11. Conference Paper (2014); Evaluating Gas Reserve and Project Cost Using Multistage Scenario Process on Gas Development Project

The development phase of oil and gas fields is challenging, since wells need to be drilled and assessed for oil and gas reserves, and production facilities need to be built. It will only be executed after the exploration phase shows attractive economic indicators (IRR, NPV and payout time). Marginal gas reserves and high development costs will result in marginal economic indicators of the project compared to the company expectation.

The marginal economic indicators have created the mechanism for tight project control during project execution, in order to maintain acceptable NPV. The objective is that the thresholds of model parameters need to be defined on a staging basis to guide the project on an economical track. The thresholds will confine the limit of drilling and facilities cost which can be spent according to reserve scenarios.

The monitoring model is then built by combining the development project economics using multistage scenario tree. A solid model needs to be built and tested using Monte Carlo simulation to generate the drilling and facilities costs. Thus, the model will result simulated economic indicators which will limit of maximum allowable project cost for each reserve scenario.

This paper shows that the economic feasibility of a gas field project at the development phase can be analyzed using the multistage scenario process. Therefore, the key activity is to monitor the performance of the project, i.e. reserve verification, drilling and facilities costs, in addition to the project schedule. Finally, decisions about the project may be made at each stage according to the portfolio profile of the company.

Keywords: Gas Field Project, Exploration and Development Project, Monte Carlo Simulation, Project Economics

Link: http://www.spe.org/events/apogce/2014/pages/schedule/tech_program/index.php

Paper: OnePetro Journal