Engineering Economy in Upstream Oil & Gas Field Development: A Concise Appraisal Technique for Investment Decision in Upstream Oil/Gas Projects

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