Managing and Planning Oil & Gas Essay Sample
Project "Orbit" is an offshore oil and gas partnership project between the government of Ghana and an International Company. The two phases have seen the development of oilfields, initiated in 2017 and non-associated gas fields in 2018. The partnership has a reserve of 400 billion cubic meters of non-associated gas and 500 million barrels of oil. The project is allocated 60 kilometres off the country coast. Further still, in the client drilled Akoma Exploration prospect in 2019 located 50 km off the coast and 12 km north-west of Sankofa hub, the new gas and oil condensate has between 540 and 650 billion cubic feet of gas and 19-20 million barrels of condensate. Phase 1 of Project "Orbit" currently produces 80 MMcf/d of gas and 14,000 bbl /d of light oil selling to the domestic market. The subsequent phase of the project seeks to implement partial or full-field development in which future oil and gas volumes sold to the export market.
This task seeks to evaluate the output of reservoir simulation models and advise on the commercial viability of the re-development of the reservoir. The simulation output produces information that informs decision making regarding geological data, production data, and NPV and IRR cases.
Given the huge cost associated with exploring and exploiting petroleum resources, it is obligatory for the investors to attain high certainty levels in the methods adopted to detect, quantify, plan and produce. Mapping the right reservoir, explicitly understanding the reservoir characteristics, porosity, permeability, and reservoir surveillance is vital before deciding to invest.
Reservoir properties and characterisation
The simulation modelling of the reservoir properties and categorisation has considered the following, petrophysical parameters of the reservoir materials, including porosity and permeability, and the natural depletion of the reservoir following a full field development. Often the simulation study is undertaken using a reservoir model, involving a static model generating a replica of the reservoir due to its static condition. It encompasses a model of the reservoir structure, shape, saturation, porosity, permeability, thickness, faults and fluid contacts. While the dynamic model would incorporate the flow properties and the behaviours obtainable in the reservoir, the Static model represents a 3D geological model capturing the heterogeneity and randomness in the reservoir to assist in making critical decisions to help develop the reservoir. The summary of the Project “Orbit” simulation model is as illustrated in the table below.
Analysis of Simulation Model output
The total porosity gives the ratio of pore volume to the total volume of the reservoir. The model was developed using the Gaussian Random Function Simulation Algorithm. After that, there is use of a conceptual variogram analysis to populate property regarding the reservoir grid cells. The porosity model indicates an average of 25%. The purple areas in the model indicate low porosity areas, while the orange areas indicate areas of high porosity. On average, the existing well and the future projected well for project orbit will have an average porosity of 25%. This shows a highly porous reservoir. Generally, the three realisations of the porosity generated with different unique numbers have a similar average porosity of 25%.
Regarding the permeability model, the plotting of the core permeability data were against the core porosity data to establish their relationship. The relationship was then populated or used o populate X, Y, ad Z directions. The permeability showed a mean value of 150mD. This is a good indication that the flow rate will be high. Oil will flow well within the reservoir.
On the use of a dynamic simulation model, the analysis considered Oil viscosity. Often, there is a decrease in the oil viscosity of crude oil with decreasing pressure above the reservoir bubble point pressure. The increase is as a result of decreasing pressure below the reservoir bubble point pressure. This change is due to expanding the solution gas, making the oil lighter. Therefore, in the report of Project Orbit, the average effect of pressure on the oil viscosity is less than 870. This indicates that the oil is not thick. It will encourage quick recovery.
The API assist in the estimation of water-oil-contact or gas-oil-contact depth in the reservoir. Often engineers use simulation models. With this, they get implied cost in man-hour in understanding the reservoir. It provides a novel methodology for reservoir track. Therefore, the result of this simulation model indicates a surface water-cut and gas-oil average ratio of 41, enable prediction of fluid contact and movement within the reservoir. It allows for the confirmation of compositional gradient in the reservoir and its effects on the API variation exploitation lifecycle. Besides, giving confidence to the water-gas breakthrough time is predictable using only the measurement of API surface level. Therefore, the API of 41 indicates a light oil that floats on water and can easily be extracted and is a sandstone rock.
Analysis Production Prediction
The production prediction is expected to run for 20 years based on the prediction of existing wells and future wells. Throughout the forecast period, the reservoir pressure will be maintained, indicating a strong aquifer.
The project's cash flow is the net cash generated or expended on the project as a function of time. Through applying a discount rate to adjust the value of money in the base year, the time value for money is often included in the economic analysis. The discount rate is usually an adjustable factor with cash flows resulting in discounted cash flow. For the Project "Orbit," the investment proposal tools applied in the economic analysis are Net present value(NPV) and Internal Rate of Return(IRR)
Net present value
Net Present Value(NPV) is the cash flow value at a specified discount rate. It is attained by summing all the present value cash flow currently acquired by the project. It is the current net worth of the project.
Internal rate of return
This is the discount rate at which NPV is zero. It is a vital investment appraisal tool used for measuring the average annual income generated from the project.
Therefore, the standard rule for investment decision making based on the value of NPV and IRR is illustrated in the table below:
Source(Osunrinde et al., 2019)
Therefore, for the Project "Orbit", the progression with the economic sensitivity analysis of (NPV and IRR) indicates that investment in re-development of the reservoir is economically viable given that the NPV is greater than zero, and the values of the different phases of IRR are greater than the NPV discount rate of 10%.
Forecast Oil and Gas Prices
The commodity pricing assumption indicates a projected and continual increase in the price of export liquid, domestic gas, and export gas over the next 20 years, as indicated below.
The oil prices basing on the 2020 Brent price forecasts an increase of 1% per annum for the next 20 years from the current low of $45 to a high of $65 /bbl. Similarly, the domestic gas price is projected to grow from $3.68/mcf to 3% for the next ten years and, after that, increase by 1%. And finally, export gas as per the Brent is expected to range between $5.50 to $7.00/mcf in the next 20 years. This reflects excellent opportunities in returns.
Recommendation and Conclusion
The analysis of the geological data as presented by the simulation model's output indicates that the reservoir is very porous, has a better permeability, and a good oil density. Additionally, the production data suggests that the natural depletion of the reservoir will take place after 20 years of operation. If we consider the projected increase in the prices of gas and oil for the both domestic and international market over the next 20 years of operations, this longevity indicates high commercial viability in undertaking investment in the re-development of the reservoir. Similarly, the NPV and IRR investment decision tool signify that acceptance of the decision to invest in this expansion.
Paredes, J.E., Carbajal, A., Izquierdo, R., Loyo, I., Pérez, R., Perera, L.M. and Larez, C.J., 2017, June. Fluid Contact Monitoring Using API Tracking. A Novel Methodology for Reservoir Surveillance. In SPE, Europec featured at 79th EAGE Conference and Exhibition. Society of Petroleum Engineers.
Osunrinde, T.O., Chiamaka, I. and Ahmad, Y., 2019. Field developmental plan analysis: a case study of ‘x’reservoir. Journal of Petroleum Exploration and Production Technology, 9(3), pp.2185-2203.
Abraham, A.B., Evans, A.B. and Thompson, B.E., 2019. Analysis of Spatial Distribution Pattern of Reservoir Petrophysical Properties for Horizontal Well Performance Evaluation-A Case Study of Reservoir X. The Open Petroleum Engineering Journal, 12(1).
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