The Economics of Upstream Petroleum Project
Projects in the upstream petroleum industry are characterized by large capital investment, inaddition to that, there some other factors that make this sector different from other investmentopportunities, such as: time lag between expenditures and revenues, high levels of uncertainty& risk, and of course, most of the projects involve high technology.
The Life Cycle of Petroleum Projects
The phases of typical oil and gas project can be described as follows: Pre LicensingProspecting, Mineral Acquisition/Contracting, Exploration, Appraisal, Development,Production, and Closure.
Pre Licensing Prospecting
Pre-license prospecting typically involves the geological evaluation of relatively largeareas before acquisition of any petroleum rights.
Mineral interest acquisition involves the activities related to obtaining the mineralrights to explore for, develop and produce oil or gas in a particular area. Typically theoil and gas company receives a mineral interest if the negotiation is successful. Amineral interest is an interest in a property that gives the owner the right to share in theproceeds from oil or gas produced.
International Petroleum Accounting
, 2005, p.8 -18