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Question no 1 Part 1: The Mackenzie Oil Co. owns a small eld named Lobster, currently producing 11,800 barrels of oil per day. The Operator
Question no 1
Part 1: The Mackenzie Oil Co. owns a small eld named Lobster, currently producing 11,800 barrels of oil per day. The Operator is considering whether to work-over the producing wells in order to improve the performance of the eld. The major impact of the work would be to improve productivity in the short term, but at the expense of production in the longer term. Some improvement in overall recovery is also expected. The work-overs would cost $30 million and could be completed during 2023. As a result of the accelerated production, the eld life is expected to be reduced by one year, with a saving of $4 million in xed Opex in that year. Variable Opex, related to production amounts to about $1.5 per barrel. These costs are in $2022 terms. The current planned and accelerated production proles are presented in the table below: The current planned and accelerated production proles are presented in the table below: 2034 2000 0 You are required to advise the management whether to proceed with the planned investment. Current policy of the company,r is to assume an oil price of $30 dollars per barrel, constant in real terms over the life of the project. In this case, taxation and ination effects are to be ignoredStep by Step Solution
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