Case I Wildcat Oil in Kazakhstan Wildcat Oil has recently discovered a new 500 million barrel crude oil reservoir in Kazakhstan. Reservoir engineers predic t recovery of about 300 million barrels with current technology. The produce the oil and firm needs a preliminary cost estimate for a feasibility study of a facility to up- prepare it for pipeline transmission. Wildeat has paid the Kazakhstan govemment $400M in Additionally, the Kazakhstan government will receive 10% of the net revenues Ibbl] minus operating costs minus transportation costs). After 100 million barrels front lease costs. have been produced, all facilities and the remaining oil will belong to the Kazakhstan The feasibility study should optimize the trade-off between capital investment and production capacity in barrels/day (bbl/d major equipment items. Vendors have provided equipmen equipment (see Table 1 below) for this size equipment, piping, and controls linked with each class of major equipment have been compiled from Wildcat's database based turbines is 2.5 times the $33.2 million (including the turbine cost). day). Engineering on a generic 36,000 bbl/day facility identified the t costs for the five classes of major facility. The factor estimates shown in Table 1 for all on past experience. For example, the total cost linked with the Wildcat Oil uses a price of $19.50/bbl for oil of this quality delivered to the Kazakhstan tanker facility. Facility operating costs are estimated at $4.50/bbl, and transportation to the tanker facility is estimated at $1.25/bbl. Production of all oil fields follows a decline curve; however, ations between the government and Wildeat Oil have seized the facility so that production is basically constant through the period of Wildcat's ownership of the facility. For estimating the cost of different size facilities, the production facility can be classed as a large refinery (with a power sizing or capacity exponent or Lang factor of .67). Table 1: Cost Estimation Basis Item Turbines Compressors Vessels & tanks Valves Switchgear Cost(Millions of S) 33.2 24.8 25.6 7.2 4.8 Factor Estimates 2.5 2.8 2.7 3.8 2.4 Answer the following questions from the cases given above: 1. How much should be budgeted for the 36,000 bbl/day production facility? 2. What additional costs and benefit(s), if any, are there to be derived from resizing the facility to process an additional 5,000 bbl/day? 3. What is the present worth of this project with a 36,000-bbl/day facility? An interest rate of
