Ann: Appraisal Program for Block 9, Cuba, page-288

A simple guide to Oil and Gas projects - Brunel

Exploration

The search for hydrocarbon deposits beneath the surface of the earth, primarily using a combination of seismic surveys and drilling wells. Exploration projects can be expensive, time-consuming and risky, drilling a well may cost tens of millions of dollars and not find any hydrocarbons, this is known as a dry-hole or a duster.

The potential rewards can be enormous however.

Take the recent case of the Johan Sverdrup field, one of the largest discoveries ever made in the North Sea off the coast of Norway. It was found in an area previously thought to be exhausted from over 4 decades of relatively disappointing exploration, and now stands to provide jobs and generate revenue for several decades.

Appraisal

After a company has found oil and gas reserves, it needs to assess how much there is and, more importantly, how much can be extracted.

The appraisal stage of a project may take years, and cost vast sums of money as more wells are drilled and further seismic surveys done to better understand the reservoir.

If an appraisal is successful, then the project will move on to the development phase.

Development

Following a successful appraisal, the development phase is where the operating company will determine the best methods to extract and transport the hydrocarbons and overall financial viability of moving to full-scale production.

The field development plan will be created to estimate the CAPEX and OPEX of the project. Many factors are involved including; the number of wells to be drilled, the recovery method, the type of installation to be used, the separation systems for the gas & fluids, and how the oil and gas will be transported to a processing facility.

Once the best estimate of all costs is in place, a company will be able to decide if the project will be profitable and grant FID to proceed with construction and ultimately move to production.

Production

Once a field is producing, this is the major source of revenue where a company can begin to recover their financial outlay and eventually turn a profit. Some fluctuations will occur over time as the level of production reduces towards the end of the field's life.

Production may last anything from several years up to several decades depending on the size of the field and how expensive it is to maintain the wells and facilities. Operations and maintenance costs run to several million dollars each year, and safety is a paramount concern at all times.

Reservoir Engineers will monitor the performance of the field to plan any additional wells or improvements to boost production and maximise the amount of hydrocarbons which can be recovered.