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1.1 Petr. Ec. I - Lect No. 01 - 3rd STG - DPETE (2 SPP) PDF
1.1 Petr. Ec. I - Lect No. 01 - 3rd STG - DPETE (2 SPP) PDF
Koya University
College of Engineering
School of Chemical and Petroleum Engineering
Department of Petroleum Engineering
Third Stage
Petroleum Economics
Basics of Petroleum Economics
Farhad Abdulrahman
Assistant Lecturer
© Farhad Khoshnaw 1
Koya Uni/FENG/DPETE 18/02/2017
INTRODUCTION TO
PETROLEUM ECONOMICS
• At the end of the course you will be equipped with analytical skills
that you can use to solve problems of an economic nature.
© Farhad Khoshnaw 2
Koya Uni/FENG/DPETE 18/02/2017
• Prerequisite
– Familiarity of field development and reservoir life cycle
2/18/2017 Petroleum Economic 5
© Farhad Khoshnaw 3
Koya Uni/FENG/DPETE 18/02/2017
ECONOMIC DECISION
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Koya Uni/FENG/DPETE 18/02/2017
- Lease Bidding
- Selection of "best" option
- Reporting
- Unitization discussions
- Fiscal changes
- Contracts
INSTRUCTIONAL OBJECTIVES
• Construct a project cashflow from given production, cost
and fiscal assumptions.
© Farhad Khoshnaw 5
Koya Uni/FENG/DPETE 18/02/2017
• OTHERS:
- Diversification of activities
1. Prioritize projects.
© Farhad Khoshnaw 6
Koya Uni/FENG/DPETE 18/02/2017
© Farhad Khoshnaw 7
Koya Uni/FENG/DPETE 18/02/2017
ASPECTS OF LEASING
• Oil and gas are minerals and part of land for Home
government (HG) or landowner’s (LO) legal right.
• If HG/LO says NO then – no bidding.
• In some countries – Govt owns the mineral rights
and only Govt can explore the minerals unless it
transfers right to another. If this happens we say
that Govt gives another a CONCESSION.
• Three Common Interests for HG/LO:
– Lease interest
– Mineral interest
– Royalty interest
LEASE INTEREST
• The lease is granted for explicit period (primary term) and for
as long as petroleum is found.
Bonus payment
Royalty payment
Reversion of right
Surface rights
Delayed rental
© Farhad Khoshnaw 8
Koya Uni/FENG/DPETE 18/02/2017
MINERAL RIGHTS:
ROYALTY INTEREST:
© Farhad Khoshnaw 9
Koya Uni/FENG/DPETE 18/02/2017
1. CONCESSIONARY
- Allows private (coy) ownership of oil and gas discovered
through transfer of rights and payments of bonuses, royalties,
taxes to Govt.
- No more prevalent
2. JOINT VENTURE
- Risk shared by Govt and Coy
- Objective is to increase HG take
- Better control of your money and assets
© Farhad Khoshnaw 10
Koya Uni/FENG/DPETE 18/02/2017
CONTRACTING STRATEGIES
1. Aligned operator and contractor's goal through performance
based contracts, such as the move from direct to
integrated/incentive contracts and balanced rewards fro
operator and contractor.
• Capability
– Delivery Management System
– Project Assurance and Risk Management
– Procurement and logistics capability
– Managing/personal and rig crew organization
– Staff CVs
– Central office support
– Contractor and sub-contractor profile and performance record
• Experience
– International Experience
– Local presence
© Farhad Khoshnaw 11
Koya Uni/FENG/DPETE 18/02/2017
2. Unit Costs
Wire line & perforation Service
Surface Well testing & sampling
Mud logging
Cementing service
Coring & evaluation test
End
© Farhad Khoshnaw 12