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DEVELOPMENT OF RGUG

PROJECT

1
EXECUTIVE SUMMARY

This report summarizes all possible combination of development options of


RGUG field. Similarly, it analyzes and describes the chosen option
considering costs and prospects of future discoveries, comparing the well
numbers to develop, the production platform options for the proposed
location and the hydrocarbon transportation options.

Important assumptions are described to carry out the development of


RGUG and achieve a successful development plan. The plan was developed
to get the objectives of producing the estimated total recoverable volume
of oil, generate additional profits through gas handling and the
development of other reserves, when the production of the field no longer
maintains operating costs, and the useful life of the installations has not
expired, and a decommissioning plan with minimal environmental effects.

It is conclude that the field will produce 4 wells with a life of field of 9 years
in a fixed steel platform, besides, oil and gas will be transported onshore
by means of pipelines systems. At the end of the life of installations,
decommissioning plan contemplates partial removal. The execution of this
development plan will generate a total cash flow of $1.62𝑥109 and a
profit/investment ratio of 1.50.

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Table of Contents

List of figures----------------------------------------------------------------3

List of tables-----------------------------------------------------------------4

Economic calculations-------------------------------------------------------5

Appraisal---------------------------------------------------------------------8

Flow diagram----------------------------------------------------------------9

Gas handling---------------------------------------------------------------11

Decommissioning plan-----------------------------------------------------12

Conclusions-----------------------------------------------------------------15

References------------------------------------------------------------------16

Appendix A-----------------------------------------------------------------17

2
List of figures

Figure 1
Flow diagram----------------------------------------------------------------10

Figure 2
Graphical overpressure margin---------------------------------------------11

Figure 3
Decommissioning alternatives of oil platforms----------------------------13

Figure 4
Decommissioning scenarios-------------------------------------------------14

3
List of tables

Table 1
Introduction to economic sheet----------------------------------------------5

Table 2
Economic analysis for development options---------------------------------6

Table3
Economic analysis for development options---------------------------------7

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ECONOMIC CALCULATIONS
Vol. of recoverable oil (million bbls) 36
$
Selling Price of Oil (𝑏𝑏𝑙) 75 Oil processing options Oil transporting options

Total revenue (million $) 2700 Option 1 Fixed platform Option 1 tanker


$
Well development options Platform (million $) 540 Tanker operation cost (𝑏𝑏𝑙) 10

Well option 1 Well option 1 (million $) 540 Well option 1(million


$
) 40
𝑦𝑒𝑎𝑟
Cost of each well (million $) 50 (million
Well option $)
2 (million $) 540 Well option 2 (million
$
) 60
𝑦𝑒𝑎𝑟
𝑏𝑏𝑙𝑠
Well capacity (million ) 1
𝑦𝑒𝑎𝑟

No. of wells 4 Option 2 FPSO Million $ Option 2 Pipeline Million $

Total well capital cost (million $) 200 Annual rental cost 80 Large up to (8 million
𝑏𝑏𝑙𝑠
) 400
𝑦𝑒𝑎𝑟

Well option 2 (million $) (million


Well option 1 720 Small up to (5 million
𝑏𝑏𝑙𝑠
) 𝑥10
340
6
𝑦𝑒𝑎𝑟
$) 𝑥106
Cost of each well (million $) 80 Well option 2 480
𝑏𝑏𝑙𝑠
Well capacity (million ) 2
𝑦𝑒𝑎𝑟
𝑏𝑏𝑙𝑠
No. of wells 3 Life of field years Annual production million
𝑦𝑒𝑎𝑟

Total well capital cost (million $) 240 Well option 1 9 Well option 1 4

Well option 2 6 Well option 2 6


Table 1 Introduction to economic sheet.
The large pipeline was only considered for development options that need the higher capacity.

5
$
Development options Total (million$) Cost per barrel ( ) Cash flow (million $) Profit/investment ratio
𝑏𝑏𝑙

Well option 1 200


Processing option Platform 540
Transporting option Tanker 360
Total combination cost 1,100 30.56 1,600 1.45
Well option 1 200
Processing option Platform 540
Transporting option Small Pipeline 340
Total combination cost 1,080 30.00 1,620 1.50
Well option 1 200
Processing option FPSO 720
Transporting option Tanker 360
Total combination cost 1,280 35.56 1,420 1.11
Well option 1 200
Processing option FPSO 720
Transporting option Small Pipeline 340
Total combination cost 1,260 35.00 1,440 1.14
Table 2. Economic analysis for development options.

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$
Development options Total (million$) Cost per barrel (𝑏𝑏𝑙) Cash flow (million $) Profit/investment ratio

Well option 2 240


Processing option Platform 540
Transporting option Tanker 360
Total combination cost 1,140 31.67 1,560 1.37
Well option 2 240
Processing option Platform 540
Transporting option Large Pipeline 400
Total combination cost 1,180 32.78 1,520 1.29
Well option 2 240
Processing option FPSO 480
Transporting option Tanker 360
Total combination cost 1,080 30.00 1,620 1.50
Well option 2 240
Processing option FPSO 480
Transporting option Large Pipeline 400
Total combination cost 1,120 31.11 1,580 1.41
Table 3. Economic analysis for development options.

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APPRAISAL

Drilling operations require huge investments, for that reason, by employing


the suitable technology and business processes, it is possible to maximize
the value of investments when drilling a well at the right cost, without
jeopardize safety and environmental regulations (Jahn and Graham 2008).

There are several options of platforms to use offshore, some of the factor
that influence your selection are the depth water, field size, construction
expertise and the important investment.

RGUG field has two production platform options: the mobile option, floating
production storage and offloading (FPSO), and those that are permanently
placed, a fixed platform. In addition, the field has the option of transporting
oil by renting a shuttle tanker or making a capital investment in a pipeline.

It was considered the option to develop the new offshore field through four
smaller capacity wells and make the capital investment in a small pipeline
to transport the oil as the most appropriate option. Some of the reasons
are that the field is located within an area with very high prospects of future
discoveries, the life of platform, less capital investment, and pipelines can
be reused.

First, the total recoverable volume in the field is 36 million barrels, which
is enough hydrocarbons to install a fixed steel platform that allows their
extraction, developing the RGUG with 4 smaller capacity wells, it will
generate 9 years of life field. The life of platform is typically between 20
and 30 years, besides its have long term production (supports a large
number of wells) and the directional drilling allows access to reservoirs with
different depths and remote localizations (Holmager 2010), taking this into
account at the end of the project, the fixed platform could generate more
income by renting its installations for future operations.

Second, because of the field is developed with 4 wells and fixed platform,
the capital investment is less than if the well will be developed with 3 wells

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and large pipeline to transport the oil, as well as the capital investment will
be greater if rents a FPSO for nine years to produce the field. In simple
terms, at the end of the project with the selected development proposal,
the capital investment is the lowest and a greater amount of income is
obtained.

Third, apart from all of this, an important point in offshore operations is


transport the hydrocarbons from their point of production to processing
centers on land. A mixture of fluids such as oil, gas, water and sand are
produced from the wells. The level of processing in the platform facilities is
limited to meet pipelines specifications for the hydrocarbons transportation
(Jahn and Graham 2008). Finally, due to the development of a new field
without infrastructure and with high possibilities to develop more fields, it
is considered feasible to build a small pipeline for the oil transportation,
the pipeline capacity is up to 5 million 𝑏𝑏𝑙𝑠/𝑦𝑒𝑎𝑟 and the field will produce
4 million 𝑏𝑏𝑙𝑠/𝑦𝑒𝑎𝑟, so it is possible to operate it profitably by renting the
extra capacity, as well as at the end of the project with a small
maintenance, the oil pipeline can be operated charging tariffs for the use
of export routes, generating extra profits for the project. On the other
hand, the rent of shuttle tanker once used, it goes without having obtained
any other benefit, furthermore, more hazards and pollution are generated
with the transportation of oil in this tank.

FLOW DIAGRAM

Before planning a process to transform fluids produced by the well into oil
and gas products suitable for transport, it is required to know the
characteristics of the hydrocarbons produced and the characteristics of the
product to be transported. Process facilities are planned to divide the fluid
mixture into gas, oil and water in order to remove any components which
can cause pipeline blockage or corrosion. Simultaneously, each of these
fluid is treated in an additionally way to obtain a product with defined
characteristics by passing through process of conditioning figure1.

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The oil, gas and water must include certain value for the next parameters:

 Oil: True vapour pressure (TVP), BS&W content, salinity,


temperature, hydrogen sulphide content.
 Gas: Water and hydrocarbon dew point, contaminants content
hydrocarbon composition, heating value.
 Water: Solids and oil content.

(Jahn and Graham 2008).

Figure 1. Flow Diagram.

The processing scheme showed above is designed primarily to meet on-


site purpose and transport specifications. Normally, an additional process
is carried out at processing plants before delivery to the costumer. Gas
transported in pipeline is treated to prevent liquid precipitation in the
pipeline (dew point control). Gas pressure can be increase to be
transported, due to the several stages that went before.

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GAS HANDLING

When the production starts, hydrocarbons are normally transported by


pipelines because the locations of the fields are away from the processor
centres. For that reason, pipelines systems are installed to distribute
hydrocarbons to them (Khan and Islam 2007).

According to Wang (2014) for the next 20 years, global demand for natural
gas will increase at growth rate of more than 1.8% per year. Several
countries consume more gas than they can generate, so the challenges of
processing and handling natural gas have main importance.

The associated gas that is produced in offshore production facilities has


normally been handled as: first, waste (flared) as an unwished product due
to oil production, second, gas exported and third, gas reinjected.
Nowadays, the value of natural gas is recognized by industry, therefore
new technologies have been developed to transport the gas from the field
to the consumer. Several factors affect the choice of proper gas handling,
for example reservoir location, oil price, reservoir capacity, and water
depth (Kim et al. 2016). Figure 2 shows the normal economic comparison
for offshore gas handling.

Figure 2. General economic comparison of offshore gas handling method


(Kim et al. 2016).

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For the development of this field, it is assumed that the reservoir has large
capacity of gas and is situated near the shore, so gas export would be the
most economic option. The gas will be transported through pipeline,
because of hazards and difficulties in transport this by shuttle tankers. Gas
is in a gaseous state at normal temperatures and pressures, unlike oil, so
for the equal amount of energy, gas requires a volume 600 times greater
than oil, consequently, the most habitual method of transport is by
pipelines under high pressure (Holmager 2010). Moreover, it is considered
to use a certain amount of gas as a fuel for turbines and generate electricity
for on-site use. The gas can be reinjected into the field to maintain
reservoir pressure, but this option was not considered because the field is
new and with the development plan it will be possible to obtain the total
recoverable volume of oil.

In brief, the oil processing system will separate the associated gas from
the crude oil, some gas will be required as fuel to generate electricity, and
the rest will be exported to land for treatment and exploitation, water
production will remain constant and will be treated to be disposal in the
sea. It is worth mentioning that another of the important factors to decide
the gas export is that at the end of the project, the pipelines can be rented
for other fields and generate additional profits.

DECOMISSIONING PLAN

The decommissioning of hydrocarbons structures is the final stage of


hydrocarbons operations that starts by unplugging and abandoning the
well, removing the infrastructure, doing remediation work, and clearing
debris from the location. This is an elaborated process, going through
phases of planning, obtaining government approval, and executing the
disposal, or reuse of a structure (Khan and Islam 2007).

International, national and regional legislations regulate the


decommissioning process. There are many elements that need to be
addressed in developing a plan for decommissioning of structures, the
prime difficulties are meeting the correct balance between:

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• Technical Feasibility
• Environmental Protection
• Health and Safety
• Cost
(Holmager 2010).

The primary aim of a decommissioning plan is to put the wells in


permanently safe conditions and eliminate the signs of exploitation
activities. Correct well abandonment plan should handle these concerns:
• Isolation of all hydrocarbon zones
• Containment of all overpressure zones
• Protection of aquifers
• Removal of wellhead equipment.
(Jahn and Graham 2008).

The choices disposable for decommissioning depend on the location of the


structure and legislations. Nowadays, complete removal, partial removal,
toppling, and leave in place are the four general categories for platform
decommissioning, the figure 3 shows these decommissioning alternatives
options (Khan and Islam 2007).

Fig 3 Decommissioning alternatives (Khan and Islam 2007).

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The figure 4 presents a decommissioning scenarios from the distinct
components of an offshore rig. The selection judgment may be safety,
technical, social, environmental, and economic aspects of each removal
alternative, as well of the physical and operational limitations or the needs
of other users of the sea (Khan and Islam 2007).

Figure 4. Decommissioning scenarios (Khan and Islam 2007).

The International Maritime Organization (IMO) is the global authority which


establishes the standards and guidelines for the disposal of offshore
platforms (Jahn and Graham 2008).

The decommissioning of the fixed steel platform consists of removing only


the upper parts from above the sea surface to 55 m depth and leaving the
remaining structure in place, so that there is no hazard to navigation. The
removal process will be done mechanically, cutting the structure into
manageable pieces. The use of explosives was not considered because it
causes many environmental problems. Khan and Islam (2007) suggest
that the explosives generates the death and scatter turtles and fish, which
incites negative effects for government and fishing groups.

Lastly, pipelines will be circulated clean and left filled with water or cement,
the topside modules of the platform will be removed by lift barge and taken
to shore for recycling.

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CONCLUSIONS

Through an examination of this development plan, it can be conclude that


having estimated the recoverable volume of RGUG field and knowing that
it is located in an undeveloped production area with high prospects of
future discoveries, it was possible to reduce the uncertainty of the
hydrocarbons in the field and to carry out a correct evaluation of the
following activities to be carried out. The next step was to analyze the
various well development options for the field. It was analyzed various
technical options, of which more than one are economically viable, as a
result, it is concluded that 4 smaller capacity wells in a fixed steel platform
are the option for the development of the RGUG.

Altogether, it is well known that the hydrocarbons produced rarely have


the quality of transport, commonly, they are produced as a mixture of oil,
gas, water and undesirable matters, for that reason, the hydrocarbons
must be separated and treated to be transported and handled. The gas
handling and oil transportation were planned with the consideration that
there are opportunities to develop other reserves through the present
infrastructure, negotiating a tariff for the use of the facilities, besides
taking into account the legislation that protects the levels of emission to
the environment. Finally, when the recoverable reserves are exhausted,
the installations will be dismantled with procedures that minimize the
environmental effects and knowing the legislation.

WORD COUNT: 2,049

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REFERENCES

HOLMAGER, M., 2010. Offshore Book An introduction to the offshore


industry. Denmark: Offshore Center Denmark.

JAHN, F., COOK, M. AND GRAHAM, M., 2008. HYDROCARBON


EXPLORATION AND PRODUCTION. Second edition ed. Oxford: Elsevier.

KHAN, M.I. AND ISLAM, M.R., 2007. THE PETROLEUM ENGINEERING


HANDBOOK SUSTAINABLE OPERATIONS. Houston, TX: Gulf Publishing
Company.

KIM, W. et al., 2016. A Technical & Economic Study of Offshore GTL


Comparing with Gas Export and Gas Re-injection. Kuala Lumpur, Malaysia:
Offshore Technology Conference.

WANG, X., 2014. Technology Focus: Natural Gas Processing and Handling
(April 2014). Journal of Petroleum Technology, 66(04), pp. 92-92.

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APPENDIX A

Economic Calculations

1.- Annual production capacity:

𝐴𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦: 𝑊𝑒𝑙𝑙 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 ∗ 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑒𝑙𝑙𝑠

𝑏𝑏𝑙 𝑏𝑏𝑙
𝐴𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦: 1,000,000 ∗ 4 = 4,000,000
𝑦𝑒𝑎𝑟 𝑦𝑒𝑎𝑟

2.- The field life:

𝑉𝑜𝑙. 𝑜𝑓 𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑎𝑏𝑙𝑒 𝑜𝑖𝑙


𝐹𝑖𝑒𝑙𝑑 𝑙𝑖𝑓𝑒:
𝐴𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦

36,000,000 𝑏𝑏𝑙
𝐹𝑖𝑒𝑙𝑑 𝑙𝑖𝑓𝑒: = 9 𝑦𝑒𝑎𝑟𝑠
𝑏𝑏𝑙
4,000,000 𝑦𝑒𝑎𝑟

3.- Total development cost:

𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑣𝑒𝑙𝑜𝑝𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡: 𝑇𝑜𝑡𝑎𝑙 𝑤𝑒𝑙𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑂𝑖𝑙 𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑜𝑝𝑡𝑖𝑜𝑛
+ (𝑜𝑖𝑙 𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡𝑖𝑛𝑔 𝑜𝑝𝑡𝑖𝑜𝑛 ∗ 𝐹𝑖𝑒𝑙𝑑 𝑙𝑖𝑓𝑒)

𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑣𝑒𝑙𝑜𝑝𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡: $ 2.0𝑥108 + $5.4𝑥108 + $3.40𝑥108 = $1.08𝑥109

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4.- The average development cost per barrel of production:

𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑣𝑒𝑙𝑜𝑝𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡


𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑏𝑎𝑟𝑟𝑒𝑙:
𝑉𝑜𝑙. 𝑜𝑓 𝑟𝑒𝑐𝑜𝑣𝑒𝑟𝑎𝑏𝑙𝑒 𝑜𝑖𝑙

$1.08𝑥109
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑏𝑎𝑟𝑟𝑒𝑙: = $30.00
36,000,000 𝑏𝑏𝑙

5.- Total cash flow before tax:

𝐶𝑎𝑠ℎ 𝑓𝑙𝑜𝑤: 𝑇𝑜𝑡𝑎𝑙 𝑤𝑒𝑙𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑂𝑖𝑙 𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑜𝑝𝑡𝑖𝑜𝑛


+ 𝑂𝑖𝑙 𝑡𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡𝑖𝑛𝑔 𝑜𝑝𝑡𝑖𝑜𝑛 + 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

𝐶𝑎𝑠ℎ 𝑓𝑙𝑜𝑤: −$2.0𝑥108 + (−$5.4𝑥108 ) + (−$3.40𝑥108 ) + (36𝑥106 𝑏𝑏𝑙 + $75)


= $1.62𝑥109

6.- Profit/Investment ratio:

𝑇𝑜𝑡𝑎𝑙 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤


𝑅𝑎𝑡𝑖𝑜:
(𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑜𝑝𝑡𝑖𝑜𝑛 + 𝑇𝑟𝑎𝑛𝑠𝑝𝑜𝑟𝑡𝑖𝑛𝑔 𝑜𝑝𝑡𝑖𝑜𝑛 + 𝑊𝑒𝑙𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡)

$1.62𝑥109
𝑅𝑎𝑡𝑖𝑜: = 1.50
($2.0𝑥108 + $5.4𝑥108 + $3.4𝑥108 )

18