QUESTION 1 BUSINESS CASE STUDY Evaluation of Intention To Develop An Offshore Deepwater Acreage Your consortium has decided to review the factors needed to justify a Development on the ABC, XYZ and TEN Projects, Deepwater Africa However, take into account some key conditions Scenario A Permit Data ABC Project is located in water depths of 1500 3000m Close to major oilfield infrastructure Proven reserves volumes of 170mmbbls evidenced by trend recent discoveries Costs Exploration well costs estimated at $1,200,000 million Field development (s) in 1,500m water depth will cost $7 5 bbl Lifting cost $7 bbl Royalties 12 50 Discount rate 13 00 Price Assumption Price Assumptions $38 barrel over the 19 year period Scenario B Permit Data XYZ Project is located in water depths of 1500 3000m Close to major oilfield infrastructure Proven reserves volumes of 160mmbbls evidenced by on trend recent discoveries Costs Exploration well costs estimated at $1,200,000 million Field development (s) in 1,500m water depth will cost $7 5 bbl Lifting cost $7 bbl Royalties 12 50 Discount rate 13 00 Price Assumption Price Assumptions $44 barrel over the 19 year period Scenario C Permit Data TEN Project is located in water depths of 1500 3000m Close to major oilfield infrastructure Proven reserves volumes of 100mmbbls evidenced by trend recent discoveries Costs Exploration well costs estimated at $1,200,000 million Field development (s) in 1,500m water depth will cost $7 5 bbl Lifting cost $7 bbl Royalties 12 50 Discount rate 13 00 Price Assumption Price Assumptions $60 barrel over the 19 year period Task Prepare a business report, an analysis and timeframe needed to support an Exploration Development programme taking into account the following A fully costed exploration programme that meets work obligation Further work assuming discover(ies) to involve appraisal drilling before a final investment decision Proceed with a development programme of the license Derive a cash flow profile that accommodates the Exploration Development cost recovery over 19 years following first oil production Assess the effects of oil price, CAPEX, OPEX, tax changes, royalty, reserve reduction, plant problems on the contract What will be the effect of these economic sensitivities (oil price, CAPEX, OPEX, Transport, tariff and treatment and project delay) on the project performance Do an economic evaluation of the various Projects taking into account the oil price forecast, discount rate, exchange rate, capital cost, fiscal terms, production profile, decommissioning provision etc (5 M ( ( 1000 words 40 of module mark) QUESTION 2 Explain the main geophysical techniques used in wireline logging and what they tell us about the properties of the rocks that they pass through Which is the most important technique and why ( 500 words 5 Marks) QUESTION 3 from Gas from shale is now established as a major contender for a key role in the energy industry The remuneration it provides is more modest than the yield from oil ventures but the success ratio per exploration hole is considerably higher and the product is more environmentally acceptable However it would seem that the gas holes have a shorter productive life, as short as two years in some cases, and the area accessed is more limited than anticipated in some instances Thus a phase ofre invigoration by further fracturing is needed to re instate gas flow Nevertheless this industry is now established as a major player Explain your views on how this energy form will fare, its relative importance, and an idea of the role it will play within the energy mix over the next five to ten years ( 500 words 5 Marks) (TOTAL 2000 words 50 of module mark) Marking Scheme Criteria Marking Criteria Correct application of financial, fiscal, risk and strategic analysis to justify decision You are expected to interpret and evaluate data on different subjects All submissions must be evidence based you must research and demonstrate extensive evaluation and synthesis in your answer Your answer must be professionally presented and well illustrated with figures, graphs, tables, etc as appropriate and you must thoroughly contextualize your report to the current assignment

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QUESTION 1 BUSINESS CASE STUDY Evaluation of Intention To Develop An Offshore Deepwater Acreage Your consortium has decided to review the factors needed to justify

QUESTION 1

BUSINESS CASE STUDY

Evaluation of Intention To Develop An Offshore Deepwater Acreage

Your consortium has decided to review the factors needed to justify a Development on the ABC, XYZ and TEN Projects, Deepwater Africa. However, take into account some key conditions:

Scenario A: Permit Data

ABC Project is located in water depths of 1500-3000m.
Close to major oilfield infrastructure
Proven reserves volumes of 170mmbbls evidenced by trend recent discoveries.

Costs

Exploration well costs estimated at $1,200,000 million.
Field development (s) in 1,500m water depth will cost $7.5/bbl
Lifting cost $7/bbl.
Royalties 12.50%
Discount rate 13.00%

Price Assumption

Price Assumptions $38/barrel over the 19 year period

Scenario B: Permit Data

XYZ Project is located in water depths of 1500-3000m.
Close to major oilfield infrastructure
Proven reserves volumes of 160mmbbls evidenced by on trend recent discoveries.

Costs

Exploration well costs estimated at $1,200,000 million.
Field development (s) in 1,500m water depth will cost $7.5/bbl
Lifting cost $7/bbl.
Royalties 12.50%
Discount rate 13.00%

Price Assumption

Price Assumptions $44/barrel over the 19 year period

Scenario C: Permit Data

TEN Project is located in water depths of 1500-3000m.
Close to major oilfield infrastructure
Proven reserves volumes of 100mmbbls evidenced by trend recent discoveries.

Costs

Exploration well costs estimated at $1,200,000 million.
Field development (s) in 1,500m water depth will cost $7.5/bbl
Lifting cost $7/bbl.
Royalties 12.50%
Discount rate 13.00%

Price Assumption

Price Assumptions $60/barrel over the 19 year period

Task

Prepare a business report, an analysis and timeframe needed to support an Exploration & Development programme taking into account the following:-

A fully-costed exploration programme that meets work obligation
Further work assuming discover(ies) to involve appraisal drilling before a final investment decision
Proceed with a development programme of the license
Derive a cash flow profile that accommodates the Exploration & Development cost recovery over 19 years following first oil production

Assess the effects of oil price, CAPEX, OPEX, tax changes, royalty, reserve reduction, plant problems on the contract. What will be the effect of these economic sensitivities (oil price, CAPEX, OPEX, Transport, tariff and treatment and project delay) on the project performance
Do an economic evaluation of the various Projects taking into account the oil price forecast, discount rate, exchange rate, capital cost, fiscal terms, production profile, decommissioning provision etc.

(5 M ((1000 words 40% of module mark)

QUESTION 2

Explain the main geophysical techniques used in wireline logging and what they tell us about the properties of the rocks that they pass through. Which is the most important technique and why? (500 words 5 Marks)

QUESTION 3

from- Gas-from-shale is now established as a major contender for a key role in the energy industry. The remuneration it provides is more modest than the yield from oil ventures but the success ratio per exploration hole is considerably higher and the product is more environmentally acceptable. However it would seem that the gas holes have a shorter productive life, as short as two years in some cases, and the area accessed is more limited than anticipated in some instances. Thus a phase ofre-invigoration by further fracturing is needed to re-instate gas flow. Nevertheless this industry is now established as a major player.

Explain your views on how this energy form will fare, its relative importance, and an idea of the role it will play within the energy mix over the next five to ten years. (500 words 5 Marks)

(TOTAL: 2000 words 50% of module mark)

Marking Scheme/Criteria

Marking Criteria

Correct application of financial, fiscal, risk and strategic analysis to justify decision

You are expected to interpret and evaluate data on different subjects.

All submissions must be evidence based you must research and demonstrate extensive evaluation and synthesis in your answer. Your answer must be professionally presented and well-illustrated with figures, graphs, tables, etc. as appropriate and you must thoroughly contextualize your report to the current assignment.