembly (UTA) houses and $2.8million
serves as a distribution control point for the hydraulic and
chemical services required at the seabed.
Connects Subsea trees to the manifold, used in the $850,000
transportation of hydrocarbon from one facility to the other Plus 1 day down time
(Williams, Hale et al, 1998)
General term for the well head an subsea tree, includes $1.5milion
individual BOP and pressure controls. The satellites are
connected to the manifold via jumpers which can be
horizontal connections or vertical.
Pumps lift hydrocarbons to the surface where natural $1.25million
pressure gradients cannot lift alone.
Dependent on size,
sea depth, pipe
length, fluid type
PLET is required for separating fluids and pumping to $1.75million
surface, to the separator.
Used to simplify subsea system by reducing the amount of
pipelines and risers required. Also optimises the fluid flow
within the system, and enables dynamic production $250 million each
surveillance, fluid monitoring of individual satellites
connected to the manifold, which can all be controlled
remotely onshore or on platform. (Kirkbride et al, 1994)

The subsea of Taminga A will be fitted with two manifolds. North manifold connected to the north cluster of wells
and the south manifold connected to the south cluster of wells. The drawback to developing subsea infrastructure is
manifolds is the high cost. This is justified however by a multitude of advantages which have the potential to
increase production, save time and finance.

Manifold Functions

Connection for 6 potential production or injection wells, separated into two production flowlines back to the
main platform.
Monitoring of individual wells dynamic performance in real time controlled onshore reducing living quarter
size.
Production and injection simultaneous capabilities (GE Energy, 2014)
Individual control of wells to mitigate problems associated with dry/damaged wells.
Pressure support for low or high-pressured reservoirs.
Dynamic information of flow, pressures temperature, which can be included in a data acquisition programme
Help to minimise the use of pipelines and risers, which can add huge amount of weight to the platforms and
lead to platform damage or increase platform costs. (Bai and Bai, 2005)
Reduction in the amount of umbilicals required to connect power, hydraulics.
An optimised subsea arrangement to mitigate against entanglement of umbilicals and flowlines.
A reduction in movement of a semisubmersible drill ship as 6 deviated wells can be drilled from one location
through a manifold before movement is required.
Temperature support to allow hydrocarbons to arrive at the platform above critical temperature.
Enables produced fluids to be distributed, control fluids, inject gas and EOR chemicals.
Provides support for other subsea infrastructure/maintenance equipment such as ROVs (Remotely Operated
Vehicle) the use of which is becoming ever increasing.
Helps to maintain valve and pipe work integrity.
Provide gas injection at the riser to reduce slug flow in flow line.
Can provides gas lift which lightens the fluid column and increases production rates.
Can control choke or killing of individual wells.
The additions of subsea manifolds are preferable in case for the need of EOR later in field life, they can be
designed to manage chemicals and other high temperature high pressure fluids.

The majority of the above capabilities are difficult to, or not possible to achieve through direct satellite to platform
tiebacks.

10

6. PROJECT SCHEDULE

The project schedule (Figure 6) incorporates all of the major development activities starting with the building and
installation of production and processing platform all the way to drilling and subsea completions. The oil and gas
pipelines are to be built during the last months of the build phase, at which time the semi-submersible drilling rig will
mobilise to field.

SEMI-SUB DRILED

PLATFORM DRILLED

First Oil

Figure 6 Project Schedule

11

7. OIL PRODUCTION PROFILE

Ultimate Recovery: 715 bln barrels

Recovery Factor: 27%

Figure 7 Production Profile

22 Month Plateau
Plateau rate: 150,000 -175,000 bopd

10 years, rate: 96,000 bopd

20 years, rate: 52,000 bopd

Build up period: 2017-2020
First Oil: January 2017
Start Water Inj: January 2017
Plateau period: 2019-2021

12

Individual Well Production

Producer number

Oil Produced
(over 20 years)

P1
P2
P3
P4
P5
P6
P7
P8
P9

99 mmbbl
85 mmbbl
73 mmbbl
87 mmbbl
42 mmbbl
48 mmbbl
75 mmbbl
148 mmbbl
58 mmbbl

Percentage of
total field
production
14%
12%
10%
13%
6%
7%
10%
21%
8%

Non-discounted
revenue from oil
$6.9 billion
$6.0 billion
$5.1 billion
$6.1 billion
$2.9 billion
$3.4 billion
$5.2 billion
$10.3 billion
$4.1 billion

Figure 8 Cumulative production per well

13

Gas Production Rate scf/day

100-200 mmscf/day for longest duration

Figure 9 - Gas Production Profile

Figure 10 Fluids Volume Production Profile

14

8. FACILITIES
The facilities decisions are based on the plateau rate which provides an optimal take-off from the field (Jahn et al
2008). They are also made with making optimal use of facility and infrastructure in mind to justify the CAPEX and
OPEX required. A steel jacket platform is suitable for the North Sea supporting the drilling rig, production, processing
and other facilities. The steel jacket is also ideal for the shallow water depth of the North Sea (approximately 150m).

Oil
Gas

Maximum Rate: 175,000 bopd

For the largest time period the rate remains between 100-200 mbopd
The gas production rate is expected to be between 100-200 mmscf/day for
the large part of field life.

Platform The facilities processing capacity is based on the total field volume
production rate inclusive of oil, water, gas. The plateau rate of 175,000 bopd
Liquids
Processing corresponds to a maximum reservoir volume production rate of approximate
380,000 bbl/day; therefore an installation (separation and treatment
systems) with a processing capacity of 400,000 bbl/day of fluids is
appropriate.
Water
Injection

Water
Treatment

100-200 Mb/day
100-200 MMscf/day

N/A

The field maximum water injection rate 200,000 bpd (oil equivalent). As a
safety for the possible addition of future infill injector wells a facility with
injection processing capacity of 250,000 bpd is recommended.
Seawater to be treated and injected into the reservoir. Produced water will be treated and disposed of
following regional legislation and guidelines.
UK North Sea water injection regulations necessitate intensive water treatment systems incorporating
the following:
-De-oiling
-Oxygen removal
-Particle content monitoring
-Bacterial treatment
-Scale inhibitor application

Cost

At $70,000/ tonne of steel, the fluid processing facilities will require an approximate investment total of
$ 1 bln.

15

9. ENVIRONMENTAL IMPACT ASSESSMENT

Field development requires an environmental impact assessment and public consultation under UK and EU
legislation, international treaties and agreements. The Offshore Petroleum Production and Pipelines (Assessment of
Environmental Effects) Regulations 1999 necessitates consideration to external bodies and presented below.
Government and Local Council

Non-Government

Environment, Fisheries & Aquaculture Centres

Environmental conservation groups

UK Parliament and The Crown Estate

Fishery and sea user associations

Scottish Government and Islands Council

Marine research groups

Historic and Nature Conservation Committees

Local activist groups

- The produced and injected water to be subjected to intensive cleaning processes in line with Department of Energy
& Climate Change regulations.
-Safe disposal of waste fluids from drilling and other onsite operations.
- Cooperation with regional environmental and wildlife monitoring agencies to be maintained in order to ensure
minimal impact on surround ecosystem and habitat.
- Future implementation of secondary, tertiary recovery methods to be intensively risk assessed.
- Consideration to air quality, energy efficiency, chemical substances.
Data availability is limited and so this assessment is based on regional environmental surveys. An environmental site
study is recommended covering the following areas:

The physical environment which influences ecology.

Plankton (potentially sensitive to hydrocarbon spills) important to marine ecosystems.
Seabed fauna sensitive to physical disturbance
Fish vulnerable to hydrocarbon pollution
Marine mammals sensitive to underwater sound and chemical discharges and emissions
Access to fishing grounds
Interaction with seabed infrastructure

16

10. PROJECT ECONOMICS

The economics of the project takes into account both oil and gas production and sales.
Oil Price

As a safety margin considering the fluctuating nature of oil price, the baseline scenario has been set to
$70 /bbl. Current spot price of Brent Crude is US $ 108.8 (EIA Spot Prices 17/04/14).

Gas Price

Current gas price $6/mscf

Ultimate
Expected
Recovery

715 MMbbl

US $ 4.7 Billion (non-discounted) distributed across 5 years.

This is inclusive of the cost of platform and facilities installation, subsea infrastructure, pipeline construction
and drilling. A detailed cost breakdown of the CAPEX is can be found in the appendix (page X).

CAPEX

Capex Breakdown Capex Breakdown

Costs
Platform & Facilities Platform & Facilities $2,383,600,000
Drilling Expenditure Drilling Expenditure
$1,215,000,000
Subsea InfrastructureSubsea Infrastructure $664,000,000
Oil Pipeline
Oil Pipeline
$120,000,000
Gas Pipeline
Gas Pipeline
$160,000,000

Cos
$2,383,6
$1,215,0
$664,00
$120,00
$160,00

Total Capex

$4,542,6

Total Capex

$4,542,600,000

Includes platform, subsea infrastructure and pipeline operating expenses.

OPEX

Platform operating costs

- estimated to be 6% of associated CAPEX plus variable costs of $2/bbl
Subsea operating costs
- estimated to be 10% of associated CAPEX plus variable costs of $4/bbl
Oil pipeline operating costs - $5/bbl
Gas pipeline operating costs - $0.50/mscf

Tax

Corporation tax for UKCS field developments are 62% and this figure has been implemented into the
preliminary economics.

Discount
Rates

Variable discount rates have been applied to CAPEX, OPEX and net revenue to assess economic robustness
of the project. The current UK discount rate specified by the Cabinet Office Centre for Social Impact Bonds
is 3.5% for projects with duration ranging 0-30 years.

NPV

Net present values have been calculated at variable discount rates as an indicator of economic feasibility.

IRR

Internal Rate of Return (Discount rate at which NPV = 0)

17

ECONOMIC DECISION CRITERIA

- Accept projects with NPV > 0

- Drop projects with NPV < 0
- Accept projects with IRR > discount factor
- Drop projects with IRR < discount factor
- Payback and maximum financial exposure considerations
The findings and quality of an economic study depends on the quality of the cash-flow elements, and the degree to
which the discount rate reflects the best alternative value of money. NPV is the primary decision making factor,
being of key importance to investors as a positive NPV indicates a profitable project. IRR is used extensively in the
petroleum industry, and has been calculated after tax. The North Sea after-tax IRR of equity ranges from 20% to
73%, with a mean of 46% (Kemp. A, 2012).

ECONOMIC ANALYSIS
A cashflow analysis based on the simulated production profile, with nominal and real values has been established
with consideration to uncertainties and their effect on NPV. At US$ 70/bbl and the current discount rate of 3.5% an
ultimate cash surplus (profit) of approximately $11 billion is expected, equating to a return on investment (ROI) of
140%. The post-tax NPV after 20 years is $13 billion which equates to an NPV/barrel of $22, which is above average
and highly profitable. At a 25% discount rate the NPV/barrel is $5. The NPV is positive across a large range of
discount rates, and with an after tax IRR of 50%, the project is robust, presenting relatively low financial risk.
The CAPEX is distributed over 5 years from facilities installation to drilling completion, and with revenue generated
as wells come on stream from 2017; the maximum financial exposure is US $ 3 billion in 2016. The breakeven point is
late 2019, a payback time of 3 years from the start of production, 5 years from the start of development.

Figure 11

18

$ 12.9 Bln

Figure 12 Discounted Cumulative NPV

Field

IRR = 50%

Recoverable Reserves MMbbl

IRR (%) after Tax

Frigg

785

34.1

Piper

618

62.9

Ninian

1,200

53.0

Fulmar

525

65.1

Nystad. A 1981

Figure 14 North Sea IRR data

Figure 13 Internal Rate of Return

19

Field production is to commence at 2017 after the hook up phase is completed, providing a 1 st year net income of
$580 mln. The 50% IRR is within realistic bounds of similar sized North Sea developments, in terms of similar
recoverable reserves, development periods and production durations (Nystad. A, 1981, SPE Economic Analysis of
the North Sea Oil and Gas Region). At the current oil price of $108.8 the IRR is 63%. The 20 year average OPEX,
calculated based on the rates from the production profile is expected to be approximately $ 370 mln/year, which
falls within ranges of DECC OPEX figures for similar fields (see Appendix). At the current discount rate, the gross
revenue is estimated to be $ 40 bln with an after tax profit estimated to be $ 11.2 bln. The net cashflow determines
the economic lifetime of a project, with the point of negative cashflow marking the project end date. Reservoir
simulation indicates economic production rates (50,000 bopd, $ 200 mln/year) and cash surplus beyond the current
20 year life plan at the current discount rate.

Investment
Period

First Oil

Figure 15 Annual Cashflow

Figure 16

Components of Cashflow

20

Development Cost

A CAPEX of $ 4.5 Billion equates to a total development cost of approximately $6/bbl

Unit Total Cost

(UTC)
At a 3.5 % discount rate applied to both CAPEX and OPEX, the UTC is $16.8/bbl

Resources /Well
(Based on dynamic
simulation results)

Total Recovery
Feasible

In total there are 9 producers (individual production cumulatives shown in Figure 8), and 12
water injectors giving 21 wells, therefore approximately 80 MMbbl is produced per
production well and 34 MMbbl per total wells over a twenty year field life. The highest
producer delivers 148 MMbbl and the lowest gives 42 MMbbl.

The total feasible recovery of the field takes into account possible future development as well
as the original simulated data. In this case the future developments are segment 2 and the
implementation of two separate EOR projects. By the end of 2057 an estimate of over 1 bln
bbl will be produced.

Figure 17 - Total Recovery Feasible

21

11. ECONOMIC RISK & SENSITIVITY

Assessing offshore field developments necessitate considering the risks and uncertainties involved at different levels;
both technical (CAPEX, OPEX, reserves, production) and economic (tax, discount rate, oil price) parameters
Oil Price At the current oil price of $108.8 the IRR is 63%. The EIU (Economic Intelligence Unit) forecasts a 14% decrease in oil
price from the present to 2018. The effect of fluctuations in oil price on NPV and IRR was assessed by applying a
price drops to the base case US$ 70/bbl. Results show the project to be profitable after a significant price decrease,
further showcasing the fields economic surety.

Price Decrease
0
25%
50%

Oil Price
$70
$53
$35

Figure 18

NPV
$12.9 bln
$ 8 bln
$ 3 bln

IRR
50%
34%
21%

Effect of Oil Price on IRR

Figure 19 EIU Crude Oil Price Forecast

22

Tax
Tax increase effects on NPV have been calculated.
Corporation Tax Rate
70%
85%

NPV
$10.7 bln
$ 8.1 bln

IRR
43%
33%

With UK North Sea reserves declining, and generally decreasing investment and field development into the province,
the political climate has changed in recent years. The government has reduced corporation tax to the current 62%
from a once higher figure to encourage investment and secure future energy supply. Given the wide variation in
profitability of oil fields, it is inevitable that significant increases in tax rate will result in field developments being
rendered economically nonviable and detract investors. Hence tax rate increase can be considered to be low risk for
the near to mid-term future (House of Commons, Energy & Climate Change Committee Implications for the North
Sea oil and gas industry of the Budget 2011). Nonetheless, sensitivity study shows the project to have positive NPV
and good IRR at higher tax rates.
Spider Diagram -

Oil Production

OPEX

2
0
-2

3.5% NPV $ bln

Oil Price

-4
CAPEX
-6
-50

-40

-30

-20

-10

+10

+20

+30

+40

+50

% Variation in Input parameter

Figure 20 Sensitivity diagram for 3.5% NPV
The spider plot represents NPV against the percentage change in technical and economic
parameters, showing the effect of each parameter on NPV. The parameter with the steepest
slope Production rates is what NPV and the project is most sensitive to. Subsequent variables
can be ranked in order of their relative impact by their steepness.

23

Economic Sensitivity
The tornado plot shows that the project is most sensitive to variation in reserves, followed by oil price.

Reserves

-40%

Oil Price

-40%

40%

40%

CAPEX

20%

Tax

10%

-20%

-10%

Gas Production

Discount Rate

-20%

20%

-15%

Base Case NPV

0

15%

Figure 21

12

18

24

1 E +8

1.1 E +8

NPV ($ bln)

Geological Sensitivity

Porosity

Channel Permeability

NTG

Corey Coefficients

GOR

API

5E +7

6E +7

7 E+7

8 E+7

Figure 22

9 E +7

1.2 E +8

Cumulative Oil Production sm3

Pattern Drive Strategy Line

All fields have a significant uncertainty and heterogeneity range, only a part of which is relevant to the actual operations, and
depends on the production goals and technology used (Soto,2010). A sensitivity analysis was conducted through running
multiple realizations of the reservoir model to assess alternative scenarios. Static and dynamic uncertainties were computed
through a Monte Carlo sampling method, randomly sampling input parameters within the ranges of defined uncertainty limits.
The effect of uncertainties associated with each property on cumulative oil production has been plotted on a tornado chart. It
can be seen that uncertainties in NTG, porosity and permeability have the most effect on cumulative recovery, largely due to
lack of core and well data from across the field.

24

12. RISK ANALYSIS & MITIGATIONS

Category

Matrix
ID
A

Description

Impact

Probability

Effect of Impact

Erratic fiscal system

Changes in tax system impact

project economic feasibility

Ability to
Influence
L

Lack of skilled
workforce
Costs miscalculation

Incompetent platform
operations and maintenance
Potential over-investment,
insufficient funds to complete
Project abandonment

Personnel training

Consultant hire, refine calculations

Develop alternative project

Unjustified facilities/OPEX
expenditure
Company reputation at risk,
fail shareholders
Affects production profile

Lower rate/drill more producers

Reconsider producer placement, drill

more
Horizontal drilling, improve seismic data

Lower recovery

Impacts long term reservoir

management
Impacts NPV

Commercial
B
C
Facilities
D
E
F

Uneconomically high
CAPEX
Insufficient
capacity/use
Failure to deliver rates

Wells
G
H
Reservoir
Engineering

I
J

Failure to reach target

pay
Ineffective
waterflooding
Main fault is/not
sealing
Significant residual oil

Potential Mitigations
Discuss fiscal matters with department of
energy

Run 4D seismic, well tests to develop

evidence based strategy
Interference well test run early in drilling
schedule
Drill infill producers/injectors, horizontal
drilling

25

High

Figure 23 - Risk Mitigation Matrix

I
J

D
A

Potential Impact

Low

Low

Ability to Control

High

In good business practice a strict HSSE assessment will be followed. This assessment is designed to keep people, the
environment and the investment safe throughout the whole of field life. The basic HSSE is outlined in the appendix.

26

13. CONTINGENCY & DATA REQUIREMENTS

There are a number of scenarios for which a contingency plan must be devised. These include instances such as
lower than expected production, high early water cut, or higher than expected gas drawdown, amongst many
others. In each instance it is important to understand which types of data should be collected to assess the extent of
the damage to the development plan and the best course of action. If the damage to the development plan is
potentially high, then the development plan should be scaled back until the problem has been fully investigated.

Problem
Type

Problem

Productivity

Low production
rates

Economic

Problem
Type

Environmental

Problem
Type

Data type used to

Investigate
Drill stem test

Contingency
Adjust water flood method if reservoir pressure is
too low.

High water cut

4D seismic, well tests

Workover wells affected to re-perforate at a

higher level to stop water influx

High gas
productivity

Fluid sampling, 4D
seismic

Adjust pressure support (water flood) in order to

maintain the gas cap more successfully

Problem

Impact

High CAPEX

Reduces profitability
of project

High OPEX

Reduces profitability
of project

Problem
Not meeting
Government
regulations for
north sea
production

Impact
Impact can range
from being fined to
being made to shut
down production

Contingency
Reconduct economic evaluation with new CAPEX
values, potentially reduce OPEX by altering the
well numbers, or work to increase early
production.
Shut down wells with highest water cut 90% +

Contingency
Implement monitoring systems to ensure
standards maintenance. Contingency plan is to
set finance aside to deal with any environmental
problems.

27

14. POSSIBLE FUTURE DEVELOPMENT

EOR
Infill Drilling
Update Model

4D Seismic
SEGMENT 2

Reservoir Management

Multilaterals

Drilling

Recovery Methods

Artificial Lift

Consideration
Criteria/Time
The reservoir produces significant volumes of solution gas which could Low-pressure/rate
potentially be used to implement gas lift to increase recovery. Gas lift is not production wells
uncommon in the North Sea, and if implemented artificial lift systems would
have to be installed.
Dynamic simulation indicates the field production rate after 20 years to be
approximately 50,000 bopd which is a profitable rate based on current Secondary recovery
economics. However reality may be a different case and EOR could be (water injection) no
considered in late field life. Zone A3 containing higher density oil can be longer effective.
subjected to the recovery method, such as water alternating gas (WAG), which
involves water injection, followed by gas injection. Miscible gas injection is
another possibility, utilising the fields own natural gas.
(Decline phase)
Zones of high hydrocarbon saturation remain proximal to the flank fault where Late life, sharply
infill drilling can be considered to increase recovery. This practice is well declining
production/nearing
established in the North Sea.
economic threshold.

Drilling branching multilateral wells from existing wells to access pocket Decline phase
hydrocarbon zones and residual oil in upper Zone A3.

Production and well test data to be used to update and history match the To be conducted
regularly
model for reliable forecasting and evidence based decision making.

Provides real time dynamic understanding of fluid displacement and factors

into reservoir management decisions/recovery decisions in terms of targeting Sensible intervals
(every 5 years)
bright spots.

Decline phase Segment 2 despite being smaller holds considerable hydrocarbon volumes (420 Facilities are largely
not being fully utilised.
MMbbl) and is to be considered as a future second development phase.

Debottlenecking could potentially increase the capacity of the facilities to produce hydrocarbons later in field life as
new technology will allow for higher processing capacity. This option can be considered once real data has been
considered. The most likely use for debottlenecking would be in the water processing stream as this is the stream
which increases in volume throughout field life.
28

Decommissioning
At the end of field life the platform and subsurface facilities must be decommissioned following the rules set out in
the Petroleum Act 1998. This will require finance to safely seal all the wells and remove the platform whether it is
sunk to make an artificial reef or removed totally and recycled. The finance for this is accrued during field life and is
already accounted for by using an oil price of $70 during the economics as the oil price is currently $108.8 (17/4/14)
so part of the surplus will is put aside to prepare for decommissioning.

29

APPENDIX

CAPEX:
Integrated Platform and Facilities Integrated Platform Costs
Topside Weight

Tonnes
22,000

Cost
$1,540,000,000

Jacket Weight

26,400

$1,056,000,0001.2* Top weight, 40 k / tonne

Total Facility (Topside + Jacket)

48,400

$2,596,000,000

Max Capacity
400,000
200,000,000
200,000
200,000,000
400,000

Tonnes Required
4,000
2,000
2,000
2,000
4,000

Standard Rig
ERD Rig

1
0

4,000
0

Accomodation

75

3,000

Flare

1,000

$70 k / tonne

Distributed over 2.5 Years

Cost per Year

Processing
Liquids bbl/day
Gas scf/day
Water Injection bbl/day
Gas Compression (Reinjection) scf/day
Utilities

10 tonnes per mb/d prdn. Liquids

10 tonnes per mmscf/d gas
10 tonnes per mb/d water injn.
10 tonnes per mmscf/d gas
10 tonnes per mb/d prdn. Liquids

Drilling

Total Topsides Weight

40 tonnes per person

22,000

Subsea Infrastructure

$250mln/manifold
Manifolds

M North
M South
Flowlines for Cluster Tieback

Number
2
Dist. To Plat. Km
2.7
3.4

Cost
$500,000,000

Oil Pipeline
Oil Pipeline
CapacityCapacity
Cost $/km
Cost $/km

Flowline Cost
$27,000,000
$34,000,000 DistanceDistance
Build Time
$3,000,000 Build Time

Total OilTotal
Pipeline
Oil Pipeline
Cost
Cost
$50mln/system
Control Systems
Total Subsea Cost

$100,000,000
$664,000,000

100-200100-200
Mb/d Mb/d
$4,000,000
$4,000,000
30
90

30
90

km
days

$120,000,000
$120,000,000

Gas Pipeline
Gas Pipeline
CapacityCapacity
Cost $/km
Cost $/km
DistanceDistance
Build Time
Build Time

100-200100-200
mmscf/day
mmscf/day
$4,000,000
$4,000,000
40 km 40 km
120 days120 days

Total GasTotal
Pipeline
Gas Pipeline
Cost
Cost

$160,000,000
$160,000,000

Total Pipelines
Total Pipelines
Cost
Cost

$280,000,000
$280,000,000

30

km
days

CAPEX distribution per year:

Wells drilled
Subsea Activities
Pipleine Construction
Subsea and drilling costs
Platform Costs
Total Costs

2014

2015

$794,533,333
$794,533,333

$767,665,056
$767,665,056

2016
P9 P2 I2
M north
Yes
$726,738,080
$741,705,368
$1,468,443,449

2017
I8 P3 I4 I1 I3 I7 P1

2018
P4, I11 P8 I10 P6 I5 P5
M south

2019
I9 I6 P7 I12

$385,129,535

$638,331,432

$186,076,070

$385,129,535

$638,331,432

$186,076,070

31

HSSE

Hazard
Environme
ntal risks
Fire
explosions

Oil Spills

GOR
H2S
Facility
problems

Risk
Natural disasters can damage production
and drilling facilities and are harmful to
personnel.
Leakage of the hydrocarbons can occur due
to improper facility installations and can
cause blowouts leading to significant
damages and fatalities.
Oil spills to the sea are major environmental
hazard and can cause significant ecological
and economical damage. They can occur by
leakage of the infrastructure or during
transportation of oil
Inability of gas compressors to handle gas
production rate, can cause blowout
Safety of personnel can be in doubt due to
harmful gas emissions
Facility breakdowns can cause significant
damage and sudden production shutdowns

Probability
Low

Impact
High

Potential Mitigations
Environmental manager should deal with accurate weather
forecasting. Personnel safety precautions should be considered.

Low

High

Availability of emergency alarms, fire proof zones, and transportation

for people evacuation.

Low

High

Development of plans for preventing oil spills. Regular inspection of

storage and transportation equipment and valves. Accessibility to the
Oil Spill Response equipment on board.

Medium

High

Low

High

Medium

Medium

Regular inspection of gas compressors and reassessment of reservoir

model
Availability of gas leakage alarms and regular inspection of valves and
fittings
Availability of facility replacement and regular checking of equipment.

32

REFERENCES
Books and Papers

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Petroleum Engineering Design Project.
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Megill. R, 1988, Exploration Economics, Penwell
Kemp. A, The Official History of North Sea Oil and Gas, Vol. II: Moderating the States Role, 2012, Routledge
Nystad. A, 1981, Economic Analysis of the North Sea Oil and Gas Region, SPE Special Publication
House of Commons, Energy & Climate Change Committee Implications for the North Sea oil and gas industry of the
Budget, Written Evidence, 2011
DSouza et al, 2012, Selecting the Right Field Development Plan, Deep Offshore Technology, Paper 2317
Cromb et al, 1999, Subsea Solutions, Schlumberger Oilfield Review
Bai, Y. and Bai, Q. (2005). Subsea pipelines and risers. 1st ed. Amsterdam: Elsevier.
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Reference HM Government. 1998. The Petroleum Act 1998

Websites
Cabinet Office Centre for Social Impact Bounds - http://data.gov.uk/sib_knowledge_box/discount-rates-and-net-presentvalue

http://www.legislation.gov.uk/ukpga/1998/17/contents
BP North Sea Region Environmental Statement 2011 www.oilandgas.co.uk/environment.cfm
Energy Matters euanmearns.com
DECC - https://www.gov.uk/government/organisations/department-of-energy-climate-change
https://www.gov.uk/oil-and-gas

33