PRO - ECO1 - S8-G1 - 14-18 Juin

FORMATION PROFESSIONNALISANTE PRO/ECO1 – GROUPE 1
Économie et Management de l’Amont
Économie des gaz non conventionnels
Alger – 14 au 18 juin 2015
Guillaume CHARON
Formation professionnalisante en
économie et management de l’amont
Module 8 : Unconventional Gas
Guillaume CHARON
guillaume.charon@ifptraining.com
1. Composition, characteristics & resources
 INTRODUCTION 3. Resources & reserves

a. The need for statistics
1. Natural gas “Essential”
b. Definition
a. Composition
c. Sources
b. Energy content
d. Reliability
c. Units
e. Conventional versus
2. Origin & characteristics of unconventional
unconventional gas  Appendix
a. Petroleum system
characteristics
b. Shale gas
c. Tight gas
© 2015 ‐ IFP Training
d. CBM
e. Gas hydrates
EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 1

2. Upstream economics – Technics & production costs
 INTRODUCTION
1. Geology, permit, geophysics c. Fracking Trends
a. Preliminary study d. Market & players
b. Exploration permit 4. Completion
c. Geophysics 5. Development study
d. Market & players
6. Production, processing &
2. Drilling water management
a. Overview a. Production
b. Drilling improvement b. Processing
c. Discovery & analysis c. Water management
d. Market & players d. Well intervention
3. Hydraulic fracking 7. Decommissioning
a. Overview
 Appendix
b. Hydraulic fracking & Micro seismic
fracture mapping
EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon
3. Decision of investment & economic analysis
 INTRODUCTION 3. Fiscal impact

a. Concession
1. Production value
b. PSC
a. Production profile
b. Associated products 4. Economic evaluation criteria
c. Production price a. Concept of discounting, NPV
b. IRR, POT, Profitability, ROCE
2. Costs associated with
unconventional gas 5. Project analysis
developments  Conclusion
a. F&D, pre‐construction
b. Drilling, fracking & completion
 Appendix
c. T&F
d. LOE

4. Panorama
 INTRODUCTION f. Hungary
g. Russia
1. North America
a. US 4. Africa‐Middle East
b. Canada a. Algeria
c. Mexico b. South Africa
c. Oman
2. South America
d. Saudi Arabia
a. Argentina
b. Brazil 5. Asia‐Pacific
c. Colombia a. Australia
b. China
3. Europe
c. Indonesia
a. Poland
d. India/Pakistan
b. UK
6. Scenarios
c. Germany
d. Ukraine  Appendix
e. France
5. Economic & strategic impact
 INTRODUCTION b. Natural gas uses, LGN &
condensates uses, associated oil
1. Gas transport uses
a. Traditional gas chain c. Oil & gas industry
b. LNG d. Petrochemicals, refining and
2. Rent sharing other industries
e. Final consumer
3. Macro‐economic impact
4. Impact on the energy mix & 6. Strategy of the O&G companies
prices a. Small and big Independents
a. Gas price b. IOC
b. Oil price c. NOC
c. Coal price and others  CONCLUSION
5. Consumer impact:
unconventional gas uses
a. Flaring, venting, injection &
commercialization
6. Environmental impact & social issues
 INTRODUCTION
1. Environmental impacts
a. Noise & local perturbation
b. Surface footprint
c. Water consumption & treatment
d. Seismic events
e. Greenhouse gas emissions
2. Social issues – Protagonists of the debate
a. The pro (O&G producers and contractors, organization, energy
consumers)
b. The cons (some O&G producers, environmental & anti‐globalization
associations, renewable industry, some consumers)
c. Position of the population & evolution of the debate worldwide
4
Unconventional Gas
Composition, characteristics & resources
 INTRODUCTION
1. Natural gas “Essential” 3. Resources & reserves
a. Composition a. The need for statistics
b. Energy content b. Definition
c. Units c. Sources
d. Reliability
2. Origin & characteristics of
e. Conventional versus
unconventional gas unconventional
a. Petroleum system characteristics
b. Shale gas  Appendix
c. Tight gas
d. CBM
e. Gas hydrates

Introduction – The need for
unconventional?
Energy need
5 times Russia
5 times
Saudi Arabia
Source: BP Stats 2013
Unconventional?
 Adjective, not conventional, not bound by or conforming to convention,

rule, or precedent
 “unconventional” is now the common term used to refer to
hydrocarbon resources that are or could be exploited with techniques
other than what are considered conventional methods at any particular
time
 Schlumberger Oilfield Glossary: “unconventional” is used to refer to oil
and gas reservoirs whose porosity, permeability, fluid trapping
mechanism or other characteristics differ from conventional sandstone
and carbonate reservoirs
 IHS Cera: “unconventional” refers to hydrocarbon resources that
cannot be produced at economic flow rates or that do not produce
economic volumes without artificial stimuli and special recovery
processes and technologies
Over time, as economic and technological conditions evolve, resources
considered unconventional can migrate into the conventional category
What is unconventional… may be conventional
… or not!
Source : Trike‐Europe
Conventional, transition or unconventional?
Conventional Transition Unconventional

Crude & Natural gas
NGL
Gas condensates
Acid gas
High pressure, high temp gas
Heavy oil (assistance to flow)
Ultra deep Oil
Ultra deep Gas
Shale Gas
Shale Oil (Light Tight Oil)
Tight Sands Gas (Tight gas)
Oil shale (Kerogen)
Extra heavy Oils
Tar/Oil sands
Coalbed Methane (CBM, CSG)
Coal Mine Gas (CMM)
GTL, CTL
Natural Gas Hydrates
Dissolved Gas
Unconventional for IEA
 "unconventional oil include extra‐heavy oil, natural bitumen (oil

sands), kerogen oil, liquids and gases arising from chemical
processing of natural gas (GTL), coal‐to‐liquids (CTL) and
additives."(World Energy Outlook 2011 report)
Gas Oil
Shale Gas
Shale Oil (Light Tight Oil)
Tight Sands Gas (Tight gas)
Coalbed Methane (CBM, CSG) Oil shale (Kerogen shale)
Coal Mine Gas (CMM) Extra heavy Oils
Syngas Coal Oil sands
Natural Gas Hydrates GTL
Dissolved Gas CTL
Source: WEO 2013, IEA
Unconventional oil & gas
Oil Gas
Game changer or much ado about nothing?
Source : IFPEN

1. Natural gas essential
1a. Natural gas composition – Typical content
Source : G. Charon, Ed Technip 2014
1a. Natural gas – Definition
 Wet / dry
 Associated / non associated
 Sour / sweet
 HP / LP
1a. Natural gas terminology
1b. Natural gas characteristics
Source : G. Charon, Ed Technip 2014 according to JC Guibet, Carburants et moteurs: technologies, énergie, environnement, IFP vol2, Technip, 1997
1b. Natural gas – Energy content
Coal Crude oil Natural gas
Ton of carbon/toe 1.123 0.83 0.653
1c. Units
 UNITS
• m3, Bm3
• Cf, BCf, TCf
• Boe, Boed
• Toe
• MBtu, mmBtu
• kWh
• J, kcalorie
1c. Units & conversion


2a. Origin & characteristics
of unconventional gas
2a. Petroleum system – Hydrocarbon genesis
0 km
60°C
2 km
0 km
60°C
2 km
0 km
60°C
2 km
3 km 90°C
0 km
60°C
2 km
3 km
90°C
2a. Petroleum system – Hydrocarbon genesis
2a. Petroleum system – Coal and hydrates genesis
2a. Migration – Conventional versus Unconventional
2a. Timing – Shale in France
Accumulation
Toarcien Shale
Autunien Shale
Source: Geosciences HSM
2a. Timing & thermal – Migration
Million years
No HC
Toarcien Shale
Autunien Shale
Maybe some
Production (km)
HC?
Source: Geosciences HSM Université Montpellier 2011
2a. Hydrocarbon genesis
 Hydrocarbons production depends on

• Sediments (Lake, forest, swamp, sea, etc.)
• “cooking conditions”
− In which environment?
− How deep?
− For how long?
− Migration?

2a. Reservoir rock – Characterization
 A ROCK is a RESERVOIR, if
• POROUS, capability called POROSITY (noted Ø, in %)
• ALLOW the FLOW of HC, this property is called the rock PERMEABILITY
(noted K in Darcy)
• CONTAIN enough HC, this is called the hydrocarbon rock SATURATION
(noted S, in %)
2a. Conventional reservoir rock
 Two main types of reservoir rocks
The clastic rocks The carbonated rocks
(ex: Sandstones) (ex: Limestones)
Like sandpaper, sandstones usually have a rough, granular texture.
Source: Pitt.edu
2a. Porosity Φ
 It is the volume of empty space (“ pores ”) divided by the total volume of the rock, in %
Pores Volume
Porosity Φ = ____________________
Rock Total Volume
 The pores connected are giving the effective porosity. The remaining porosity is called
residual porosity
 The reservoir rocks have very variable porosities but they are usually between 10% et
35 %
 Primary Porosity:
• Inherited from the original sediment
 Secondary Porosity:
• Due to the diagenetic modifications
during the sediment burial or due to
the appearance of fractures
Porosity values are obtained by : measurement on the cores or by
interpretation of Wire Line or Logging While Drilling logs
2a. Porosity & Permeability
Connected pores lend the rock its permeability
Source: Erdgassuche in Deutschland (ExxonMobil)
2a. Porosity & Permeability
Sandstone Shale Shale (clay rich/pressure)
Diagenesis? Distribution?
 Grain texture : The rounder the grain, the higher permeability

 Grain size: Permeability decreases with grain size
 Grain distribution: Different sizes?
 Grain mineralogy : Clays are plastic, can deform in response to pressure
 Diagenesis: MINERALISATION or dissolution?
2a. Size of molecules/pore size
Sandstone grain diameters range from 0.06 mm to 2 mm
2a. Permeability
QUIZZ: Conventional / Unconventional Petroleum System
 CONVENTIONAL  UNCONVENTIONAL
• Source rock • ?
• Reservoir Rock • ?
• Seal Rock • ?
• Structure or Trap • ?
• Maturation of source rock • ?
• Migration of Oil & Gas • ?

2b. Origin & characteristics of
unconventional gas
Shale gas
Million Quaternary
years
2b. Accumulation
Era Cenozeoc
Neogene
23 –
Oil (Gb) 30 20 10 100 200 400 Gas (Tcf)
Key Oil Shale Gas Shale CBM
Paleogene
Eagle Ford (US)
66 –
Maracaibo & Catatumbo (Lat. America)
Cretaceous
Eagle Ford / Burgos & Sabinas (Mexico)
Neuquen (Argentina)
146 –
Bazhenof (Russia)
Era Mesozoic
Jurassic Haynesville (US)
Surat Basin (Australia)
200 –
Qinshui (China)
Triassic Permian / Sichuan (China)
Bowen & Cooper Basin (Australia)
251 – Cooper (Australia)
Paris (France)
Permian
Karoo (South Africa)
299 – Dniepr‐Donets (Ukrainia)
Pennsyl
Era Paleozoic
Source : G.Charon, Ed Technip, 2014
vanian
Carboniferous
Bakken + Marcellus (US)
318 –
Mississi Duvernay (Canada)

ppian
Horn River & Cordova (Canada)
359 –
Ghadames Berkine/Tannezuft (Algeria)
Devonian
Longmaxi / Sichuan (China)
419 –
Silurian Canning, Goldwyer (Australia)
Ordovician 23
2b. Shale and CBM in North America – Examples
2b. Shale gas/oil
Huge accumulation
2b. Shale gas / oil – Different porosity
Comparison of scale of porosity observed in organic matter
in a Barnett organic‐rich rock
Conventional sandstone reservoir Barnett shale
SEM photomicrograph of a fined‐grain sandstone
Source: Passey et al. 2010 (SPE131350 )
2b. Shale gas / oil – Mineralogy
Clay
Source: Core lab
Quartz Carbonate
Source: Schlumberger
2b. Exploration: very first decision scheme
 Depth ‐ less
 Thickness ‐ high
 TOC ‐ high
 Permeability ‐ high or high brittleness
 Ro ‐ 0,5 to 1% for oil

• Very low maturity = favourable to biogenic gas
• High maturity = favourable to thermogenic gas
2b. Shale: examples
2c. Origin & characteristics of
unconventional gas
Tight gas
2c. Tight gas reservoirs
 Tight gas reservoir refer to:

• Sandstone or limestone formations
• No need for a cap
• Gas trapped within the porosity, with limited pore connectivity
• Gas reservoirs having less than 1 mD of permeability
• Often deep
Conventional sandstone: well connected pores (dark blue)
Tight gas sandstone: pores irregularly distributed and poorly

connected
Source: DOE, 2001
2d. CBM reservoirs
 CBM reservoir refer to:

• CBM, CSG, CMM
• Coal Bed is the reservoir
• No need for a cap
• Gas is kept in breaks
• Gas is adsorbed
• Not very deep
• Variable permeability
• Coal can store around 6 to 7 times more methane than the
equivalent volume of rock in a conventional gas reservoir

2e. Origin & characteristics
of unconventional gas
Hydrates
2e. CBM reservoirs
 Hydrates:
• Biogenic
• In deep offshore sediments (high pressure, limited temperature)
• In Permafrost (low temperature, limited pressure)
• A combination of water and gas (most often CH4) solid under
specific thermodynamic conditions
• Can be produced with
− Depressurization
− Thermal stimulation
− Injection of inhibitors
Source: NOOA Source: Conseil national de recherches
Canada

3. Resources & Reserves
3a. Why do we need Resources data?
 Oil company
• Projects
• Assets
 Shareholders & investors
 States and resources owners
 Consumers
 Others

3b. Definitions
 Volumes of hydrocarbons in place

• Oil and gas originally in place (PIIP, OOIP, OGIP) ‐ Static evaluation
 Reserves
• Volume of hydrocarbons produced/to be produced
• Initial, remaining or ultimate reserves (ERR: Estimated Remaining
Reserves) ‐ Dynamic evaluation requiring knowledge of the production
profile
 TRR: Technically Recoverable Resources
 Others
• EUR: Estimated Ultimate Recovery / well
• Cum
• Recovery factor = RESERVES/PIIP
Petroleum total in place
(Total PIIP)
Discovered PIIP
Undiscovered PIIP
Commercial Sub‐commercial
Reserves Contingent Prospective

Resources Resources
1P 1C Low estimation
Unrecoverable (non récupérable)
(Proven) (Proven)
Already produced
Unrecoverable
Uncertain
2P 2C
Better estimation
(Probable) (Probable)
3P 3C
(Possible) (Possible) High estimation
Commercialibility
3b. Types of RESERVES
 Proved
• Can be estimated with reasonable certainty & to be recoverable
under specified economic conditions ‐ 90 to 95 % confidence
 Probable
• Less certain than proved ones 50% confidence level
 Possible
• Reserves not yet discovered 10% confidence level
‐ economical risk +
possible
probable
proved
‐ technical risk +
3c. Sources
 Oil companies
 Geological institute (BGS, PGIP, etc.)
 Others

3d. Measurement of rock properties
 Porosity
• Measurements on core plugs
• Well logs Interpretation
 Permeability
• Well tests Interpretation
 Saturation
3d. Reservoir Modeling
 Conventional methods
• Geological maps, OOIP evaluation, analytical evaluations (material
balance), utilization of analogs
 Mathematical modeling of reservoirs

• Integration of geological model, petrophysical model and dynamic
production data
• Reservoir management tool
geological
model
petrophysical numerical simulation
model model
production
data

3d. Reliability
 SPE‐PRMS / SEC
 Audit?
 Technically Recoverable Shale Oil and Shale Gas Resources, EIA,

ARI, june 2013?
‐‐ ++
• Geology, permeability? GIP // theory?
• Seismic? 137 formation (41 countries)
• Analogy method Technology
• Surface challenges Learning curve
• Manipulation US track record
• Track Record Poland
3e. Basins with assessed shale formations
Source: EIA, 2013

3e. Unconventional gas resources
3e. CBM resources

3e. Hydrate "deposits"
More than 100 spots

identified
Gas volume in hydrates

2,5 to 7 Tm3
but might reach
21 Tm3
Mallik
Barentz Sea

Conclusion
3e. Reserves & resources
Oil Dry gas
G b R/P Tcf G boe R/P
Proven reserves 1 642 52 6 741 1 162 57
Unproven reserves 1 370 44 8 842 1 524 75
Proven reserves (shale & tight oil) n/a 97 17 1
Unproven reserves (shale & tight oil) 345 11 7 796 1 242 66
3 357 107 23 476 3 945 198


Appendix
Gas to Oil supply / GTL – 2013
Countries Projects Capacity (Boed) Companies Year
South Africa Mossel Bay 22 000 PetroSA 1992
Malaysia Bintulu 14 700 Shell 1993
32 400 QP & Sasol 2007

Qatar Ryx & Pearl
140 000 QP & Shell 2011
Nigeria Escravos 34 000 Chevron & Sasol 2014?
Production 2013: 0,2 Mbd

Unconventional Gas
Upstream Economics – Technics & production costs
EM ‐ SONATRACH 2015‐ Unconventional Gas ‐ G Charon
 INTRODUCTION
1. Geology, permit, geophysics 4. Completion
a. Preliminary study 5. Development study
b. Exploration permit
c. Geophysics 6. Production, processing & water
management
d. Market & players
a. Production
2. Drilling b. Processing
a. Overview c. Water management
b. Drilling improvement d. Well intervention
c. Discovery & analysis
d. Market & players
7. Decommissioning
 Appendix
3. Hydraulic fracking
a. Overview
b. Hydraulic fracking & Micro seismic
fracture mapping
c. Fracking Trends
d. Market & players

Introduction
Exploration contract
Preliminary study
Months or years Geopysical
survey
Site preparation 1 to 3 months
Drilling 35‐50 days
7‐30 days
Investment decision
Fracturation Test Developments:

7‐30 days 1 – 2 ‐ Drilling, fracturation,
months pipe, treatment, etc.
Production contract 14‐60 days /well

Production
Key
Exploration
Production
Disman‐
Restoration telment Production
Months or years 7‐20 days 15‐40 years
1. Geology, permit, geophysics
1a. Preliminary studies
Identify a sedimentary basin and collect all the information available
Core analysis Geological field study
Log interpretation Modelisation
Existing seismic
interpretation
Source: Beicip Franlab
To characterize an unconventional petroleum system

1a. First resources evaluation
 Preliminary geological and reservoir data are assembled including

the following key items:
• Depositional environment of shale (marine vs non‐marine)
• Depth (to top and base of shale interval)
• Organically‐rich gross and net shale thickness
• Structure, including major
faults
• Gross shale interval
• Total organic content
(TOC, by wt.)
• Thermal maturity (Ro)
A first resources evaluation
can be “imagined”
Source: ARI, june 2013
1a. Preliminary studies – Ex: New Zealand
 Companies exploring under permit for minerals and coal in New

Zealand are required to offer core and samples to New Zealand
Petroleum & Minerals. Any material is held in confidence for a
period of up to five years before becoming available. © 2015 ‐ IFP Training

1a. Preliminary study – Cost
Depends of:
 What is available?
 Complexity of the geology?
 Surface
 From 100ks USD to 10s millions

Ex: For Shale in France, estimated 1,7 million euros by Beicip‐Franlab (Office
“Parlementaire d’évaluation des choix scientifiques et technologiques”, juin 2013)
1b. Exploration permit – Bidding round or request?
 Option 1: The State opens blocks  Option 2: The company address

for international bidding round directly to the permit holder
1. Advertizing
2. Block Offer opens The company(ies) apply for licence
3. Last date for questions
4. Last answers to questions posted
(Contract templates & Negotiation
of the contract terms or not)
5. Closing Date ‐ Bids must be
received
6. Assessment, alternative offers
7. Public announcement of permit
grants
8. Commencement date of permits
granted
The company provides an impact study (including environmental study,
management plan, etc.) and a work program. If accepted, the company (or JOA)
and the permit holder sign an exploration agreement

1b. Exploration permit – Content
 The exploration permit gives the holder

• The exclusive right to explore hydrocarbons
• Within a specific perimeter
• For a specified term
• May be renewed
• Obligation of expenses
• In case of development decision:
• The operator must then apply for exploitation
• It is customary that the company takes the risk to explore can easily
get permission to develop in case of commercial discovery. In some
cases, there is no distinction between exploration permits and
operating licenses.
1b. Various phases of an E&P contract
Proposals Exploitation END OF

Evaluation Permit PRODUCTION
Negotiation
Signature of Detailed Studies
PATRIMONIAL Restitution
CONTRACT Exploration of
Permit DEVELOPMENT Sites
Start of Production
EXPLORATION
DISCOVERY EXPLOITATION
Evaluation
Delineation
Marketing Plan New Investments
for End of
PATRIMONIAL
DEVELOPMENT Enhanced Recovery
CONTRACT
DECISION

1b. State’s intervention in exploration/production
Two possible types of intervention of the State
 The State, holder of the mining rights, develops its own natural
resources through national companies, exerting or not a
monopoly, or service companies within the framework of
technical assistance contracts
 The State, holder of the mining rights, chooses the company who
will carry out the operations of exploration and exploitation,
within the legal regime in force:
• Concession regime
• Production sharing contracts regime
• Contracts of service regime
1b. Patrimonial contracts
STATE CONCESSION
OPERATOR
CONTRACT PSC
JOINT OPERATING
AGREEMENT
Risk‐Service
Contract
PARTNERSHIP (JV)
PARTNERS
(IOC, NOC)

1b. Concession
 Mining rights: assigned to the licensee (Company) by the host

country (State)
 Ownership of resources: State
 Overall management: licensee
 Operational management: licensee
 Exploration/Development/Production: licensee
 Ownership of facilities: licensee
 Ownership of O&G produced: licensee
 Tax consolidation: generally
 Negotiation flexibility: limited
Historical petroleum contract
1b. Concession
Licensee (Company) Host country
 Undertaking and financing the  Calling upon technical skills and

exploration at his own risk, the financial means of the company
development and the production
 Participating in decision
 Deciding on development and
production under control and with  Being paid by several State revenue
necessary approval of the State sources
• Bonuses
 Being reimbursed and remunerated
in kind (barrels) with his production • Surface renting ($/km²)
• Royalty on production
 Paying the host country (royalty,
taxes…) • Petroleum income tax
• Special petroleum tax
 NOC can be part in the JV

1b. Concession
Sharing resources
NOC’S PROFIT
Depreciation
Exploration Expenses
COMPANY ’S PROFIT
Depreciation
Development
TAX
Expenditures
ROYALTY
Operating Expenses (OPEX)
Investment Investment Time

OPEX
Exploration Development
State ’s Participation
(eventually)
Financing investments
1b. Concession: barrel and rent split
OTHER
Petroleum Rent
ROYALTY
STATE
INCOME
TAX
MARGIN
CONTRACTOR
CONTRACTOR OPEX
CAPEX

1b. Production sharing contract
 Mining rights: State/NOC

 Overall management: State/NOC
 Operational management: contractor (+ State/NOC)
 Exploration/Development/Production: contractor (+ State/NOC)
 Ownership of facilities: State/NOC
 Ownership of O&G produced: contractor + State/NOC
 Tax consolidation: generally not (ring fencing)
 Negotiation flexibility: generally
Most widely used contract since 1970s
Licensee (IOC) Host country
 Being reimbursed in kind (barrels) • Bonuses
by the cost oil • Surface renting ($/km²)
 Being remunerated in kind (barrels) • Royalty on production
by a share of the profit oil • Petroleum income tax
 Paying the host country (royalty, • Special petroleum tax
taxes…)
• Share of profit oil

1b. PSC: barrel and rent split
OTHER
ROYALTY
Petroleum Rent
STATE
PROFIT OIL
STATE
PROFIT OIL
CONTRACTOR
OPEX CONTRACTOR
CAPEX

1b. Service contracts
 Mining rights: State/NOC

 Overall management: State/NOC
 Operational management: contractor (contracted by State/NOC) +
State/NOC (only NOC for Buy‐Back contract)
 Exploration/Development/Production: contractor (+ State/NOC)
 Ownership of facilities: State/NOC
 Ownership of O&G produced: State/NOC
The newest and the least popular contract:

highest governmental control
1b. Risk service contract
Contractor (IOC) Host country
development and the production  Asking for services
 Being reimbursed in cash (O&G  Paying the contractor
sales)
 Having full control on contractor
• without interest for exploration
expenses and OPEX
• with interest for development
investments
 Being remunerated in cash: fee (%
remaining revenues)
• which could be taxed
Generally for partially depleted fields
Octobre 1999
1b. Service contract without risk: technical assistance
contract
Contractor (IOC) Host country
 Undertaking and undirectly financing  Calling upon technical skills and
the development and the production financial means of the company
 Being reimbursed in cash (O&G  Asking for specific services
sales)  Paying the contractor: ensuring a
• Without interest for exploration minimal revenue ($/b) regardless
expenses and OPEX crude oil price
• With interest for development  Having full control on contractor
investments
 Being remunerated in cash: fee (%
remaining revenues)
• Which could be taxed
Pure service contract (similar to a service company contract)
Generally for oil field exploitation (sometimes development work)
Octobre 1999
1b. Exploration permit – Study by RDS on Karoo Basin
 Study submitted to Petroleum Agency in SA

1. Introduction
2. Context and history
3. Legal context
4. Existing environment – The karoo
− Geology, Climate, Topography, Soil, Terrestrial Ecology,
Surface water, Groundwater, Air quality, Visual aspects,
Noise, Sensitive landscapes, Socio‐economic environment
5. Description of applicant and proposed exploration
project
6. Environmental Management Plan (EMP) preparation
process
7. Consideration of project alternatives
8. Technical assessment
9. Environmental management plan

10. Undertaking and commitments
11. Conclusions and recommendations
1b. Exploration permit – Size & costs
 Permit size:
• 2,5 km² in Haynesville or Fayetteville (US)
• 500 km² average in Poland
• 8000 km² for Yuzivska in Ukraine
• 6300 km² for Oleska in Ukraine
 Cost:
• Bonus
• Exploration expenses (1,9 B USD Yuzovska permit in Ukraine)
• Very often in US between 1 and 2 USD/Mcf
1c. Geophysics – Reflection seismic principle
2D seismic data may be acquired over the lease area
Source: RWE Energy
To identify plays and prospects

1c. Geophysics – 3D Marine acquisition geometry
Courtesy of CGG
1c. Geophysics – Equipment
SUR TERRE
EN MER

1c. Geophysics – Seismic processing & interpretation
Data processing converts the data into a form that can be
processed by computer and analysed by geoscientists
2D
Coupe 2D 3D
1c. Geophysics – Seismic processing & interpretation

1c. Geophysics – Seismic costs
LAND MARINE
3 000 to 9 000 $/km 500 $/km
2D SEISMIC
150 to 300 km/month‐crew 2 000 to 3 000 km/month‐crew
Acquisition
8 000 to 50 000 $/km2 4 000 to 15 000** $/km2
3D SEISMIC
50 to 400* km2/month 200** to 1 500 km2/month
Processing
 2D SEISMIC
3D SEISMIC
100 to 400 $/km
350 to 600 $/km2
50 to 100 $/km
200 to 400 $/km2
100 000 $ to 1 000 000 $ / study
Interpretation
Weeks to Months to Years for Interpretation …
* Desert Operations 24h/24h ** HR Marine or Small 4D
1d. Geophysics market
Seismic vs. Overall E&P expenditures:
Source : Barclays Capital 2011, ION, November 2011
1d. Geophysics players
 Certification:
• AJM Deloitte, Beicip Franlab, DeGolyer & MacNaughton, Gaffney,
Cline & Associates, GLJ Petroleum Consultants, McDaniel &
Associates, RPS Energy Canada, Ryders Scott.
• Geology
• Beicip Franlab, DMT, GEPlan Consulting, Geoform Ltd, Petroleum
Geosciences, Netherland, Sewell & Associates, etc.
• Geophysics:
• CGG‐Veritas, Schlumberger, BGP, PGS, Halliburton, Fugro,
Geokinetics, TGS Nopec, Input Ouput, Dawson Geophysical.
 Environmental study
• Amec Earth & Environmental Inc, Ash Creek, Aspen, Berger/Abam,
ICF International, ENSYS Energy, Nexon Consulting, etc.

2. Drilling
2a. Drilling exploratory well(s)
The objective of an exploratory well is to learn as much as possible
about the petroleum geology of the area
Source: H&P
2a. Drilling exploratory well(s)
 First target
• Mud logging
• Electric Logs
• Core
• Tests
 Second target
• Produce & test
2a. Overview – Drilling steps
1. Find the area
2. Mark the targeted area for drilling
3. Take the legal steps
4. Clear and level the designated area
5. Dig a reserve pit and line with a plastic
6. Use a drill truck to drill a starter hole
7. Drill the main hole with an oil rig
8. Ciment the hole to prevent collapse + pipe, casing & cimenting
9. Measurement: test rock samples, measure pressure, low
sensors
10. Lower a perforating gun to punch holes in the casing
11. Run tubing
12. Seal the outside of the tubing with a packer
To
complete 13. Connect a Christmas tree
the well 14. Install a pump on the well head

2a. Drilling preparation site
Identify site
Negotiate and organize access
Prepare drilling site
Drilling preparation
Source: Anaya
2a. The rig side work space
 The well site includes:

• Production of primary energy
• Expendable product storage & warehousing
• Facilities for handling waste discharges
• The pumping facility and tanks
• Shelters
• The derrick
Source: Laney drilling
2a. The drilling rig – Functions
2a. Drill string
Weight on bit: the drill string
Weight indicator
Land rig

2a. Drill bit
Roller bit Diamond bit
Source : Union Pétrolière
2a. Well design
Hole diameters and casing diameters
Ground level
Hole diameter Casing/liner diameter
18-5/8‘‘
22‘‘
13-3/8‘‘
17-1/2‘‘
12-1/4‘‘ 9-5/8‘‘
7‘‘
8-1/2‘‘
4-1/2‘‘
6‘‘
Reservoir
2a. Drilling rig classification
 Lightweight rigs 1500 m to 2000 m  650 hp
 Intermediate rigs to 3500 m  1300 hp
 Heavyweight rigs to 6000 m  2000 hp
 Ultra heavy rigs to 8000 m / 10000m  3000 hp
P.S: Every 100 feet of borehole requires 10 horsepower at the draw

works
It means weight on the hosting hook
2b. Horizontal drilling – Why?

2b. Directional drilling
Directional kick‐off with turbo drilling
 Bended connection
 Orientation pad
 Tool orientation swivel
2b. Drilling market – From vertical to horizontal in US
1 400
Vertical
1 200
Horizontal
Directionnel
1 000
800
600
400
200
0
1/21/00 1/21/02 1/21/04 1/21/06 1/21/08 1/21/10 1/21/12 1/21/14
Source : Baker Hughes, 2014
2b. Drilling time per well on advanced rig
Example advanced rig performance on Oxy‐operated projects
2b. Drilling improvement – New rigs
Source : H&P 2013
2b. Drilling time per well on advanced rig
Source : H&P 2013
2c. Gas discovery and matrix analysis
The exploration well confirms the presence of hydrocarbons
The rock (and the effluent) recovered from the reservoir is
analyzed in a laboratory
Gas discovery and rock analysis
Source : netl.doe.gov
2c. Measurement of rock properties
 Porosity
 Permeability
• Well tests Interpretation
 Saturation
2c. Logs
 What are useful well logs for

• Recognition of reservoirs (lithology, porosity
and saturation)
• Knowledge of wells characteristics (diameter, Cable tension
recorder
inclination, cementing, formation‐hole Recording
communication) system Depth
recorder
• Comparison between wells to identify well
marker correlation
Winch Cable
 Different types of logs
Tools
• Electrical (PS, resistivity…)
• Radioactivity (GR, Neutron,Density, TDT)
• Sonic
• Auxiliaries (caliper, deviation, cementing …)
• Others (RFT, production …)
2c. Well testing (drill stem test)
Other analysis can be done : logs, side wall cores, pressure measurements
and formation flow and well tests. The formation must be tested and
evaluated to determine whether the well will be completed for production,
or plugged and abandoned
Reservoir must be tested (if possible…)
2c. Delineation
Producing
GAZ
HUILE Not
producing
EAU
Source : Union Pétrolière
2d. Drilling record
Today
US – GOM
US GOM
Exploration well
Subsea well
Anadarko
Well from
floating platform
A331*28 – Octobre 2012
2d. Pre drilling cost
 Permit fees
 Site construction
• Size
• Regulation
• Geography
• Infrastructure
 In US: average from 400 kUSD to 600 kUSD


2d. Drilling rigs costs
Cost of a drilling rig
K$ / day Today
LAND RIG 15 to 30 et + … 30 et + …
SWAMP BARGE 30 to 35 et + … 50 et + …
TENDER RIG 30 to 40 et + … 100 et + …
JACK UP 20 to 120 et + … 100 et + …
SEMI‐SUBMERSIBLE 80 to 150 et ++ … 400 et ++ …
DRILL SHIP 140 to 250 et ++ … 500 et ++ …
Example Land rig Gabon :
October 2005 : 50 k$/d – March 2006 : 100 k$/d – 2007 : 150 k$/d
2d. Onshore rate
Rental rate
Rental Rental
Rental
Source : IFPEN, IHS Energy

A224*16ter – Novembre 2012
2d. Drilling players
 Onshore drilling companies

• Nabors Industries, Helmerich & Payne, Ensign, Patterson‐UTI,
Precision Drilling, Eurasia Drilling Co, KCA Deutag, Pioneer Drilling,
PR Marriot, Nomac Drilling, Union Drilling, Falcon Drilling, etc.
 Offshore drilling companies

• Transocean, ENSCO, Diamond Offshore, Seadrill, Noble Drilling,
Maersk Group, KCA Deutag, Fred. Olsen Energy, Rowan Companies,
etc.
 Drilling Services
• Schlumberger, Baker Hughes, Halliburton, Weatherford, GE Oil &
Gas
2d. Drilling players
Onshore Estimation
Source : IFPEN, Spears é Associates
3. Fracking
3a. Perforations
 Perforations with « Overbalanced
pressure » before running
completion:
• Large multidirectional cannons
• Can damage the reservoir
 Perforations with « Under‐balanced
pressure » and completion in place
(TCP):
• Minimize reservoir damage
• Smaller cannons

3a. Primary recovery
 Natural energy of reservoir is used to produce the hydrocarbons

• Initial pressure
• Rock compressibility
• Oil and gas compressibility
• Gravity drainage, capillary forces
 No other external energy is used
3a. Need – Producing very low permeability reservoirs
 To produce low permeability gas reservoirs, it is necessary to

artificially increase the reservoir permeability
 Hydrofracturation allows to fracture the matrix rock or/and by

stimulating existing natural fracture networks
 Hydrofracturation is not new. It is a "common" stimulation

technique to improve production of very low (but not only)
permeability formations
 Its was already used in the 40’s
 Later, it was used worldwide


3a. Hydraulic fracturing: overview
 Hydraulic fracturing is a well stimulation technique that consists

in injecting under pressure an appropriate fluid into a selected
area of the reservoir formation in order to initiate and propagate
a fracture into the rock matrix
 After fracture initiation a propping agent is added to the fluid in

order to maintain the fracture open and to finally ensure the
permeability
 The fracking fluid, the pressure and the sequence are adapted to
the local stresses and the rock properties
Hydraulic fracture design is difficult
3a. Main fracking steps
Source: Golden rules for a Golden Age of Gas, IEA report
3a. Fracking equipment
Source: Baker Hughes
3a. Propagation of an hydraulic fracturation
CASING PERFOS
MINIMAL
CEMENT
STRESS

3b. Hydraulic fracturing: 2 main parameters
 The rock matrix
 The initial state
of stress
In situ stresses
Petrophysical and
mechanical rock properties
of the target layer
Adapted from John Perez 2008
3b. Fracture initiation and propagation
 On a mechanical point of view one has to consider two main

steps in the hydraulic fracturing process:
• The initiation of the fracture that consists in breaking the rock, the
relevant parameter is the fracture toughness
• The propagation of the fracture previously created (propagation
criteria)
Fracture always initiates at an heterogeneity!

3b. Fluid properties
 Ideal fracturing fluid must

• Be compatible with rock formation
• Be compatible with fluid formation
• Generate enough pressure drop down the fracture to create a wide
fracture
• Be able to transport the propping agent
• Break back to a low viscosity fluid for clean up after the treatment
3b. Hydraulic fracturing pressure
 Depends on fluid properties and rock petrophysical ones
 Fluid properties are adapted to make fracture initiation possible:

i.e. to reach a pressure level sufficient enough to initiate rock
fracturing
10 000 to 20000 m3
of water per well For low to very low permeability matrix additional

viscous gel is not necessary
1300 – 2400 m3 per stage to initiate fracturing but required to transport the
36 to 140 tons of sand per stage propping agent
3b. Fracturing fluid examples
 Foams and gases (CO2 for example) for very low permeability
formations
 Oil (diesel): low injection rates
 Water (brine): high injection rates
 Water and additive
 Gels
3b. Summary of chemical additives
Hydraulic fracturing white paper DOE 2004

3b. Fracking fluid in US
The make‐up of fracturing fluid varies from one geologic
basin or formation to another
3b. Data availability
https://www.hydraulicfracturingdisclosure.
org/DisclosureSearch/MapSearch.aspx

3b. Addition of proppants to maintain permeability and
fracture conductivity
C = W * K
[m‐1] =[m]*[m‐2]
3b. Prop to keep open the cracks
Source: D.Susong, Utah Water Science Center, USGD
3b. proppants
 Sand: the less expensive
Stress Bond Resin Coated Sand
 Resin‐coated (epoxy): stronger
compressive strengh than sand
 Ceramic proppants consist in sintered bauxite (intermediate strengh

proppant) and light weight proppant, better for high stressed fracture
(deep wells / 2700 m)
3b. Proppant injection efficiency
 Adapted proppant to in situ conditions (stress, temperature, fluid

properties)
 Adequation between fluid injected and proppant for optimal
proppant transportation
 Effective proppant distribution in the fracture?

3b. Sequence – Fracturing pressure analysis
Minifrac: hydraulic fracturing of a vertical well
without injection
Re‐opening of proppant
INJ
INI PC
Fracture initiation Fracture sollicitation
3b. During injection and after injection
 INI: initial injection point

 INJ: upper limit of linear phase of pressure build‐up
 Breakdown: fracturing pressure or peak pressure
 Rapid pressure decline due to fluid penetration into the fracture
 IPP: initial propagation point (not always visible)
 Shut down: injection stops (or Shut‐in point)
 ISIP: instantaneous shut‐in pressure, end of the pressure drop
 PC: pressure closure. This value is assumed to correspond with
the minimal stress value, it is not visible in the pressure‐time
curve

3b. Fracking – Logistics
Chemical &
sand storage
3b. Fracking fleet
Source : Baker Hughes
3b. Fracking fleet
3b. Hydraulic fracturing of a well
Source: http://fracfocus.org
3b. Fracking for EGS
Drilling site for an EGS project Drilling operation at Egoci project ‐ EGS

(France)
Less pressure
Less additives
Source: European Geothermal Energy Council
3b. Passive seismic monitoring
LF
HF

3b. Monitoring Marcellus shales
Mayerhofer et al. 2011 ‐ SPE 145463
3b. Frack monitoring
Mapping more than 15,000 frac jobs during the past decade
Source : Pinnacle 2012
3c. Shale oil/gas production: intensive use of hydraulic
fracturing of horizontal wells
2008
The marriage of horizontal drilling and hydraulic fracturing
3c. Fracking improvement
Source : Statoil
3c. Fracking & drilling density
 Selective multifracs within an horizontal well is more and more

applied to increase the "surface of fracture“
 For example: Barnett Shale

• The usual well spacing for vertical wells is 1 well per 40 acres
• Spacing between horizontal wells is a function of the shape of the
induced fractures, typically resulting in spacing of at least 450 to
600 ft
Selective multifracs within an horizontal well is more and more
applied to increase the "surface of fracture“
3c. Fracture & drilling
 In case of massive fracturing, it is very expensive depending on

fracturing fluid and proppant characteristics, injected volumes
and area of operation (cheep in North America compare to other
countries)
 For unconventional gas production, this technique is intensively

applied in combination with horizontal drilling: the larger the
fracture extension the more the production

3c. Fracture & drilling
 Mapping hydraulic fracture helps in optimal well positioning and

at least for improving production efficiency
 Well spacing and orientation (for horizontal ones) are key points
in gas production based on hydraulic fracturing
 Environmental issues are severe and controversy is rising

everywhere but resources convert to reserves…
3d. Fracking market
 Hydrofracking companies
• Schlumberger, Baker Hughes, Halliburton, Weatherford, GE Oil &
Gas, FTS International, Universal Well Service, Trican, Calfrac,
Nabors, etc.)
Fracking Estimation
Source : IFPEN, Spears é Associates
3d. Fracking cost
 In 2010, 10 fracks on an horizontal well cost 2 to 4 M USD
 Micro seismic cost 50 000 USD to 150 000 USD

4. Completion
4. Well integrity
4. Blow out prevention
Blow out
preventer
4. Completion role

4. Completion equipment (1)
WELLHEAD & X‐MAS‐TREE
4. Completion types (2)
TUBING TUBING
CIRCULATING VALVE
"SLIDING SLEEVE"
PACKER

4. Completion types (3)
DUAL COMPLETION SELECTIVE COMPLETION
4. Well Completion
The safety valves
SCSSV : Surface Controlled Sub‐Surface Safety Valve
Shut in the well, below the ground or the
mudline(‐150’)
Hydraulic operated from the surface
Retrievable by tubing; large flow path
Retrievable by wire line; restricted flow path
Ball closure
Flapper closure

COMPLETION EQUIPMENT « JEWELERY »
• Tubing ( diameter, thickness, metallurgy)
• packer (to isolate annulus)
• Circulating valve ( sliding sleeve)
• 1 or more « landing nipples » to anchor
instrument gauges, plugs …
• equipment to activate non ereuptiv wells
SAFETY EQUIPMENT
• Wellhead & xmastree equiped with number
of valves
• « Downhole safety valve »
PACKERS
INFLATABLE PACKERS
 Available for open hole or

cased hole completion
 Can be anchored & released

mechanically: weight, traction,
rotation
 Can be anchored hydraulically

(dropped ball or plug )

5. Development study
5. Analysis for a development project
Question: invest or not in the development of a discovery?
 After discovery, the Value of the field for the Oil Company is the Net
Present Value ( NPVd ) resulting from development
 The evaluation excludes past cash flows in exploration but includes

exploration cost in the cost recovery or depreciation according to the
fiscal terms of the patrimonial contract
 This Net Present Value will depend on the Scenario considered:
►Development Plan
►Economic Assumptions
►Contractual Framework

5. Risk Assessment (Prospect evaluation)
The prospect has been identified and successfully mapped, a
business decision must be made
 To answer this question the

specialists must determine :
• What are the potential oil or
gas reserves?
• What is the risk of the
prospect?
• What is the cost of drilling and
fracking?
• What infrastructure is needed?
Cost associated?
• Is there a market for the
hydrocarbons?
• How will they be transported
to this market?
Does it make sense to develop?
5. What is RESERVOIR ENGINEERING?
 After the discovery of a reservoir

• RESERVOIR ENGINEERING set up a DEVELOPMENT PROJECT to
OPTIMIZE the RECOVERY and the ECONOMICS
 During the reservoir life

• Reservoir Engineers study the BEHAVIOUR of the reservoir
throughout the life of the field to OPTIMIZE PRODUCTION and
ECONOMICS
 Optimal profitability of a project needs knowledge of

• Volumes of hydrocarbons (oil and/or gas) in place
• Recoverable reserves
• Well productivity potentials

5. Development studies: objectives & key activities
• Appraisal requirements
Appraise Development Preliminary Study
• Preliminary scheme
Potential • Development feasibility
• Planning & cost
Conceptual Study • Screening of alternatives
Select Best Concept • Confirmation of feasibility
for Development • Key parameters definition
Decision • Concept selection
Pre‐project Study • Basis of design
Define Concept • Facilities and wells description
for Sanction • Project execution principles
Decision • Project economics
• Basic & detailed engineering
Project • Installation & drilling
5. Multidisciplinary approach
Geophysics Economics
Geology
Field Operations
Reservoir
Project
Construction
HSE
Conceptual Drilling &
Engineering Completion
Safety Engineering
Infrastructures Liquefied Natural Gas
Design & Layout
New
Process Design Technology
Research &
Cost Estimate Mature Fields
Development

5. Conceptual studies & concept selection
 Objective
• Select the best scheme to develop the field
 How?
• List the different schemes/concepts/scenarios to be studied
• Concept selection
− Criteria
» Value creation
» Costs
» Risks (technical, economic)
− Experience, operability, flexibility
5. Main Project phases
Decision Start up
Development
studies Basic
Engineering
Detailed
Engineering
Supplies
Fabrication/Construction
Conventional
Installation
Project duration Commissioning
1 to 4,5 years
Development
studies Basic Engineering
Detailed Engineering Shale/Tight
Supplies
Installation
Commissioning
Basic Engineering : aims at narrowing and refining the technical definition of the Project and
at preparing the calls for tender for the main purchase orders and contracts

5. Management of uncertainties
Uncertainty
100 %
Project
definition
Basic
Initial Engineering
Evaluation
Construction
Conceptual Commissioning Reservoir
studies knowledge
Pre-Project
Time
DISCOVERY DEVELOPMENT PRODUCTION END of

DISCOVERY
DECISION START UP PRODUCTION
5. Commitment of CAPEX
Investment
100% Potential commitment
through Construction
technical decisions Basic On‐site
engineering operations
Conceptual Pre‐project
Initial studies Actual commitments
50%
evaluation towards
contractors/suppliers
0%
DECISION Time
DISCOVERY TO PRODUCTION
DEVELOP START‐UP
Appraisal
Reservoir development

5. Conceptual study report 1/2
 Basis of Design
• Geographical, geotechnical and environmental data
• Petroleum, industrial and economic environment
• Seismic data, exploration and appraisal wells data (logs, PVT,
production tests, etc.)
• Regulations, rules and specifications from Company, international
and local authorities
 Subsurface
• Geological and geophysical evaluation
• Reservoir: depletion strategy, well count, recovery factor, reserves,
etc.
• Possible development schemes
• Screening of possible development schemes, including innovative
solutions
• Selection of 3 to 4 schemes to be evaluated and compared
5. Conceptual study report 2/2
 Technical Description of Selected Development Schemes

• Drilling and completion. Field layout
• Gathering system, processing units, utilities and export system
• Sustainable development and HSE. Operating philosophy
• Project execution, planning and costs
• Duration of field production, CAPEX and OPEX estimates
 Comparison of Solutions
• Recovery, operability, sustainability, risks, planning, economics, etc.
• Recommended development scheme
• Risks and uncertainties

5. Pre‐Project study report 1/2
 Basis of Design
• Update of Conceptual Study Report (results of new surveys, wells, etc.)
 Subsurface Evaluation
• Update of the subsurface section of the Conceptual Study Report
 Well Engineering
• Drilling & completion. Well monitoring and data acquisition. Well
interventions
 Process and Flow Assurance
• Definition and sizing of gathering networks, processing facilities, export
system and utilities
• PFD's and simplified PID's. Main production parameters, chemicals,…
 Field Layout and Facilities, Sizing and Weight Estimates
• Well centers, pipelines network, processing and utilities units, living
quarters, offsite facilities
5. Pre‐Project study report 2/2
 Operating Philosophy
• Operability, maintainability, equipment redundancy, plant availability
factor
• Manning. Operations support facilities. Consumables. OPEX
 Sustainable Development
 Safety and Environment
• Safety concept. Environmental impact assessment
 Project Execution Outline
• Project planning and costs. Contractual strategy. Local content. Risks and
uncertainties
 Preliminary Plan for Site Abandonment
 Remaining Potential and Future Development

5. Project execution plan
 Project Context & Description

• Stakeholders
• Development Scheme
• Technical Referential
 Project Objectives
• Budget and Planning (Life of Project)
• HSE and Quality
• Sustainable Development and Local Content
• Other project specific objectives
 Project Implementation
• Organization
• Contractual Strategy
• Risk Management
• HSE Management
• Insurance and Financing
• Quality Management
5. Oil & Gas contracts awarding procedure
 Negotiations
• The legislation does not specify all the conditions applicable to an oil
agreement
 International invitation to tender (exploration rounds)
• An international invitation to tender (bidding) is the usual rule
• A model contract is provided (can be attached to a decree of application)
with blank terms left
 Transfer of Interest on Fields
• An international invitation to tender (bidding) is the usual rule
• The model contract must fit to the specificity of a discovery already made
or a field already in the exploitation phase
 From an existing interest holder by:
• Farm in/out
• Swaps of interests
• Outright purchase
− Developed
− Non developed
• Corporate acquisition
5. Development improvement – Multipad revolution
Source : Statoil
5. Development improvement – Drain length and precision
3000 m
200 m
5. Development improvement – Multipad wells

6. Production, processing
& water management
6a. Main phases of exploration & production process
Field development process
Exploration
Appraisal
Development
Development Production
studies
Production profile
Development
Project
• Maintenance / WO
• G & G studies • Dev & Eco studies • Infill wells
• Explo drilling • Development wells • Plug & Abandonment Field
• DST Abandonment
TIME CAPEX OPEX Site

Rehabilitation
Investment
Discovery decision First oil End of
Production

6a. The Production Flow
Collection,
Treatment,
Storage,
Measuring,
Exportation
6a. Unconventional gas production

6a. CBM production
Methane Water
production Production
6a. Production facilites
Well head and dehydration unit (US)
Source: Total
6a. Well activation (1)
Methods for artificial lift
 Volumetric pumps
• Sucker rod pumping
• Progressive capacity pumps (PCP)
• Hydraulic piston pumps
 Down‐hole centrifugal pumps
• Electric submersible pumps (ESP)
 Suction pumps
• Jet pump: venturi method
 Pumping by reducing the fluid column weight
• Gas lift
Gas lift
GAS GAS GAS
CLOSED
GL VALVE
CLOSED
GL VALVES
OPEN OPEN
GL VALVES GL VALVES
OPEN
GL VALVE

Sucker road pumping
6a. The collectors
Pig launcher and receiver
<‐‐‐‐‐‐‐‐‐ To launch a pig
To receive a pig ‐‐‐‐‐‐‐>


6a. The collectors
Well head in the bush
Wellheads with safety valves
and choke boxes.
Swab‐valves, master‐valves
Well head off‐shore
Wing valves. Well head in the swamp
Chemical injection points
Pressure/temperature sensors.
6a. The collectors
Inlet manifold

6a. Shale & Tight gas production
Volume (MM Cf/y)
400 to Accelerated
4000 depletion
15 to 40 year
6a. CBM production
Volume (M
Cf/d) Stabilisation Depletion
200 to
400 After 1 to 2
years
CBM production
« dewatering » Water production
25 to 40 years
6b. The effluent flow
Well effluents from Foam
wellheads Droplets of liquid
Gas
In the gas Gas treatment
dehydration
Condensate
Gas/Liquid Condensate
recovery Water
Separation
Emulsion
Mixture of water
and oil
Operations sometimes Export oil
realized in 1 process
equipment set up
Oil/Water Emulsion
Separation treatment
Emulsion
Free water Water
6b. Three phase separator
Deflector plate Safety valve Pressure gauge

Rupture disc
Gas out
Foam breaker
Effluent in Mist extractor
Man hole
Liquid stabilizers
Vortex breaker
Oil sight glass
Water sight glass

Water out Water out Oil out
Weir plate
Separator internals / externals

6b. Separator
6b. The aim of the production
 Sell the crude oil
 Sell the gas ...
for
Short, medium, long term
• Optimize the production

• Optimize the recovery of the fields
• Assure the exported effluent specifications
• Respect the safety and the environment
• Minimize the costs
• Find new fields ...

6b. Components of well effluents
Inert gas : Nitrogen, Helium

Acid gas : H2S : Hydrogen sulfur, extremely corrosive and deadly
CO2 : Carbon dioxide, corrosive
Hydrocarbons :
Light : C1 C2 C3 C4
Heavy: C5 . C6 . C7 … C10 ... C30 ...
(Paraffin, Naphthene, Aromatics, … )
Hydrocarbon composition
Sulfur (mercaptans)
Nitrogen, Oxygen
Organo‐metallic ( Asphaltene )
Water & Salt
Solids : Sand, Clay, Corrosion products ...
6b. Crude processing
COMPONENTS PROBLEMS
Free water  Corrosion ( with H2S et CO2 )

 Hydrates ( with C1, C2, C3, H2S )
+ Salts  Emulsions
 Plugging and Corrosion (pipelines)
 Corrosion (with free water)

Acid gas H2S ‐ CO2
 Toxicity : % H2S < 40 ppm
 Light : degassing in tanks

Hydrocarbon Components
 Paraffin's : pipelines plugging

6b. Gas processing
COMPOUNDS PROBLEMS
Hydrates (with free water)
WATER
Gas Water Dew Point
Corrosion (with free water)
ACID GASES
Safety (H2S content)
(H2S and/or CO2)
Gas Calorific Value (CO2 content)
Condensation (Transportation line)
HEAVY COMPONENTS
Gas Hydrocarbon Dew Point
(C5+)
Gas Calorific Value (too high C5+ content)
6b. The oil & gas treatment
 OIL
• Separation
• Stabilisation
• Dehydration
• H2S Removal ( stripping )
• Desalting
 GAS
• Separation
• Condensate stabilization
• Sweetening ( H2S ‐ CO2 )
• Dehydration
• Ethane, propane, butane recovery

6b. The effluent treatment consists of
 Separators to separate gas and water from oil

 Pumps for the liquid and compressors for gas transportation
 Heat exchanger to heat up effluent, or coolers to cool down
effluent
 Columns which separates the product more in depth (ethane,
LPG)
 Instrumentation equipment linked to the control room
 Electric motors (with their cables)
 Gas turbines, to drive the pumps, compressors and generators
 Piping and valves, to connect the various pieces of equipment,
vessels, pumps, storage tanks etc
6b. Exportation
 OIL
• Storage
• Metering
• Pumps for transportation
 GAS
• Metering
• Gas compression to
export the gas
 In the two cases
• We measure before exportation

• We supply energy to the effluent

6b. Costs
 LOE (Lease Operating Expenses)

• 0,9 to 1,8 USD/MCf
• LOE depends on:
− Number of wells per site
− Gasoline price
− Geology & infrastructure (corrosion, water tretment, etc.)
− Costs of services
− Reglementation
− Cost of treatment & transport
• 0,1 to 0,3 USD/Gallon of liquids
6c. Water management challenges
Source: Accenture
6c. Water use in drilling & fracking
Source: Accenture
6c. Salinity
* Parts per million
Source: Accenture
6c. Water management options
 Numerous options to manage the water requirements and the

produced wastewater depend of:
• Costs
• shale’s particular characteristics
• life cycle stage of the well
• Local infrastructure
• local regulatory framework
• availability of local water sources
• public perception of water risks
 Underground injection well

• Normal practice in conventional oil and gas production
• Done by operators or outsourced
• In US, needs EPA approval through the Underground Injection
Control (UIC) program
• Underground formations are situated in deep porous rock
formations

 Water reuse
• Flowback water can be collected and reused in a closed‐loop system
• Will depend of the water recovery rate : Some formation characteristics
tend to trap and bind the water in the formation (known as “imbibition”)
− Volumes will need to be supplemented by freshwater to reach the
volumes required
• Quality of the returned water will shape the decision on the levels of
treatment required to reuse the water (simple filtration or dilution, or
further treatment) without affecting well productivity
− Concentration of Total Dissolved Solids (TDS): High levels of salinity
can impact the effectiveness of some of the friction reducers
− Levels of Total Suspended Solids (TSS): not cause scaling in the
injection train or clogging of the pore space in the formation
− Concentrations of scale‐forming chemicals (including barium, calcium,
magnesium) can impact equipment
− Levels of microbial constituents: microbes can increase the likelihood
of plugs being formed in the wells
 Water treatment
• The most expensive management option. Depends on which types
of pollutants are removed: salt and other inorganic materials OR oil
and grease and other organic materials
• Filtration:
− to remove suspended solids in wastewater. Consist of a filter with
pore size range from 0.04 to 3 micros, which capture total suspended
solids. It does not reduce the TDS levels. Reverse Osmosis (RO) (if
limited TDS levels)
• Chemical precipitation:
− to remove scale‐forming constituents (calcium, magnesium, barium,
strontium, iron and manganese) and metals. Treatment chemicals are
added. The treated water is then decanted (sludge).
• Thermal‐based technologies address the desalination:
− Thermal‐distillation, evaporation and crystallization

6d. Well interventions (1)
Well maintenance
 Light interventions
• Running pressure/temperature gauges, logging and sampling
• Setting a plug to isolate a production zone
• Change out gas lift valves
• REPLACEMENT OF DHSV (down‐hole safety valve)
• Open/close a sliding side doors
• ….
 Light work‐overs
• Cleaning out the tubing by fluid circulation
 Full work‐over
• Change out of the completion
6d. Well Intervention (2)
Slick line (wire line)

Snubbing
Coiled tubing

Major well maintenance : « work over »
Requirement of a drilling rig or equivalent
 Completion is recovered and pulled out of the hole

• To replace it or modify it
• To deepen the well
• To abandon the well
 « Killing the well » is required at least partially with all the

consequences on the reservoir/wellbore interface

7. Decommissioning
7. Well abandonment
 TA: temporary abandonment

• During a long shut‐down
• Waiting on a workover
• Waiting on field development or redevelopment.
− Set plugs to prevent cross flow and production. Isolate all flow and
protect from pressures. Test and monitor the well and keep good
records
 TP: plugged and abandoned

• End of current economic operations
• Well problem that cannot be economically repaired
• Moving the bottom hole location – P&A the bottom and reuse the
top part of the well
− Set cement and mechanical plugs to prevent cross flow and

production. Isolate all flow and protect from pressures. Follow
governing body regulations
7. Threats & requirements
 Threats From Improperly Abandoned Wells

• Contaminated surface water entry (minerals, bacteria, waste, etc.)
• Surface leakage from shallow zones through well or leaking cement
sheath
• Leakage form an aquifer to surface
• Leakage from surface to an aquifer
• Danger of open well to surface egress (falling down the well)
 Requirements
• Plug thickness
• Tag to validate plug position
• Pressure tests to validate seal
• Well Identification
• Marking of lost radioactive source tools
7. Well abandonment cost
 Well equipment recovered often offsets cost of P&A
 Pipe damage may necessitate pulling operations not in the

original plans. Cement plugs generally need to be circulated into
place –a functional tubing string is required

7. Marcellus Shale drilling site, during drilling
Well site during active drilling to the Marcelllus Shale formation in Upshur County, West Virginia, in 2008.
(An additional water storage pit is not in the photo.) Copyright WVSORO, June 2008.
7. Marcellus Shale drilling site, after drilling
150 m
Photo of the site after reclamation. Copyright WVSORO, June 2008.
7. Before/After a gas pipe installation

Conclusion
Unconventional gas footprint
Stages in UK

Appendix

Rigs
Swamp‐Barge (Submersible)
Land rig
Rigs
Types of Rigs
Tension leg
production
Jacket Dynamic positioned
Semi‐submersible platform
Land rig Jack‐up drill ship
Sub‐sea well heads Sub‐sea
production
manifold

ON LAND DRILLING
VERTICAL DEPTHS
GROUND LEVEL
Z1
Z2 NON HYDRO CARBON LAYERS
Z3
Z4
Zr CAP ROCK
RESERVOIR
RESERVOIR
ON LAND DRILLING
DIFFERENT PRESSURES
GROUND LEVEL
Pa à P1
P2 à P3 NON HYDRO CARBON LAYERS
P4 à P5
P5 à P6
P7 à P8
CAP ROCK
Pr RESERVOIR
RESERVOIR

3b. In situ state of stress
 Most of the time: v > Hmax > Hmin
 As a rules of thumb, one can consider that:

• 40 m of overlying induce 1 MPa vertical stress taking into account the average
density of rocks
• H= 0.7 v Example with tectonics:
v < Hmin (= 1.1 v) < Hmax (= 2 v)
The effective stress veff applied to the mineral matrix of the rocks at any depth is the geostatic

stress v (also named total vertical stress) less the hydrostatic stress p (weight of the
overlying water column in the porous network):
veff = v – p
Stress units: Megapascals (MPa) = 106 Newton/m2
1 MPa = 106 Pa = 10 bar
Logging / Coring / Fluid Sampling / PVT Analysis
Pay zone
Oil/Water contact
Gas/Water contact
Net to gross ratio
Pressure
Temperature
Porosity
Saturation
Capillary pressure
Wettability
Permeability
Relative Permeabilities
Fluid composition
Fluid viscosity + +
+ +
Bubble point Dew + +
+ +
+ +
point
+ +
Volume factor

Main listed Oil Services Players (Mar 2014)
Schlumberger 120 Schlumberger 120 Schlumberger
50
50 Halliburton 50 Halliburton
5 20 National Varco 20 National Varco

25 Baker Hughes 25 Baker Hughes
Seadrill
Capitalisation (G$)
Fugro Transocean
Fluor* Technip Technip
Ensco Saipem FMC*
10 Saipem
10 Helmerich
Saipem 15 15
TGS Nopec Jacobs*
Wheatherford Subsea 7 Subsea 7 Cameron
Pride Int Nabors Oceaneering
Diamond/ Noble
CGG-Veritas 5 5
2,5 10 10
Fugro
PGS Rowan Patterson-UTI Aker Asa
FTS International FTS International

Precision Dril SBM SBM
5 Foster Wheeler* 5
Ensign Patterson-UTI
Fred Olsen McDermott Tidewater
Prosafe / Bourbon
ION Trican Calfrac

Trican Calfrac
BW Offshore
Kvaerner Modec
0 0 0
Equipments
Acquisition Evaluation, EPC

Production
(engineering, Production
& Drillers Services & Services &
construction, Supports
treatments Equipments Equipments
purchase)
SEISMIC DRILLING DEVELOPMENT PRODUCTION

* : High exposure in non energy activity Conglomerates are not mentionned Ex: ABB, Amec, Daewoo, GE, Hyundai Heavy, Ingersoll, Kawasaky Heavy,
Hitachi, Keppel, Mitsui, Moller-Maersk, Samsung Heavy, Siemens, Sumitomo, Worley …
4. Completion equipment
Landing nipples Sliding side doors Side pocket mandrels

Secondary Recovery
 Takes place when natural reservoir energy is too low to maintain

primary recovery
 Requires external energy
 Principal methods
• Water injection at the bottom of the oil zone or into the aquifer
• Gas injection at the top of the oil zone or into the gas cap
• Injection of gaseous hydrocarbons (dry gas injection into gas
condensate reservoirs)
Tertiary recovery – Costs
Gas injection
Water injection
CO2 injection
Miscible gas injection
Polymers
Micro-emulsion
Steam, in situ combustion

$/bbl
0 5 10 15 20 25 30 35 40 45

Unconventional Gas
Decision of investment & economic analysis
 INTRODUCTION
1. Production value 3. Fiscal impact
a. Production profile a. Concession
b. Associated products b. PSC
c. Production price 4. Economic evaluation
2. Costs associated with criteria
unconventional gas developments a. Concept of discounting, NPV
a. F&D, pre‐construction b. IRR, POT, Profitability, ROCE
b. Drilling, fracking & completion 5. Project analysis
c. T&F
d. LOE
 Conclusion
 Appendix

Introduction
Why do we need economics?
 The decisions to:

• Acquire exploration acreage,
• Drill exploration and/or appraisal wells,
• Undertake field development,
• Upgrade of existing facilities (water treatment, gas pipe, etc.)
are always based on “economic” considerations
 Economic calculations are performed in every steps of the oil &

gas business

Economics and risk analysis in the E&P chain
NO ONE FINDS GAS
WITH ECONOMICS AND RISK ANALYSIS
BUT ...
Portfolio
THEY CONTRIBUTE TO
Play
CONSTRAIN, F P F P
RANK, AND P L L ??
Block
SUPPORT
PROJECTS EVALUATION AND CHOICES
THROUGHOUT
THE EXPLORATION AND PRODUCTION VALUE CHAIN
Critical decision points along the E&P chain
Critical Decision Point:
Go into the Permit or not ?
Exploration Field Field operation

Development
Appraisal
Critical Decision Point: Wells
Development Studies Additional development, Yes or No ? abandonment
Preliminary
CONTRACT Conceptual
Pre‐project
Project
Production profile
1‐3 y 1 ‐ 3 y 3‐6 y >20 years months

“First Gas” End of Restored

Discovery production site
Final
Investment Critical Decision Point:
decision Launch development or not?
Objectives of economic analysis
 To place a monetary value on a project
 To analyze the project value drivers
 To analyze investment alternatives and technical alternates
 To aid investment decision making when a wide variety of project

opportunities exist in a company
 To prepare negotiation positions
 To forecast cash flow and prepare budget
 To track on‐going project performance versus budget or forecast

1. Production value
1. Value creation and investment decision
PROJECT Revenues
Capexdev Opex
Gvt Take
Cash Flow = Cash Inflow – Cash Outflow
E&P Division
Project’s
Net Cash Flows Project’s NPVd
Modeling Value for the IOC

1a. Shale gas & tight gas production profile
Volume (MM Cf/y)
400 to Accelerated
4000 depletion
15 to 40 year
1a. Shale gas production
MCfe/d
Key

1a. CBM production profile
Volume (M
Cf/d) Stabilisation Depletion
200 to
400 After 1 to 2
years
CBM production
« dewatering » Water production
25 to 40 years
1b. Associated production
1 400 Key 70
1 200 Gaz naturel (G ‐ MM Cf)) 60
1 000 Ethane (D ‐ barils) 50
800 Propane (D ‐ barils) 40
600 30
400 20
200 10
0 0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

1c. Production price US in 2013
1c. Production price – Hedging
2015 2016
Pioneer 90% O&G 25%
EQT 60% Gas 30% Gas
Antero 95%
Chesapeake 43% O&G
Devon E 50% Oil, 40% Gas
Cabot O&G 31% Gas

2. Costs associated with
unconventional gas developments
2. Value creation and investment decision
PROJECT Revenues
Capexdev Opex
Gvt Take
Cash Flow = Cash Inflow – Cash Outflow
E&P Division
Project’s
Net Cash Flows Project’s NPVd
Modeling Value for the IOC

2. Drilling cost – Examples on Eagle Ford
2,4 MUSD
2. Fracking cost – Examples on Eagle Ford
4 MUSD
2. Production cost of shale gas in US – 60 companies
($/Mcfe)
10
8
13
7
5
Median 12
4 3,6 $/ Mcf 13
3
14
2
1 8
2. Learning curve & cost cutting – Examples on Marcellus
Source : G.Charon, Ed Technip, 2014, according to Talisman 2010
2. LTO cost of production – North America
US$/b

3. Fiscal impact
3. Sharing the economic rent

3a. Concession
Licensee (Company) Host country

• Bonuses
 Being reimbursed and remunerated
in kind (barrels) with his production • Surface renting ($/km²)
• Royalty on production
 Paying the host country (royalty,
taxes…) • Petroleum income tax
• Special petroleum tax
3a. Concession
Sharing resources
NOC’S PROFIT
Depreciation
Exploration Expenses
COMPANY ’S PROFIT
Depreciation
Development
TAX
Expenditures
ROYALTY
Operating Expenses (OPEX)
Investment Investment Time

OPEX
Exploration Development
State ’s Participation
(eventually)
Financing investments

3a. Concession / Exercise
3b. Production Sharing Contract
Licensee (IOC) Host country
 Being reimbursed in kind (barrels) • Bonuses
by the cost oil • Surface renting ($/km²)
 Being remunerated in kind (barrels) • Royalty on production
by a share of the profit oil • Petroleum income tax
 Paying the host country (royalty, • Special petroleum tax
taxes…)
• Share of profit oil

3b. Cost recovery and profit oil sharing
 Cost recovery methods

• Cost stop cost oil
• Depreciation of CAPEX and uplift
• Carrying forward unrecovered oil costs the following year
 Profit oil sharing methods: determination of pre‐tax sharing

coefficients
• Fixed profit oil sharing rate
• Progressive profit oil sharing rate according to physical parameters
• New mechanism of profit oil sharing based on the rate of return
and other profitability ratios
3b. Production sharing and cost recovery process
ROYALTY FUNDS PROVIDED BY THE COMPANY
GVT. =
RECOVERABLE COSTS
COST
PROFIT
STOP
OIL
NET PRODUCTION
COMPANY EXCESS OIL
COST RECOVERABLE
OIL COST
YEAR N YEAR N + 1 YEAR Y

IF RECOVERABLE COSTS > COST STOP “EXCESS COST OIL” MAY BE
PSC IS SATURATED THIS YEAR AND ‐ ADDED TO THE PROFIT OIL
Sub‐Contractors SURPLUS IS CARRIED FORWAD ‐ OR SHARED DIFFERENTLY

3b. Production sharing and cost recovery process
3b. PSC / Exercise

4. Economic evaluation
criteria
4. Forward investment analysis for a development project
Question: invest or not in the development of a discovery?
 After discovery, the Value of the field for the Oil Company is the
Net Present Value (NPVd) resulting from development
 The evaluation excludes past cash flows in exploration but

includes exploration cost in the cost recovery or depreciation
according to the fiscal terms of the patrimonial contract
 This Net Present Value will depend on the Scenario considered:

• Development Plan
• Economic Assumptions
• Contractual Framework

4. Capital costs and operating costs
CAPEX
• Drilling
• fracking
• Wells
• Treatment facilities
• Pipelines (export and gathering)
• Compressors
• Onshore terminals and other facilities
• Access roads, ...
ABANDONMENT COSTS
• Dismantlement
OPEX • Treatment of wastes
• Consumables
• Wells, plug and abandon
• Personnel
• Pipelines decommissioning or dismantlement
• Logistics: helicopters, vehicles, etc.
• Energy
• Transportation of products (tariff)
• Maintenance
4. Economic evaluation of an investment project
What does an economist need to model and evaluate the economics of a project?
 Technical Data
► Capital Expenditures (exp., app., dev., tangible, intangible, schedule, currencies)
► Operating Expenses (fixed, variable, schedule, currencies)
► Abandonment or Decommissioning Cost (schedule, currencies)
► Production Profile (annual volumes or quantities)
 Economic Assumptions and Contractual Framework

► Brent or WTI Price Scenarios, Quality Differentials
► Natural Gas Price Scenarios or Formulas
►Inflation Rate, Escalation Factors, Exchange Rates
► Fiscal Terms (profit sharing, royalty, taxes, depreciation..)
 Discount Rate
Fixed by the Management and linked to:
► Company’s Cost of Capital Employed, and
► Management’s Appreciation of Risk

4. Economic criteria
 Main criteria
• Net Present Value (10) [ NPV 10 ]
• Internal Rate of Return [ IRR ]
• Capital Profitability Index (10) [ CPI 10 ]
• Breakeven oil price (Oil price at which Project NPV (10) = 0)
 Other criteria
• Pay‐Out Time [ POT ]
• Maximum Capital Exposure [ MCE ]
• Technical cost per barrel
4. Corporate finance : two sources of financing
 Equity Capital
• Resources provided by the shareholders of
the company
• Resources are brought by shareholders in two
forms:
− Funds brought when new shares are issued
− Reserves (retained earnings) which are the Shareholders
part of net income, belonging to shareholders,
but not distributed as dividends
 Debt Capital
• Resources borrowed from banks and capital
markets
• Debts must be reimbursed and remunerated

with interest Bankers

4. Corporate finance and capital employed
Equity Capital Debt Capital
Capital Employed
Shareholders Lenders
Capital Employed
is to be remunerated from the return on investment projects
a project will be financed by a fraction of the total capital available.
4. Cost of capital and value creation in the absence of risk
All funds make up total capital employed to
which one must associate a single cost
WEIGHTED AVERAGE COST OF CAPITAL
CONDITION FOR VALUE CREATION IN THE ABSENCE OF RISK
Project’s Rate of Return (%)
Investment projects must provide
an economic profitability Project’s
higher than Value
the company’s average cost of capital
Company’s Cost of Capital (%)
Otherwise, the project would destroy value for the company.

4. Corporate finance and weighted average cost of capital
 Company’s Debt Ratio (Debt Capital / Total Capital)
Equity Capital Weighted Average Cost of Capital Debt Capital

i =  e + (1 – ) Cp
(1‐ 
Cost Cp Cost e
Remuneration Remuneration
expected by shareholders Total Capital contracted with lenders
Example
α= 25% Debt 1– = 75% Equity
cost e = 4% cost Cp = 12%
WACC = i = 0.25*4% + 0.75*12% = 10%
4. Cost of debt and equity capital
 The cost of debt capital corresponds to the market interest rate,

plus a premium for the lender. The premium depends on the
quality of the company, on the guaranties of the parent‐company
when the borrower is an affiliate.
• Notation of companies
− The notation is the evaluation by a specialized independent agency
(standard & poors) of the risk of non‐payment of loans.
− This notation, condition the access to loans from financial markets and
bankers: amount of further loans, interest rates charged…
 The cost of equity capital for the company is the rate of return
expected by the shareholders.
− The shareholders anticipate some remuneration which depends on
future dividends and capital gains
− Because of the higher risk faced by shareholders, their remuneration

needs to be higher than that of bankers; and, therefore, from the point
of view of the firm:
» Cost of Equity Capital > Cost of Debt Capital
4. Time value of money and discount rate
Future Value in year n of a Present Cash Flow CF0
compounding
CF0 CFn = CF0 . (1+i)n
Amount that can be obtained in year n from saving
every year, with an annual interest i, the present cash flow CF0
Present Value of a Future Cash Flow CFn from year n
CFn discounting
CF0 = CFn
(1+i)n
Amount that can be borrowed today and paid back,
with an annual interest i, in n years with the future cash flow CFn
In the absence of risk, Time Value of Money is measured by
Discount Rate = Cost of Capital
4. Concept of present value
Future Net Cash Flows
i = 10%
Year 0 1 2 3 4 5 6 Sum
0 20 30 50 50 50 50 250
Acc.
18 18
43 25
81 38
« Present Value @10% »
115 34
146 31
174 28
An asset value is the present value of
Discounted Net Cash Flows
future net cash flows

4. Discounting vs compounding – Calculation
year 0 year 1 year 2 … year n

factor 1 factor (1+i) factor (1+i)2 … factor (1+i)n
Present Values Future Values
S0 S1 = S0.(1+i)
S0 S2 = S0.(1+i)2
S0 Sn = S0.(1+i)n
S1
S0 = S1
1+i
S2
S0 = S2
(1+i)2
Sn
S0 = Sn
(1+i)n
i discount rate
1 + i compounding factor
1
discounting factor
1+ i
4. Corporate finance and discount rate of a company
Financing Decision Investment Decision
(selecting financial sources) (selecting investment projects)
Debt Capital E&P Division
Cost e i
Finance Division PROJECT Capex
in charge of
Corporate Finance Policy Revenues
Cost Cp Opex
Equity Capital Gvt Take
Financial Theory excludes Risk
Company’s Discount Rate = Weighted Average Cost of Capital
i =  e + (1 – ) Cp
 Company’s Debt Ratio (Debt Capital / Total Capital)
For the management of the company facing technical, economic, and contractual risks,
Company’s Discount Rate = Weighted Average Cost of Capital + Risk Premium
4. Fundamental condition for value in the presence of risk
Investment projects must provide
Project’s Rate of Return (%) IRR
an economic profitability
higher than
the company’s discount rate Project
Value for the IOC
Company’s Discount Rate (%) i
Risk Premium WACC + Risk premium
introduced by the management
to mitigate the overall risk Company’s Cost of Capital (%)
WACC
A company present in several sectors and/or several countries with different levels
of risk must then use several discount rates incorporating its own perception of risk.
4. Standard global profitability analysis
Global Profitability of an Investment Project
Evaluation of the value that could be created by the project
and the potential return on all the capital invested.
without consideration of the mix “debt capital ‐ equity capital”.
 It is the point of view of the Technical Department in charge of

studying, carrying out and exploiting investment projects.
 Discount rate which applies to the operating cash flows schedule
is the corporate cost of capital employed, i.e. the WACC + Risk
premium.
 This average cost is evaluated by the Finance Department in
charge of the overall financing of all the needs of the company.

4. Economic indicators of profitability studies
ECONOMIC INDICATORS
Net Present Value
Internal Rate of Return
Pay‐Out Time
Financial Exposure
Profitability Index
Break‐Even price
4. Analysis of free cash flows
(Operating Period = N years)
PROJECT Revenues
Capex Opex
Taxes
Cash Flows Schedule
Year 0 … to ... N
Operating Revenues (1)
Investment (Capex) (2)
Depreciation Charges (3) = ∑Capex / n
Operating Expenses (Opex) (4)
Taxable Income (5) = (1‐3‐4)
Taxes (6) = (5) x tax rate
Net Cash Flows CF = (1‐2‐4‐6)
4. Computation of depreciation charges
 Fiscal Depreciation
• Spreads the investment cost over the depreciation period.
• Books annual depreciation charges.
 Computation of Depreciation relies on Fiscal Rules

• Depreciation period and type of depreciation are set in the
petroleum contract, depending on the nature of the equipment.
• Depreciation is charged starting the first year of exploitation.
•  nominal values of depreciation charges = nominal value of asset.
 Straight‐Line Depreciation
• Constant depreciation charges over the depreciation period.
• Depreciation annuity = I / n
I : investment cost n : number of years for depreciation.
4. Economic criteria / Net Present Value
Net Present Value of a Cash Flows Schedule
Year 0 1 … C … N
Discounting at a rate i 1 (1+i) (1+i)n (1+i)N
Cash Flows After-Tax CF0 CF1 … CFn … CFN
Discounted Cash Flows CF0 CF1/(1+i) … CFn/(1+i) … CFN/(1+i)N n
Net Present Value = Sum of Discounted Cash Flows
N
CFn
NPV  
n  0 (1  i )
n
i = Discount Rate = Average Cost of Capital + risk premium

N
CFn
NPV  
n  0 (1  i )
n
If NPV > 0
The revenues of the project are sufficient to:
 pay all types of expenses
 repay the capital invested
 remunerate it at rate equal to the discount rate
 create a value equal to NPV
NPV > 0 measures then the value created
by the project
4. Net Present Value of future revenues
Future Net Cash Flows
i = 10%
Year 0 1 2 3 4 5 6 Sum
-100 20 30 50 50 50 50 150
Acc.
-82 18
« Net Present Value @0% »
-57 25
« Net Present Value @10% »
-19 38
15 34
46 31
74 28
Discounted Net Cash Flows

N
CFn
NPV  
n  0 (1  i )
n
If NPV = 0
The revenues of the project are sufficient to:
 pay all types of expenses
 repay the capital invested
 remunerate it at a rate just equal to the discount rate
The value of the discount rate which takes NPV to zero
measures the rate of return from the investment project
4. Economic criteria / Internal Rate of Return
Cash flows schedule of simple investment projects:
One or several negative cash flows followed by a series of positive cash‐flows.
NPV for this type of projects decreases when the discount rate increases.
NPV
IRR
Discount
Rate i
CF0
Average Cost of Capital
If internal Rate of Return > Discount Rate of the Company Then project’s NPV >0
IRR : maximum rate acceptable for the cost of capital
Rate at which the project remunerates the capital invested

4. Example / IRR
Valeur Actuelle Nette

NET PRESENT VALUE
M$
600
500
400
300
200
100
-100
-200
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
T aux d'Actualisation (%)
Discount rate %
Internal Rate of Return ~ 17%
4. Economic criteria / Pay‐Out Time – Financial exposure
Pay‐Out Time definition:

Operating period necessary for the cash flows from the project to reimburse
the capital invested.
NPV@0%
POT@0%
Start up
Financial
exposure
Several definitions for POT:
• starting date: Start of production
• discounted cash flows @x% or 0%
4. Example / Pay‐Out Time – Financial exposure
Cash Flows Nets

Net cash flows Cumul des Cash Flows
Accumulated net cash flows
Start up Start up
M$ M$
300 400
200 200
100 0
0 -200
-100 -400
-200 -600
-300 -800
0 1 2 3 4 5 6 7 8 9 10 11 12 0 1 2 3 4 5 6 7 8 9 10 11 12
years
Année Année
years
POT @0% ~ 5 years
Financial exposure @0% ~ M$600
4. Economic criteria / Break‐even price – Profitability index
Selling Price ($/b)
BREAK‐EVEN PRICE
Project Selling Price such that NPV = 0
Value for the IOC No Profit, No Loss
Break‐Even Price = Unit Economic Cost
Break‐Even Price ($/b)
NPV NPV
PI = Investment
PI = Financial
(ERC) (ERF) Exposure
PROFITABILITY INDEX
A MEASURE OF VALUE CREATED PER DOLLAR INVESTED
Terminology used within Total: ERC (Enrichissement relatif en capital), ERF (Enrichissement sur exposition financière)

4. Global profitability analysis / Concession
Technical Data in Constant Money Economic Assumptions & Fiscal Regime
Capex, Opex, Production profile Price, Discount rate i
Royalty and Petroleum Tax
Company’s Cash Flows Schedule
Year 0 … to ... N
Revenues (1)
Royalties (2)
Capex (3) Project’s
Fiscal Depreciation (4) = ∑ Capex / n Economic Indicators
Opex (5) N
CFn
Other deductible charges (6) NPV  
n  0 (1  i )
n
(carry forward, provisions, etc.)
Taxable Income (7) = (1‐2‐4‐5‐6) IRR = i

Petroleum Tax (8) = (7) x tax rate such that NPV = 0
Gvt Take (9) = (2+8)
Company’s Cash Flows CF = (1‐2‐3‐5‐8)
4. Global profitability analysis / Production sharing
Capex, Opex, Production profile Price, Discount rate i
Royalty and Profit Sharing
Company’s Cash Flows Schedule
Year 0 … to ... N
Revenues (1)
Royalties (2)
Capex (3)
Capex Recovery (4) Project’s
Economic Indicators
Opex (5)
N
CFn
Other recoverable costs
(carry forward, provisions, etc.) (6) NPV  
n  0 (1  i )
n
Cost Oil (7) = (4+5+6)
Profit Oil (8) = (1‐2‐7) IRR = i
Profit Oil Company (9) = (8) x Co. share such that NPV = 0
Profit Oil Gvt (10) = (8) x Gvt. share
Gvt Take (11) = (2+10)
Company’s Cash Flows CF = (7+9‐3‐5)

4. Case study: oil field development
TECHNICAL DATA CONSTANT M ONEY (M $ year 0)

100% SUM 0 1 2 3 4 5 6 7 8 9 10 11 12
Crude Oil Production Mbbl 120 10 16 20 20 20 16 10 8
Appraisal Capex M$ 40 40
Development Capex M$ 800 200 300 300
Fixed Opex M$ 320 40 40 40 40 40 40 40 40
Variable Opex ($/b) 4
Variable Opex M$ 480 40 64 80 80 80 64 40 32
Total Opex M$ 800 80 104 120 120 120 104 80 72
ECONOMIC ASSUMPTIONS
Discount Rate 11% 1,00 1,11 1,23 1,37 1,52 1,69 1,87 2,08 2,30 2,56 2,84 3,15 3,50
Crude Oil Price ($/b) 60 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0 60,0
PRODUCTION SHARING CONCESSION

Total Past Exploration Cost 100 M$ recoverable
Royalty 30% Royalty 30%
Cost Recovery or Fiscal Depreciation:
40%
Cost Stop
Exploration & Appraisal Cost 100% a year starting 1st year of production
Profit Oil Sharing: Petroleum Tax Rate
Development Cost 20% a year starting 1st year of production
Company 35% 68%
Uplift for Development Cost 25%
4. Basic risk analysis in investment profitability studies
Taking risk into account
• discount rate with a risk premium
• pay‐out time criterion
• sensitivity analysis
Sensitivity analysis
 The variation of some key risk factors allows us to assess
the impact of those factors on the economic indicators (NPV, IRR).
 The project drivers are identified during this analysis


4. Sensitivity analysis
Sensitivity - NPV 11%
Price Production Capex Opex
400
300
200 The variation of some key risk factors

100 allows us to evaluate the impact of
those factors on the economic
M$ 07
0
-40% -30% -20% -10% +0%
-100
+10% +20% +30% +40%
indicators (NPV, IRR).
-200
-300
NPV (M$)
-400 Component 55 100 160
Reserves
This analysis gives a better idea for Oil Price

the potential and the risks of the
project.
CAPEX
OPEX
4. Advantages of sensitivity analysis in investment decision
 A sensitivity analysis is a useful first procedure in evaluating the

risks inherent in an investment opportunity
 It allows us to Identify key variables which contribute most to the

project’s risk and examine them more in detail
 It also allows us to discover maximum variations consistent with

acceptability of project

4. Limits of sensitivity analysis in investment decision
 Procedure ignores full dispersion of possible outcomes and

ignores probabilities attached to variations in primary variables
 Dependency causes difficulties in a sensitivity analysis because it

is then not strictly correct to consider wide variations in only one
variable while the others remain constant. (Two variables are dependent
if a knowledge of the value of one would influence the estimates made for the other)
 Despite limitations of sensitivity analysis, this method can

however be considered as a way of quickly identifying those
variables which contribute most to the risk of the investment

5. Project analysis
5. Project analysis
 Single well cost
 Multiple well cost
 Vertical versus horizontal
 Drilling efficiency
 Project analysis

Conclusion
Appendix

Inflation, nominal money and constant money
Money of the Day with an Inflation Rate d
1$0 1$1 1$2 ……. 1$n
1$0 n
= 1$n * (1+d) Monetary depreciation is summarized
in the annual inflation rate
measured by the Consumer Price Index
1$n = 1$0 / (1+d)n
Cash Flow of Year n
Escalation Rates
Constant Money in nominal money
CFn($0) and constant money
1+’ = (1+) . (1+d)
’   + d
“Inflate” * (1+d)
n
/ (1+d)n “Deflate”
Constant in Constant Money
CF’n($n)
 = 0 and thus ’ = d
Nominal Money
Current money and constant money : «inflate» / «deflate»
Example : The price of a given equipment, in money of the day, increases by 5% a year
Inflation rate = 5%/Year
Current Money
$100,00 $105,00 $110,25 $115,76 $121,55
“Inflate”
$Yr0 x 1,05 $Yr1 x 1,05 $Yr2 x 1,05 $Yr3 x 1,05 $Yr4
“Deflate”
1 1 1 1
(1,05)1 (1,05)2 (1,05)3 (1,05)4
$100 $100 $100 $100 $100

$Yr0 $Yr0 $Yr0 $Yr0 $Yr0
Constant Money
Current money and constant money : «inflate» / «deflate»
Example : The price of a given equipment, in money of the day, increases by 7% a year.
Inflation rate = 5%/Year
Current Money
$20,00 $21,40 $22,90 $24,50 $26,22
“Inflate”
$Yr0 x 1,07 $Yr1 x 1,07 $Yr2 x 1,07 $Yr3 x 1,07 $Yr4
“Deflate”
1 1 1 1
(1,05)1 (1,05)2 (1,05)3 (1,05)4
x1,019 x1,019 x1,019 x1,019
$20,00 $20,38 $20,77 $21,16 $21,57
$Yr0 $Yr0 $Yr0 $Yr0 $Yr0
Constant Money
Inflation, current money and constant money
Inflation = d = 5% a year
Price of Specific
Good or Service
Current Money
P’ Basket
Current Money
’ = +7% a year P
Constant Money
 = +1.9% a year
Constant Money
years
1+’ = (1+) . (1+d) or ’   + d

Global profitability analysis / Concession
Capex, Opex, Production profile Price, Inflation d, Discount rate i
Inflate
x(1+d)n Royalty and Petroleum Tax
Company’s Cash Flows Schedule in
Current Money Year 0 … to ... N
Revenues (1)
Royalties (2)
Opex (5) N
CFn
n  0 (1  i )
n
(carry forward, provisions, etc.)

Gvt Take (9) = (2+8)
Company’s Cash Flows CF’ = (1‐2‐3‐5‐8)
Deflate
Cash Flows Constant Money CFn = CF’n / (1+d)n

Global profitability analysis / Production sharing
Inflate
x(1+d)n Royalty and Profit Sharing
current money Year 0 … to ... N
Revenues (1)
Royalties (2)
Capex (3)
Capex Recovery (4) Project’s
Economic Indicators
Opex (5)
N
CFn
Other recoverable costs
(carry forward, provisions, etc.) (6) NPV  
n  0 (1  i )
n
Cost Oil (7) = (4+5+6)
Profit Oil (8) = (1‐2‐7) IRR = i
Profit Oil Company (9) = (8) x Co. share such that NPV = 0
Profit Oil Gvt (10) = (8) x Gvt. share
Gvt Take (11) = (2+10)
Company’s Cash Flows CF’ = (7+9‐3‐5)
Deflate

Case study: oil field development
TECHNICAL DATA CONSTANT M ONEY (M $ year 0)

100% SUM 0 1 2 3 4 5 6 7 8 9 10 11 12
Crude Oil Production Mbbl 120 10 16 20 20 20 16 10 8
Appraisal Capex M$ 40 40
Development Capex M$ 800 200 300 300
Fixed Opex M$ 320 40 40 40 40 40 40 40 40
Variable Opex ($/b) 4
Variable Opex M$ 480 40 64 80 80 80 64 40 32
Total Opex M$ 800 80 104 120 120 120 104 80 72
ECONOMIC ASSUMPTIONS
Discount Rate (constant money) 11% 1.00 1.11 1.23 1.37 1.52 1.69 1.87 2.08 2.30 2.56 2.84 3.15 3.50
Inflation Rate 2% 1.00 1.02 1.04 1.06 1.08 1.10 1.13 1.15 1.17 1.20 1.22 1.24 1.27
Crude Oil Price ($/b) 60 60.0 61.2 62.4 63.7 64.9 66.2 67.6 68.9 70.3 71.7 73.1 74.6 76.1
PRODUCTION SHARING CONCESSION

Total Past Exploration Cost 100 M$ recoverable
Royalty 30% Royalty 30%
Cost Recovery or Fiscal Depreciation:
Cost Stop 40%
Exploration & Appraisal Cost 100% a year starting 1st year of production
Profit Oil Sharing: Petroleum Tax Rate
Development Cost 20% a year starting 1st year of production
Company 35% 68%
Uplift for Development Cost 25%
Case study: oil field development / Concession
CASH FLOW SCHEDULE MOD (M$)
IOC's Share 100% SUM 0 1 2 3 4 5 6 7 8 9 10 11 12
Revenues 8487 662.4 1 081.1 1 378.4 1 406.0 1 434.1 1 170.2 746.0 608.8
Royalty 2546 198.7 324.3 413.5 421.8 430.2 351.1 223.8 182.6
Total Capex 892 40.8 208.1 318.4 324.7
Total Capex Depreciation 1205 353.6 212.8 212.8 212.8 212.8
Operating Costs 945 88.3 117.1 137.8 140.6 143.4 126.8 99.5 91.3
Taxable Income 3791 21.8 426.9 614.3 630.8 647.7 692.4 422.7 334.8
Petroleum Tax 2577 14.8 290.2 417.5 428.8 440.2 470.6 287.4 227.6
Company's Cash Flows 1527 -40,8 -208,1 -318,4 -324,7 360,6 349,5 409,5 414,8 420,2 221,8 135,4 107,2
Deflate
/ (1+d)n
Company's CF 1234 -40,0 -200,0 -300,0 -300,0 326,6 310,4 356,5 354,0 351,6 181,9 108,9 84,6
Cst Money
Discount
Internal Rate of Return 23%

/ (1+i)n
Discounted Cash-Flow 330 -36,0 -162,3 -219,4 -197,6 193,8 165,9 171,7 153,6 137,5 64,1 34,6 24,2
Accumulated DCF NPV@11% -36,0 -198,4 -417,7 -615,3 -421,5 -255,6 -83,9 69,8 207,2 271,3 305,8 330,0
Financial Exposure (M$) 840

Pay-Out Time @0% (years) 6,6
PI @0% 1,47 176
Case study: oil field development / Production sharing
CASH FLOW SCHEDULE M OD (M $)
IOC's Share 100% SUM 0 1 2 3 4 5 6 7 8 9 10 11 12
Revenues 8487 662.4 1 081.1 1 378.4 1 406.0 1 434.1 1 170.2 746.0 608.8
Royalty 2546 198.7 324.3 413.5 421.8 430.2 351.1 223.8 182.6
Total Capex 892 40.8 208.1 318.4 324.7
PSC desaturated
Total Capex Recovery 1205 353.6 212.8 212.8 212.8 212.8
Operating Costs 945 88.3 117.1 137.8 140.6 143.4 126.8 99.5 91.3
Carried forward from previous year 256,4 283,6 248,3 208,0 162,7
Costs to be recovered 441,9 586,3 634,3 601,7 564,2 289,5 99,5 91,3
Cost Stop (40%) 185,5 302,7 386,0 393,7 401,6 327,7 208,9 170,5
Carried Forward to following year 256,4 283,6 248,3 208,0 162,7
Cost Oil 2150 185,5 302,7 386,0 393,7 401,6 289,5 99,5 91,3
Profit Oil 3791 278,2 454,1 578,9 590,5 602,3 529,7 422,7 334,8
Contractor's Profit Oil 1327 97,4 158,9 202,6 206,7 210,8 185,4 148,0 117,2
State's Profit Oil 2464 180.8 295.1 376.3 383.8 391.5 344.3 274.8 217.6
Discount Deflate
Company's Cash Flows 1640 -40.8 -208.1 -318.4 -324.7 194.5 344.5 450.7 459.8 469.0 348.1 148.0 117.2
/ (1+d)n
Company's CF 1316 -40,0 -200,0 -300,0 -300,0 176,2 305,9 392,4 392,4 392,4 285,5 119,0 92,4
Cst Money
/ (1+i)n Internal Rate of Return 22%
Discounted Cash-Flow 330 -36,0 -162,3 -219,4 -197,6 104,6 163,6 189,0 170,3 153,4 100,6 37,8 26,4
Financial Exposure (M$) 840

Pay-Out Time @0% (years) 6,9
PI @0% 1,57
Global profitability analysis (Shadow Interest)
Inflate
x(1+d)n Royalty and Petroleum Tax
Current Money Year 0 … to ... N
Revenues (1)
Royalties (2)
Opex (5) N
CFn
n  0 (1  i )
n
(interests, carry, provisions, etc.)

Gvt Take (9) = (2+8)
Company’s Cash Flows Shadow CF’ = (1‐2‐3‐5‐8)
Deflate

Methods
Decision Tree Analysis
Monte Carlo Simulation
Scenarios approach
Decision Tree analysis

Risk to analyze in exploration and appraisal projects
 Exploration:
• What is the chance of finding Risk
hydrocarbons in this prospect ?
 Appraisal:
• What is the volume of hydrocarbons Uncertainty
in this discovery ?
Shall we appraise more,
or
launch field development?
Probability of success for an exploration prospect
Objective :
Evaluate the Probability of Success (PS) measuring the chances of finding an accumulation of hydrocarbons.
Methodology : Risk analysis Probability

Evaluate the probability of existence of each component of a Source rock 0,7
petroleum system and multiply them to obtain the Probability Migration 0,8

of Success. Reservoir rock 0,5
Trap 1,0
Seal rock 1,0
Timing 0,7
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
Probability of success 20%

Exploration risk
Expressed by a probability of success
Discovery followed by
development NPV(M$)
PS
Exploration Work
M$
1 - PS
Dry well Expenses (M$)
EMV = ENPV = PS x NPV(successful project) + (1‐ PS) x NPV(Dry Well)
PS : Probability of success
NPV : Net Present Value
ENPV : Expected Net Present Value
EMV : Expected Monetary Value
Economic logic for an exploration project
Question : invest or not in the exploration of a given region?
 Investment in exploration is the “bet” in the upstream sector.
 Geological risk is measured by the “probability of success”.
Success : Gain = ‐ E + NPVd = +M$220

220 M$
(NPVd – E) = Economic Value Gain expected in case of success
of the field for the oil company PS =20%
Expected Economic Value
Explore ENPV = PS . NPVd – E
with a Probability of Success PS = 30%
20% . 240 – 20 = M$28
1 – PS = 80%
20 M$ Guaranteed loss in case of failure
E = Amount Failure : Loss = ‐E = ‐M$20
Of Exploration Expenses

Graphic illustration of expected Net Present Value
Expected Value
240
220
200
180
160
140
ENPV (M$)
120
100
80
60
40
20
0
-200% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
-40
Probability of Success

Some Strategic Games
with Decision Trees
Farm in / Farm out strategy
A (100%) A (50%) / B(50%)
Farm In / Farm Out
Agreement
A B
 Farmout is a transaction by which a company transfers all or part

of its participating interest in a Petroleum Contract and the
related Association Agreement, to another company.
 This transfer of rights to explore for and develop any
hydrocarbons discovered is made usually in exchange for a
commitment to drill a well(s) and/or conduct other exploratory
activities.
 In exchange for this commitment, the party farming in is entitled

to a share of the profit generated by a success.

Decision process for a farm out strategy
HERE IS THE GAME!
Drill alone E = M$10
Farm out 50% interest
Value of potential discovery: NPVd = M$100 OR Cost of drilling taken by the partner
Strategy 1 : …………………………………… Strategy 2 : EMV = …………………………….
10 0 Drill 100%
80 Farmout 50%
ENPV (M $)
60
40
20
- 20
0% 10 % 20% 30% 40% 50% 60% 70% 80% 90% 10 0 %
Decision process for a farm out strategy
HERE IS THE GAME
Drill alone E = M$1
Farm out 50% interest
Value of potential discovery: NPVd = M$100 OR Cost of drilling taken by the partner
Strategy 1 : EMV = PS . NPVd – E Strategy 2 : EMV = PS . 50% . NPVd
10 0 Drill 100%
80 Farmout 50%
ENPV (M $)
60
40
20
0
- 20
0% 10 % 20% 30% 40% 50% 60% 70% 80% 90% 10 0 %

Exploration potential / consolidation of dry exploration
Investment in Exploration E = M$10
Value of potential discovery NPVd = M$100
Probability of Success PS = 20%
Gain = NPVd – E = + 90
With a ringfence, the State does not PS
allow the consolidation of
dry exploration, and, ENPV = PS . NPVd – E = +M$10
Explore
therefore, does not share
exploration risk with the IOC …
1 – PS
Loss = – E = – 10
With consolidation of dry exploration, the PS
State pays part of
that exploration through
immediate tax reduction Explore ENPV = ………………………………………………
for production coming
from other permits, and, therefore, shares 1 – PS
exploration risk with the IOC. Loss = ……………………
With an Income Tax Rate IT = 70% …
Exploration potential / consolidation of dry exploration
With a ringfence, the State does not PS
allow the consolidation of
dry exploration, and, ENPV = PS . NPVd – E = +M$10
Explore
therefore, does not share
exploration risk with the IOC …
1 – PS
Loss = – E = – 10
With consolidation of dry exploration, the PS
State pays part of
that exploration through ENPV =
immediate tax reduction Explore
PS . NPVd – E + (1 – PS) IT . E = +M$15.6
for production coming
from other permits, and, therefore, shares 1 – PS
exploration risk with the IOC. Loss = – E + IT . E = – 3
With an Income Tax Rate IT = 70% …

Exploration potential / State’s participation
Without State’s participation … PS
Explore ENPV = PS . NPVd – E = +M$10
1 – PS
Loss = – E = – 10
Gain = ………………………………………………….
PS
With State’s participation SP = 65%…
Assuming State reimburses
exploration only when Explore ENPV = .…………………………………………………
commercial discovery is made …
1 – PS
Loss = – E = – 10
Exploration potential / State’s participation
Without State’s participation … PS
Explore ENPV = PS . NPVd – E = +M$10
1 – PS
Loss = – E = – 10
Gain = (1 – SP) NPVd – E + SP . E = + 31.5

PS
With State’s participation SP = 65%…
Assuming State reimburses ENPV =
exploration only when Explore
PS . NPVd (1  SP)  E (1  PS . SP) = M$1.7
commercial discovery is made …
1 – PS
Loss = – E = – 10

State participation and probability of success
Expected Monetary Value
100
80 Gvt Carry
0%
60
EMV (M$)
Gvt Carry
40 25%
20
Gvt Carry
65%
0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
-20

Monte Carlo simulation
Probability distributions and risk profiles
 Probability distributions are used to incorporate risk in the analysis.
 It describe the range of possible values of a variable : it is a curve which provides an indication
of the relative likelihoods of different values of the variable occurring.
Normal Lognormal Discrete

Probability
Probability
Probability
x x x
Uniform Step Rectangular Triangular Trapezoidal

Probability
Probability
Probability
Probability
x x x
X

Statistical parameters
Xi (Xi ‐ X)²
MEAN X =  n VARIANCE ² = n
STANDARD DEVIATION  = ²
MODE Value of the variable that has the highest chance of occurring
(highest point of frequency curve)
MEDIAN Point at which there is an equal likelihood of being above or below

(50% point of cumulative frequency) “P50”
MEAN Weighted average of all possible occurrences
VARIANCE Measure of the spread of the distribution
Monte Carlo simulation for reserve evaluation
Each parameter is described by a probability distribution
Net / Porosity Oil Saturation

Gross Rock Gross Volume factor Recovery
Volume Factor
Reserves Distribution

Monte Carlo simulation for E&P projects
Reserves distribution obtained by Monte Carlo simulation
For each volume discovered is associated
an optimized development scheme :
‐ production plateau
‐ number of wells
‐ installations designed accordingly
‐ CAPEX, OPEX
….
For each development scheme is
associated an  NPV
Project’s distribution of
Economic Value (NPV)
Valuing under exploration uncertainty
PS
Exploration Well M$
1-PS
Dry Well M$
For each reserve volume discovered, there exists :
 probabilitypi
 An optimized development scheme
 An associated NPV for the projecti

EMV = PS pi x NPV (Successful project)I +(1‐ PS) x NPV (Dry well)

Limits of Monte Carlo simulation
 Problem of dependency between variables and poor optimization options

for each development architecture and production profiles.
• Ignoring correlations among variables may produce misleading results.
• However, information on possible correlations is seldom available !!
 Black box effect : impossible to identify the contribution of a given input to

the output value (GIGO).
 This is a critical drawback for experts and managers.
Difficult
Communication
TECHNICAL
STAFF MANAGEMENT

Scenarios approach
Scenario approach for value evaluation
From the simplest concept …
Gain = NPVd – E
PS
Explore ENPV = PS . NPVd – E
1  PS
Loss = – E … to the more realistic
tool.
Reserves Probability Distribution
Mini Case
Mode Case
PS
Maxi Case
Explore
1  PS
Loss = – E

Looking for a way to keep it simple: Scenarios approach
 The decision problem, for a given strategy or technical option, can be described
with a natural approach through three deterministic scenarios:
NPV Distribution
NPV Distribution
• “Min”: “pessimistic” scenario NPVmin
Mode Case
Maxi Case
Mini Case
• “Mode”: “most probable” or base scenario NPVmode
• “Max”: “optimistic” scenario NPVmax
 Assuming that the distribution of current values is a continuous distribution

unimodal and not too eccentric, the economic value of the project is given by
Expected Net Present Value:
EMV = ENPV = <NPV>  0.3 ENPVmin + 0.4 ENPVmode + 0.3 ENPVmax
(Swanson’s Rule)
Swanson : Mean = 0,30 x P90 + 0,40 x P50 + 0,30 x P10
When geologists have mode only
Mean = 0,30 x P95 + 0,40 x Pmode + 0,30 x P05
The coefficients 0.30, 0.40 and 0.30 are weights and not probabilities !
Log‐normal distribution
1.0 P99
P95
0.9 Min (P95): 48 Mode : 86 Max (P5): 265
0.8
Probability Density Function
0.7 mode
Cumulative Probability
0.6
0.5 median
0.4 mean
0.3
0.2
0.1
P5
0.0 P1
0 50 100 150 200 250 300 350 400 450

Variable
Lognormal distributions can be described approximately by three points
Min Mode Max

Swanson’s Law
Mean  0.30 x 48 + 0.40 x 86 + 0.30 x 265 = 128
« Three points » approximation for mean VAN
 In a simple case (one prospect), a statistical distribution of NPV calculated using a
Monte Carlo approach follows closely a log normal law.
 The three NPVs associated with the deterministic cases Mini, Mode and Maxi or P90,
P50 and P10 can be combined to calculate the mean NPV (or « expected NPV EMV »).
Mini case
Mode case
PS
Maxi case
Exploration Work
(M$)
1-PS
Dry exploration M$
EMV  PS*(0.3 *NPVmini + 0.4 *NPVmode + 0.3 *NPVmaxi) + (1 –PS) NPVdry

EMV  0.3 ENPVmini + 0.4 ENPVmode + 0.3 ENPVmaxi
Scen ario R eserves size T otal # of w ells # of FPSO FPSO capacity Plateau length
M ini 514 M bo 42 1 1 x 150 kb/d 3 years
M ode 851 M bo 49 1 1 x 230 kb/d 4 years
M axi 1,431 M bo 54 2 2 x 230 kb/d 5 years
Basis for decision‐making in exploration
Exploration Project’s Risked Economics
Mean ENPV  0.3 ENPVmini + 0.4 ENPVmode + 0.3 ENPVmaxi
Reserves
Mbbl NPVd ENPV = P*NPVd - E
Maxi 1431 620 104 M$
Success Mode 851 240 28 M$
P 20% Mini 514 110 2 M$
Prospect
EMV = Mean ENPV = …………… + …………… + …………..
1-P 80%
Dry -20 -E EMV = 43 M$

Basis for decision‐making in exploration
Exploration Project’s Risked Economics
Mean ENPV  0.3 ENPVmini + 0.4 ENPVmode + 0.3 ENPVmaxi
Reserves
Mbbl NPVd ENPV = P*NPVd - E
Maxi 1431 620 104 M$
Success Mode 851 240 28 M$
P 20% Mini 514 110 2 M$
Prospect
EMV = Mean ENPV = 30% x 2 + 40% x 28 + 30% 104
1-P 80%
Dry -20 -E EMV = 43 M$
Financial table
n
(1 + i)n-1
Present value of a stream 1$ per year over n years  k 1 = n
k=1 (1 + i) i(1 + i)
Discount rate ( i %)
Years (n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16%
1 0,990 0,980 0,971 0,962 0,952 0,943 0,935 0,926 0,917 0,909 0,901 0,893 0,885 0,877 0,870 0,862
2 1,970 1,942 1,913 1,886 1,859 1,833 1,808 1,783 1,759 1,736 1,713 1,690 1,668 1,647 1,626 1,605
3 2,941 2,884 2,829 2,775 2,723 2,673 2,624 2,577 2,531 2,487 2,444 2,402 2,361 2,322 2,283 2,246
4 3,902 3,808 3,717 3,630 3,546 3,465 3,387 3,312 3,240 3,170 3,102 3,037 2,974 2,914 2,855 2,798
5 4,853 4,713 4,580 4,452 4,329 4,212 4,100 3,993 3,890 3,791 3,696 3,605 3,517 3,433 3,352 3,274
6 5,795 5,601 5,417 5,242 5,076 4,917 4,767 4,623 4,486 4,355 4,231 4,111 3,998 3,889 3,784 3,685
7 6,728 6,472 6,230 6,002 5,786 5,582 5,389 5,206 5,033 4,868 4,712 4,564 4,423 4,288 4,160 4,039
8 7,652 7,325 7,020 6,733 6,463 6,210 5,971 5,747 5,535 5,335 5,146 4,968 4,799 4,639 4,487 4,344
9 8,566 8,162 7,786 7,435 7,108 6,802 6,515 6,247 5,995 5,759 5,537 5,328 5,132 4,946 4,772 4,607
10 9,471 8,983 8,530 8,111 7,722 7,360 7,024 6,710 6,418 6,145 5,889 5,650 5,426 5,216 5,019 4,833
11 10,368 9,787 9,253 8,760 8,306 7,887 7,499 7,139 6,805 6,495 6,207 5,938 5,687 5,453 5,234 5,029
12 11,255 10,575 9,954 9,385 8,863 8,384 7,943 7,536 7,161 6,814 6,492 6,194 5,918 5,660 5,421 5,197
13 12,134 11,348 10,635 9,986 9,394 8,853 8,358 7,904 7,487 7,103 6,750 6,424 6,122 5,842 5,583 5,342
14 13,004 12,106 11,296 10,563 9,899 9,295 8,745 8,244 7,786 7,367 6,982 6,628 6,302 6,002 5,724 5,468
15 13,865 12,849 11,938 11,118 10,380 9,712 9,108 8,559 8,061 7,606 7,191 6,811 6,462 6,142 5,847 5,575
16 14,718 13,578 12,561 11,652 10,838 10,106 9,447 8,851 8,313 7,824 7,379 6,974 6,604 6,265 5,954 5,668
17 15,562 14,292 13,166 12,166 11,274 10,477 9,763 9,122 8,544 8,022 7,549 7,120 6,729 6,373 6,047 5,749
18 16,398 14,992 13,754 12,659 11,690 10,828 10,059 9,372 8,756 8,201 7,702 7,250 6,840 6,467 6,128 5,818
19 17,226 15,678 14,324 13,134 12,085 11,158 10,336 9,604 8,950 8,365 7,839 7,366 6,938 6,550 6,198 5,877
20 18,046 16,351 14,877 13,590 12,462 11,470 10,594 9,818 9,129 8,514 7,963 7,469 7,025 6,623 6,259 5,929
Unconventional Gas
Panorama of the development worldwide
 INTRODUCTION f. Hungary
1. North America g. Russia
a. US 4. Africa‐Middle East
b. Canada a. Algeria
c. Mexico b. South Africa
2. South America c. Oman
d. Saudi Arabia
a. Argentina
b. Brazil 5. Asia‐Pacific
c. Colombia a. Australia
3. Europe b. China
c. Indonesia
a. Poland
d. India/Pakistan
b. UK
c. Germany 6. Scenarios
d. Ukraine  Appendix
e. France
Contribution of
unconventional / transition
Oil & Gas
Deep & ultra deepwater: > 500m & > 1500m
>1000m: 450 fields for proven reserves estimated to 90 G b oil / Gas 3 Tm3 gas
45% discovered reserves (1998‐2008) ‐ 2/3 is oil
6 to 12% growth / year for deepwater and ultra deep (2010 to 2030, source BP)
Production > 5 Mboe/d (>1000m) Production > 9 Mboe/d (>500m)
North Sea
Canada
Gulf of Mexico ‐ Egypt, Israel
Prod 1,9 Mboed
Mars, Ursa, Horn Asia
Mountain… Gulf of Guinea India (Krishna‐Godavari),
Mexico Malaysie (Kikeh), China,
2 Mbd (Angola, Indonesia …
Nigeria)
Australia …
Brazil – Prod 1,4 Mbd
Albacora, Marlim, Barracuda, Caratinga,
Reserves >1000m (G boe)
15
Roncador, Jubarte, Cachalote, Turbidites…
7
Source: IFP Training & industry
“Heavy” oil – 2013
OIP Proven Production
2000 2006 2012 2020 2022 2030
reserves (Mbd)
Extra Heavy Oil >1,2 Tb 235 Gb Venezuela 0,3 0,6 0,5 2,5*
US ‐ ‐ ‐
OIL Shale >1,5 Tb
World 0,01 0,02 0,02
Tar Sands 1,8 Tb 168 Gb Canada 0,6 1,1 1,9* 3,8* 5,2*
* gov
Canada **Estimations IEA
Athabasca, Cold lake, Peace
Russia
river ‐ Tar Sands in Alberta
China
Italy
USA
Maroc
Venezuela Congo
Orinoco Extra Heavy Oil
Brazil
Source : CERI, BPSR, PDVSA, Canada National Energy, BloomBerg, CRS US
Light tight oil – 2015
TRR LTO production in US
in 2012 Mbd
Gb
2012: 2,3 Mbd
End 2013: 3,2 Mbd
March 2015: 5 Mbd
Source : EIA, ARI 2013
Production estimée en fonction du prix du brut
Shale oil production (LTO) – Scenarios
US Rest of the world
Source: EIA, AEO 2014, Citi 2013, SBC 2013
In 2035, LTO may reach 7% (BP) or 12% (PWC) of global supply
Oil production growth – Scenario
Source : WEO 2013, IEA
Global oil supply – Scenario
??
2nd
3rd
1st
Source: Exxon World Energy Outlook 2013
About 25 Mbd for Heavy, LTO & Deep
Unconventional and transition oil – Resources and costs
Arctique
Source: SBC, 2013
The US Shale contribution – 2015
Shale gas basin
2013: 276 BM3
2015: 400 BM3
(7,3 Mboed)
Source: EIA March 2015
Shale gas, tight gas and CBM supply – 2013
In 2011, tight gas (250 Bm3), shale gas (232 Bm3) and CBM
(78 Bm3) represent 17% of total gas production worldwide
Basins with assessed shale oil & shale gas formations
Source: EIA, 2013

Assessed world shale gas and shale oil resources
(42 Countries, including U.S.)
Are Unconventional gas resources important?
P1 Asia/Pacific
R/P = 31 years
R/C = 24 years
R/P R/C R/P R/C R/P R/C

Australia 86 206 China 28,0 21 Bangladesh 12,6 13

Indonesia 42 76 India 40,2 26 Pakistan 16,7 17
Vietnam 63 63 Malaysia 15,8 32 Thailand 6,8 5
North American oil & gas boom
Shale outside North America
 At a much slower than in North America

 “revolution will not be replicated quickly elsewhere”, Shell, April 2013
 “unlikely to start in Europe this decade”, Chevron
 “ Beyond China, we see developments being slower in some of the
other places, South America, Argentina, Europe etc., that’s to do with
both the fundamentals of the rocks and the development environment,
the investment environment, constraints like water” BG Group, august
2013
 Lack of equipment and skilled staff (cf. Nabors, Halliburton, Bakker
Hughes)
 Need for extensive exploration (assets, legislation)
 Lack of knowledge of the geology
 It tooks 30 wells to understand a new prospect (Shell)

1. North America
US, Canada, Mexico
1a. North America
US Tight gas & CBM

1a. Unconventional gas low permeability reservoirs
(the USA resources)
k<1mD
Shale gas
Tight sands
Source: U.S. Geological Survey Energy Resource Surveys Program

Western Washington
Wind River Basin
coal region
6 Tcf Powder River basin
24 Tcf Illinois
39 Tcf
basin
21 Tcf
Greater Green
River basin Northern
314 Tcf
13,000 km2 Appalachian
basin
61 Tcf
Central
k ≈ 1‐100 nD Appalachian
basin
Uinta basin
≈ 6% 10 Tcf 5 Tcf
Piceance
basin Black
99 Tcf Warrior
San Juan basin
basin 20 Tcf
84 Tcf Raton Arkoma
7.6 cm basin basin
k ≈ 0.1 to 50 mD 10 Tcf 4 Tcf
Cherokee
basin
6 Tcf Schlumberger 2005
Coal bed methane
1a. Tight gas: major plays – USA lower 48 states

1a. US CBM basins
1a. USA coal bed methane breakeven gas price
2010
1a. USA coal bed methane – Ex Raton Coal Basin – UGS
1a. USA coal bed methane – Ex

1a. USA coal bed methane – Ex
Typical raton basin Vermejo coal production profile

1a. North America –
US Shale gas
1a. Engines of the US shale revolution

1a. Technological milestones
1a. Shale resources evolution & unconventional basins –
US
1a. Unconventional gas supply in US
What has happened?
1a. US remaining shale gas resources

1a. US O&G reserves
45% of gas reserves
are shale gas
1a. US shale plays characteristics

1a. US shale gas – 1. Antrim (Michigan Basin)
Detroit
1a. US shale gas – 1. Antrim (Michigan Basin)
Typical Antrim project

1a. US shale gas – 1. Antrim
1a. US shale gas – 1. Antrim, players
 Atlas Energy (largest player), 2500 wells operated
 Chevron
 Breitburn Energy Partner
 Whiting Petroleum

1a. US shale gas – 2. Barnett
Activity on Oil
window & liquids

‐
 Chesapeake : focus on gas
 Devon: focus on oil
 EOG
 Quicksilver
 Range Resources
 Williams
 Carrizo
1a. US shale gas – 2. Permian (Tx)
 Avalon
 Leonadr
 Spraberry
 Yeso
 Bone

1a. US shale gas – 2. Permian (Tx)
2 500 000 600
Oil production (bbl/d)
500
2 000 000 Gas production (bbloe/d)
Rig count 400
1 500 000
300
1 000 000
200
500 000
100
‐ ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015
1a. US shale gas – 2. Permian (Tx) players
 Concho
 Pioneer
 Sandridge
 Chesapeake
 Pioneer

1a. US shale gas – 3. Fayetteville
Arkoma Basin
1a. US shale gas – 4. Woodford

1a. US shale gas – 5. Haynesville
deposited about 150
million years ago in a
shallow offshore
environment
Average vertical depths are 11800 ft (3600

m) with bottom hole temperatures
averaging 165oC, and wellhead treating

pressures during stimulation commonly
exceeding 10,000 psi (69 MPa).
Source: Encana Corporation's February 2013 Investor Presentation
2 500 000 Oil production (bbl/d) 300

Gas production (bbloe/d)
Rig count
250
2 000 000
200
1 500 000
150
1 000 000
100
500 000
50
‐ ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015
1a. US shale gas – 6. Appalachian basin

1a. US shale gas – 6. Marcellus


 Pennsylvania natural gas production rose 69% in 2012 despite

reduced drilling activity
http://www.youtube.com/watch?v=_3lbgX0DVjI
Shale Play
Natural Gas Drilling in
Pennsylvania
http://stateimpact.npr.org/pennsylvania/drilling/
1a. US shale gas – 6. Marcellus play
1a. US shale gas – 6. Marcellus – The show must go on…
3 500 000 160
Oil production (bbl/d) < 3 USD to 2 USD !!
3 000 000 140
Rig count
120
2 500 000
100
2 000 000
80
> 3 USD !!
1 500 000
< 3 USD !! 60
1 000 000
40
< 6 USD !!
500 000 20
‐ ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015
1a. US shale – Utica
450 000 35
400 000 Gas production (bbloe/d) 30
350 000 Rig count
25
300 000
250 000 20
200 000 15
150 000
10
100 000
5
50 000
‐ ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015
1a. US shale gas – 7. Eagle Ford / 2010 drilling activity
Producing Eagle Ford Oil and Gas Wells:

Distribution of producing wells in the Eagle Ford in
2010. Gas is the dominant product for wells on the
southeast side of the play while oil is produced on

the northwest side of the play. Map prepared using
data from the Energy Information Administration

1a. US shale gas – 7. Eagle Ford
1a. US shale gas – 7. Eagle Ford
2 000 000 300
1 800 000
250
1 600 000 Rig count
1 400 000
200
1 200 000
1 000 000 150
800 000
100
600 000
400 000
50
200 000
‐ ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015

1a. US shale gas – 8. Bakken / 2010 drilling activity
http://www.youtube.com/watch?v=_3lbgX0DVjI
1a. US shale gas – 8. Bakken
Boe Rig
1200 000 250
1000 000
200
800 000
150
600 000
100
400 000
Rig count
50
200 000
Oil
Gas
‐ ‐
Apr‐07
Jul‐07
Oct‐07
Apr‐08
Jul‐08
Oct‐08
Apr‐09
Jul‐09
Oct‐09
Apr‐10
Jul‐10
Oct‐10
Apr‐11
Jul‐11
Oct‐11
Apr‐12
Jul‐12
Oct‐12
Apr‐13
Jul‐13
Oct‐13
Jan‐07
Jan‐08
Jan‐09
Jan‐10
Jan‐11
Jan‐12
Jan‐13
Jan‐14

1a. US shale gas – Niobrara
1 200 000 140
Rig count 120
1 000 000
100
800 000
80
600 000
60
400 000
40
200 000
20
‐ ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015
Shale & population – US
Key
Population density
2000
>200
100‐
200
50‐99
20‐11
10‐24
5‐9
1‐4
<1
Drilling and production
10 000 000 Oil production (bbl/d) 1 400

9 000 000 Gas production (bbloe/d)
1 200
8 000 000 Rig count
7 000 000 1 000
6 000 000
800
5 000 000
600
4 000 000
3 000 000 400
2 000 000
200
1 000 000
‐ ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015
Source : Baker Hughes, 2014
Production per well in US
Additional production (bbloe/d) /well
Rig count
400 1 400
Linéaire (Additional production (bbloe/d) /well)
300 1 200
1 000
200
800
100
600
‐
400
(100) 200
(200) ‐
2007 2008 2009 2010 2011 2012 2013 2014 2015

Cost of supply

1b. North America – Canada
1b. Unconventional gas in Canada
Key

1b. Shale gas in Canada
Source: CSUR, 2012
1b. Shale gas production in Canada
Key

Players in Canada
Shell
Chevron
Progress Energy (Petronas)
Talisman Energy
Sasol
Horn River basin players:
Apache Corp.
Conoco Phillips Canada
Devon Energy Corp.
Encana
EOG Resources
ExxonMobil Corp.
Nexen Inc.
Petro‐Canada/Suncor
Canadian Natural Resources Ltd. (CNQ)
Talisman Energy Inc., etc.
1b. Unconventional gas in Canada
 Horizontal wells now account for more than 70% of wells drilled
 Unconventional gas now accounts for more than 25% of natural

gas produced in Canada
 Tight gas represents 15% of gas production

Source: Canadian Society for Unconventional Resources, October 2012
1b. Shale basin in Canada
1b. Shale resources in Canada

1c. North America – Mexico
1c. Shale resources in Mexico

1c. Shale resources in Mexico
 Hig shale gas potential on medium to long term
 Limited population in shale area
 No commercial wells
 Shale blocks to be proposed in 2015

2. South America
Argentina, Brazil, Colombia
2a. Shale Gas in Argentina

2a. Shale Gas in Argentina – Neuquen basin
2a. Neuquen basin, recent drilling activity
Source: Americas Petrogas, may 2013
2a. Shale Gas in Argentina
 YPF, Chevron, ExxonMobil, Petronas, Petrobras, Total
 Multi billions $ projects
 Existing infrastructures
 Better price
2b. Brazil

2c. Colombia
2c. Shale Gas in Colombia
 Ecopetrol, Shell, ExxonMobil, Canacol
 Pilotes and active development in 2015
 Existing infrastructures

3. Europe
Poland, UK, Germany, Ukraine,
France, Hungary, Russia
3a. Unconventional gas in Poland

3a. Unconventional gas in Poland – Exploration concession
Source: PGNiG, May 2013
3a. Shale resources in Poland

 A crew member fills a drilling pipe with mud at a shale gas exploration well in
Pinczow, Poland. Exxon Mobil Corp. has failed in its first two efforts to crack
gas‐rich shale fields in Poland, CEO Rex Tillerson says. Bloomberg file
 In 2010, Exxon failed in its first two efforts to crack gas‐rich shale
fields in Poland. Gas discovered in a pair of wells didn't flow, even
after the company used high‐pressure jets of water and sand to
create fissures in the rocks
 "Some of the shale don't respond as well to hydraulic fracturing,"

"It's going to take research and time in the lab to understand
that." (Tillerson)
 "Parts of some of these well‐known shale plays everyone's all

excited about don't work," Tillerson
 Chevron has abandoned exploration in Poland in 2012
 Others also
3b. Shale in UK
 Vastly underestimated (BGS

report) Or “Not the golden
goose” (Ed Davey)
 UK shale gas will not be a

“game changer” (BP)
Any estimates of the ultimate
impact on UK gas supply are
premature.” (Wood McKenzie)

3b. Shale resources in UK
3b. Shale gas in UK – Players
O&G Companies
Viking Petroleum

3b. Cuadrilla’s First Lancashire Well Pad at Preese Hall
Source: Cuadrilla
3b. Shale gas in UK

3c. Shale in Germany
3c. Shale in Germany

3c. Unconventional gas in Germany – Düste Z10
 Düste Z10, by the Barnstorf operations in Lower

Saxony
 This natural gas deposit contains so‐called tight
gas, which is embedded in a deep layer of dense
sandstone and which can be produced with the
hydraulic fracturing method
 Believed to offer potentially recoverable reserves
of about ten billion cubic meters of natural gas
• May 2012: Exploration well completed
• May 2013: Experts at Wintershall are currently analyzing the
geology of the rock samples gathered and the results of the physical
tests
• An application to the State Mining Office is currently being
prepared
 If successful, the entire reservoir in the district of Diepholz could be
developed from 2015. Wintershall has already been producing tight gas
in Lower Saxony for more than 30 years with hydraufracturation
Source: Wintershall, March 2013
3d. Shale in Ukraine

3d. Shale resources in Ukraine
3e. CBM in France
 Produced by EGL (European Gas Limited) after Gazonor

acquisition (Ex Charbonnages de France)
 EGL produce 360 GWh/year from coal mines (in North Pas de
Calais)
 In Avion (Pas‐de‐Calais), the gas is injected in the GRTGaz

network (high PCI)
 In Divion and Désirée, sold to local industries.


3e. France
Source: Geosciences, UM2
3f. Unconventional gas in Hungary
 Initial potential reserves: 26 Tcf.
 In 2010, studies conducted by ExxonMobil, Mol and Falcon Oil &

Gas
 To evaluate Mako

Source: CPR Report
The 2009 Exxon operated
Foldeak‐1 well was drilled to
test the Lower Szolnok
Formation

 Falcon Oil & Gas hold 100% interest in a production license

granted 2007
 Covers 245,775 acres within the Makó Trough, Central
 Pannonia Basin Hungary
 The Deep Unconventional Play
• Significant contingent resources in deeper unconventional play
• RPS Energy (January 2013) estimates gross recoverable contingent
resource of 35.3 TCF and 76.7 MMBO (P50)
• Early exploration efforts focused on proving hydrocarbon potential
and delineation of basin to secure Production License
• Six wells drilled by Falcon. Each encountered thick sequence of
hydrocarbon bearing rocks; tests flowed hydrocarbons from each
tested horizon
• May seek to partner with industry player to develop and finance
3g. Shale in Russia

3g. Shale resources in Russia
3g. Messoyakha (Siberia‐ Russia): 1970's
 Production by depressurization and injection of inhibitors

(methanol)
hundreds of wells
W109 W121 W150 W142 W7
Hydrates
Free gas
GWC
Reservoir Caprock Hydrates
Technically successful but economically not
Unconventional gas in Europe – Cost of production
 The cost of well development ranges from $3m‐$11m, while in

Europe costs range from $8m‐$16m (Shale Gas Europe)

4. Africa – Middle East
Algeria, South Africa, Oman,
Saudi Arabia
4a. Shale – Algeria

4a. Tight/Shale gas – Algeria


1. Resources : Confirmed by regional studies and results on several

wells (logs and cores) carried out by Sonatrach
2. Pilot wells drilled and completed in 2013
3. Dry gas and liquids : dry and wet gas (western basins), shale oil
(eastern basins)
4. Different layers in synergy
5. Available water : huge aquifers from eastern border of Algeria to

the western basin of Ahnet)

4b. Shale in South Africa
4b. Shale in South Africa

4b. Shale gas – South Africa
 Shale gas in the Karoo, the semi‐desert that covers more than 100,000
square miles of South Africa’s Cape region
 Technically recoverable shale gas resources = 485 trillion cubic feet (EIA,
2012)
 South Africa became the first country to lift a moratorium on fracking
following a report into the issues (Sept 2012)
 Exploration permits by Shell, Falcon O&G
 Shell hopes to invest $200m to explore in the Karoo and – subject to
approval – has plans to drill at least six wells within the first three‐year
license period
 There are “genuine concerns about where we will get the water from
and what are we going to do to make sure we do not contaminate the
aquifers near the surface in an area that needs water to desperately”
 There are just 120 onshore rigs in the whole of Africa (90% in North
Africa) compared with 120 in the prolific Marcellus shale basin in the US

4c. Tight gas – Oman
4d. Tight gas – Saudi Arabia

5. Asia Pacific
Australia, China, Indonesia, India
& Pakistan
Shale gas production in Asia‐Pacific – Context

Gas is 11% of energy mix in Asia
 Favorable context
• Gas balance
• Gas need
• Gas infrastructures
Gas balance (in Bcm)
50,0 Australia
40,0
Bangladesh
30,0
Energy demand (in Bcm)
20,0 China
10,0
India
0,0
1970 1975 1980 1985 1990 1995 2000 2005 2010
‐10,0 Indonesia
‐20,0
Malaysia
‐30,0
‐40,0 Pakistan
‐50,0
Source: BP stats 2014, Cedigaz 2014, IEA 2014
Asia‐Pacific Shale Gas development
Potential Active Commercial
Pilotes Production
assesment exploration develop
Australia
China
India
Indonesia
Pakistan
Mongolia
Size of TRR (in Tcf)
Thailand 200
Others countries with basin in contact with potential shale gas basin:
100
Bangladesh, Cambodia, Malaysia, Myanmar, Laos, Papua New Guinea, Vietnam, etc.
50 country
0
Source: based on ARI, june 2013, Ed Technip GC, 2014
Main Asia / Pacific main unconventional gas players
CBM 13 Bcm (2013)
Shale gas 1.5 Bcm (2014)
CBM 0.2 Bcm (2013)
Shale gas 2016?
CBM 7.5 Bcm
Shale gas start in 2012
CBM 0.03 Bcm
Sugico
Shale gas 2020? Ephido
Medco Mitsui
Bumi R
Energi Megada Persada
Source: various including Cedigaz 2014, EIA/ARI, G Charon ed Technip 2014

Asian NOC strategy in Shale gas ‐ Exemples
 PC buys 50% Arrow Energy (B$ 3,7 Md ‐ 2010)
 PC buys Shell assets in Canada (B$ 1 Md ‐ 2012)
 PC partnership Petrochina Shell, and Encana (dec 2012)
 Sinopec buys 1/3 of Devon Energy (in Tuscaloosa et Niobrara) & Daylight Energy (B$ 2,1 ‐ 2012)
 Sinopec partnership Total (march 2012), & ConocoPhillips (february 2013)
 Sinochem buys 40% assets Wolcamp Shale of Pioneer Resources for 1,7 Md USD (2013)
 CNOOC owns 19% of Igas (since 2011)
 Petronas buys Progress Energy Resources for 5,2 Md USD (2012) & sells assets
 Petronas JV with YPF for Argentina (2014)
 KOGAS buys assets from Encana in 2010
 ONGC in partnership ConocoPhillips (march 2012)
 Oil India, Indian Oil & GAIL do small acquisitions (Carrizo Oil)
 MOU PTT & Statoil (2011)
 Other acquistion in North America: Chubu, KNOC, Marubeni, Mitsubishi, Osaka gas, Posco,
Reliance group, Tokyo gas, SK, etc
Innovation / Development / Acquisition / Partnership / Integration / Valorisation
5a. Australia

5a. Australia coal bed methane exploration/production
2010
5a. Australia shale

5a. Australia shale resources
5a. Australia – Shale gas
 Limited domestic gas demand but potential for export in LNG form
 Shale gas drilling costs are about 3times those of the United States (in
remote locations with a lack of infrastructure, tight skilled labor and
contractor supplies, and a lack of drilling technology and expertise)
 Concerns over fracking are already being raised in the context of coal
seam gas, and so it is likely there would be similar concerns with shale
gas
 Shale gas may not be able to compete with coal seam gas because coal
seam gas is located close to large east cost population centers while the
shale deposits are far away and require transportation
 Foreign and local companies are exploring for shale gas plays in various
locations
 There is currently a limited commercial production of shale gas
Shale gas development is in an early, immature state and its
economic viability is uncertain
5a. Australia – Example of Capex program
5b. Shale in China

5b. Shale resources in China

5b. Shale gas in China
 China’s technically recoverable shale gas resources could be 50 % bigger

than those in the US (EIA)
 Shale gas could be China’s largest onshore source of energy, and the
country is looking to develop this resource in order to decrease
dependence
 Chinese National Energy Administration’s goal: to produce 230 billion
cubic feet of shale gas a year by 2015 and 3.5 trillion cubic feet a year
by 2020
 There is no regulatory framework in place in China
 Small incentives (a subsidy of a 40 fen /m3 of shale gas sold / handout
lasts until 2015, for a price of PetroChina's ex‐gas‐field selling price last
year, or 1.13 yuan /m3)
 well‐head gas prices for the last three years at about $5.20 per million
British thermal units

China is expected to be “most successful in
developing shale gas outside North America.” BP
 Petrochina produces about 70 % of the nation's output of the gas

 In 2010, the Chinese government began to explore shale gas production
 About 60 shale exploration wells have been drilled over the past two years (2011‐2012 /
source IHS CERA, May 2012)
 Strategic partnerships with foreign companies in order to acquire the skills and
technologies needed to develop and exploit its shale gas reserves
 JV between PetroChina and Shell Oil, 10‐15 wells are in operation, producing about
2000 cubic meters daily (July 2011) The venture started in the last quarter of 2010 and is
situated in western China. In October 2011, production commenced in the Sichuan Basin
 Shell would enter "significant drilling season" in 2013 and next year in China, after
winning the country's approval for shared shale gas development in the Fushun block.
 Partneship Petrochina & Chevron
 In China, until recently only the three state‐owned giants – Sinopec, China National
Petroleum (CNPC), and China National Offshore Oil – bid on gas drilling projects. The
latest auction for exploration leases opened up bidding to state‐owned enterprises in
other industries, and the winners included several power and mining companies
without experience…
Commercial development “is likely to be in a three‐ to five‐year time frame” (Shell)
well into the 2020s before China’s shale gas is an important domestic energy source
(HIS Cera)
 Water supply constraint (it is uncertain if U.S. methods of retrieving the

gas can be duplicated)
 No experience (China has never been a major natural gas producer or
consumer)
 Sichuan basin, “the formations seem to be more faulted and folded,
which makes it more difficult and less economic to drill long horizontal
well bores” (former geologist at Anadarko Petroleum)
 A much higher clay content than the shale found in the United States,
which makes them “deform rather than shatter”
 About 90 percent of its pipelines are owned and operated by a single
company, CNPC, which has no legal obligation to hook up its rivals. gas
pipeline network is also woefully small, stretching about 50,000
kilometers versus 400,000 kilometers in the U.S. The government
regulates gas prices
“It’s about the above‐the‐ground factors”

5b. China, India and Vietnam coal bed methane
2010
5c. Shale in Indonesia

5d. Shale in India/Pakistan
5d. Shale in India/Pakistan

Shale gas production cost in Asia/Pacific?
 Permit & exploration?
 Drilling
 Fracking
 Fiscality
 Infrastructures
 Surface issues?
 Can cost continue to decrease?
It will depend of assets availability & prices, experience &
efficiency, financing solutions… and geography!
Governements and/or players need to be implicated!
5e. Japan, Nankai: R&D hydrates production program
Objective: Industrial production in 2018
March 2103 production test
Copyright@JOGMEC

5e. Japan, Nankai trough
 Geological context: accretion prism at subduction zone

 Water depth: 945 m
 BSR depth: 270 m below sea bottom (1215 m total depth)
 Good siliciclastic reservoir: 20% porosity
 3 well drilled and cored: no hydrates reach the surface / dissociation
(risk of important pressure in shallow water depth)
 Identification of 3 hydrate series of 1 to 10 m thickness
 Methane origin: biogenic until 1500 m and thermogenic below
 Methane concentration (20% of the bulk volume)
 High concentration of hydrates in the pore volume (80%)
 2008 and 2013 production: successful production tests
Shale gas challenges in Asia/Pacific
Issues:
 Geology ?
 Surface issues ‐ Drilling & Fracking
 Infrastructures
 Population
 Gas prices
 Assets available
Advantages:
 Gas demand is there
 Gas network are in development
 Gas price will increase! (Local affordable gas will decrease, more expensive
imports will increase)
 Better gas expertise & more players

 Learnig curve will apply

Scenarios
New cards / new geopolitical world?
Growth in unconventional gas production by
type in selected regions in the New Policies
Scenario
Unconventional gas production
by selected country in the New
Policies Scenario
Source: World Energy Outlook 2013 | Global Energy Trends © OECD/IEA, 2013
Unconventional gas production – Forecast for 2035
 Shale gas resources estimation rises 25 Tcf to 800 Tcf in 5 years (2007 – 2012)…
 USA will export gas in the next decade
Source : IEA ‐ WEO 2012
World gas production forecast

Hot topic – The oil revolution in US
2011/2010: oil production +7% / natural gas liquids surging +11%
From 2011‐2020, US total liquid production:
‐ Deep water: x 3 1,3 to 3,8 Mbd ?
‐ Shale Oil: x 4 0,7 to 3 Mbd ???
‐ Alaska x 2 0,6 to 1,1 Mbd ???
‐ Conventional 3,2 to 2,3 Mbd ?
‐ NGL 2,3 to 3,8 Mbd ??
‐ Biofuels 0,9 to 1,5 Mbd ??
Total 9 to 15,6 Mbd
ExxonMobil : Citi 2012
US natural gas supply
Source: WoodMackenzie, 2012

Shale gas, tight gas and CBM supply – Scenario
Key
IEA predicts 27% market share in 2035, ExxonMobil 33%
Source : According to Scenario NPS, WEO 2013, IEA
Shale gas – New Policy Scenario, IEA Bm3 (2011‐2035)
Key
800
Autres
700 Australie
Indonesie
600
Mexique
500
Algerie
400 Europe
300 Inde
Argentine
200
Canada
100
Chine
0 Etats‐Unis
2011 2020 2035
Shale gas TRR/C

Conclusion
Shale & CBM developments
10 advices to develop shale
 Negotiate your fiscal terms

 Test & test & test
 Be unconventional
 Follow the demand and the market
 Don’t underestimate the surface issues
 Don’t underestimate the financing needs
 Fast and active on permits
 Control costs
 Control operations
 Discuss with the population

Appendix
Risked shale in‐place and technically recoverable

Fracking capacity
Unconventional Gas
Economic & strategic impact of unconventional
gas revolution
 INTRODUCTION
1. Gas transport b. Natural gas uses, LGN &
a. Traditional gas chain condensates uses, associated oil
uses
b. LNG
c. Oil & gas industry
2. Rent sharing d. Petrochemicals, refining and other
industries
3. Macro‐economic impact e. Final consumer
4. Impact on the energy mix & prices
a. Gas price
6. Strategy of the O&G companies
b. Oil price a. Small and big Independents
c. Coal price and others b. IOC
c. NOC
5. Consumer impact: unconventional
gas uses  CONCLUSION
a. Flaring, venting, injection &
commercialization

Introduction
Energy importance?
 Fossil Energy: 87% of primary energy demand worldwide
 Hydrocarbon: 57%
 Fundamental for industry… but also agriculture and services
 728 l of milk need 100l of fuel oil
 Extraction industry : 21 to 23% GDP Worldwide
 Top 100 companies in SE: 17 O&G companies

1. Gas transport
1. Energy logistic
OIL IS LIQUID !
 Easy to handle through interruptible and flexible chain
S
Production Refinery Storage Transport Delivery
Tanker/pipe…
GAS IS « GASEOUS » !

 Difficult to handle and requires practically non interruptible and rigid chain
Gas Pipeline
Storage
Production 1000 times less
Treatment energy than oil
per cubic
LNG plant Regaseification terminal meter!
COAL, SOLID !
 Heavy to handle but through flexible chain
Production Tanker/truck/train Storage Transport

1. Gas commercialization
Flared gas Main network
Commercial
Retail network
Industry
LNG plant
Production Treatment
Energy production
Regas terminal
Injected gas Gas tanker
Petrochemical
Propane Transport
Butane G‐T‐L
C5+

2. Rent sharing
2. Rent sharing – Examples
12
Key
10
consumer Gazprom Margin
Gazprom
4,81 Key
6 $/MBtu
Company
Profit compagnie Cout de transit
Transit
8 $/MBtu
8 (Ukraine)
ISCorporate Tx
Custom tax
Droit de douane
Royalties
Redevances (Russia)
(Russie)
6 2,59 LOE
LOE Taxe d'extraction
Production Tax
1,50
T&F
T&F Transport cost
4 0,81 Drilling & Cout de transport
(Russia)
0,39 1,80 Total Forage &
completion (Russie)
0,21
0,60 0,90 completion
Pre_construction
Pre‐construction Production cost
Cout de production
2
F&D
F&D
0
4 USD/Mbtu 6 USD/Mbtu 12 USD/Mbtu 12 USD/Mbtu
us
ETATS‐UNIS Gazprom & Fourni
2. Rent sharing – Examples
Md USD
1 200
1 000 422 B USD

800 (Others OECD*)
600
687 B USD 832 B USD
400
G7
Canada, France, Italy, OPEC
200 Germany, Japan, UK,
US
*N.B: Other OECD members are Australia, Austria, Canada, Chili, S. Korea, Denmark, Estonia, Finland, Greece, Hungary,
Ireland, Iceland, Israel, Luxemburg, Mexico, Norway, New‐Zealand, Netherlands, Poland, Portugal, Slovakia, Tcheq Rep,
Slovenia, Spain, Sweden, Switzerland, Turkey
2. Gas consumption – Who will benefit?
3. Macro‐economic impact
3. Energy & trades – 2008‐2012
Key
Source : IEA, 2013
Activity Players State
FINAL CONSUMMER PT + VAT
Elec, industries, individuals, Consuming state
etc. CT, IT
Oil products Petro Refiner,

Natural Ref 70 Petrochemicals
Producing state
gas, GUSD/y Supplier
LPG, etc. REFINING Transport
& PETRO Petro Retail
Natural gas Bonus
Oil &
& LNG CT Royalties
condensates
325 Bcf/d Profit Oil & VAT PT, VAT
87 Mbd
autres taxes IT
1 000 G$ 3 200 Md $
Others sectors (logistic,
building, finance, etc.)
O&Services (engineering, State (of
PRODUCTION O&G drilling, geophysics, etc.) CT companies)
VAT
Oil IT
700 GUSD/y
companies
3. Contribution
Permit ‐ Expenses or taxes
‐ Employees
CAPEX ‐ Income tax
OPEX ‐ CT & charges
‐ VAT
Royalties
CT
Direct Production
impacts
Petro, electricity production and
‐ Employees
Induced industries investments ‐ Income tax
impacts O&S investments ‐ CT & charges

‐ VAT
Competitiveness of businesses
‐ Expenses
Competitiveness of individuals ‐ Income tax
4. Impact on energy mix
& prices
4. North America
Key
4. Europe
Key
4. Asia

4. Gas trades
Europe
P° 240 Mtoe
C° 450 Mtoe FSU
P° 690 Mtoe
100
95 C° 525 Mtoe
US ‐ Canada
P° 760 Mtoe
75 20
C°745 Mtoe
Asia ‐ Oceania
P° 440 Mtoe
45 C° 565 Mtoe
Middle East
P° 495 Mtoe 170
C° 370 Mtoe
25
90
80
Africa
P° 195 Mtoe
10 C° 110 Mtoe
Latin America
Key
P° 215 Mtoe
C° 220 Mtoe
Transport by LNG tanker (LNG)
Natural gas pipe
4. Gas prices
Key

Gas prices decorrelation
Prices, 19 May 2015
HH 3 $/Mbtu
NBP 6.6 $/Mbtu
Asian Oil Index LNG 11.5 $/Mbtu
Brent 66 $/B
Source: Reuters, IFPEN, BMWI, Japan Ministry of Finances
4. LNG arbitrage
Key
US Gulf to Europe US Gulf to Japan

4. Energy prices
Key
250
Northwest Europe marker price †
US Central Appalachian coal spot price index ‡
Japan coking coal import cif price
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
4. Gas price scenario

4. Unexpected oil price collapse
Mbd 2013 2014 2015
140
Oil demand +1.2 +0.7 +0.9
‐33% ‐40% Oil supply (NOPEC) +1.9 +1.3 ???
120
WTI (2014‐2015 ‐ post Nov) ($/b)
WTI (2014 ‐ pre Nov) ($/b)
100
80
60
US$ increase
40
WTI (2008‐2010) ($/b) “It is not the role of SA, or certain
other Opec nations, to subsidise higher
20
cost producers by ceding market
août oct. déc. févr. avr. juin août oct. déc.
share”, Feb 2015, Ali al‐Naimi, KSA oil
minister
Source : IEA, OMR Jan 2015, DOE march 2015

5. Consumer impacts
5. Gas prices 2014, energy cost in US 2012
Nitrogen
Differences of gas price fertilizer
$US/MBtu
4 Organic
2
chemicals
0 Industrial
198419861988199019921994199619982000200220042006200820102012 gas
‐2
‐4
Cement
HH/NBP
‐6
HH/German Iron &
‐8
Canada/German Steel
‐10
Primary
aluminium Energy % in
« Shale gas discount » Inorganic production cost
= 1000 Billion US$ chemicals
subsidies to US & Canada Pulp &
Key:
between 2006 and 2013 paper
Electriciy
Glass & glass Fuel
product Feedstock
Source: World Energy Outlook, IEA 2013
Key
Flaring
Reinjection
Injection
Torchage
Loss
Pertes de volume
Commercialized
Production
commercialisée
5. Gas production
Key
350 Autres Asie
Malaysia
Indonesia
China
300
Australia
Autres Afrique
Nigeria
250 Egypt
Algeria
Autres Moyen Orient
200 United Arab Emirates
Saudi Arabia
Qatar
Iran
150
Autres Europe & Eurasie
Uzbekistan
Turkmenistan
100 Russian Federation
Norway
Netherlands
50 Autres Amerique Latine
Trinidad & Tobago
Mexico
0 Canada
1985 1990 1995 2000 2005 2010 US

5. Gas consumption
Other Asia
5%
Thailande
South Korea 2% 2%
Pakistan 1%
Japan 4% USA 22%
India 2%
China 4%
Other Africa 2%
Egypt 2%
Canada 3%
Other ME 3%
UAE 2% Mexico 3%
Argentina 1%
Saudi Arabia 3%
Other South
& Central
Iran Am 4%
5% France 1%
Germany 2%
Other Europe/Eurasia Italy 2%
8%
Uzbekistan 1%
Russia 13%
UK Turkey 1%
2% Ukraine
1%
Flared gas Main network
Commercial
Retail network
Industry
LNG plant
Production Treatment
Energy production
Regas terminal
Injected gas Gas tanker
Petrochemical
Propane Transport
Butane G‐T‐L
C5+

5. Gas in primary energy
Gas in primary demand
30% 22% 24% 46% 41% 11%
0,8
0,6
0,4
0,2
0
North
Amerique du South
Amerique du Euresia
Europe (OCDE) Eurasie (Inc Africa
Afrique & M‐ Asia
Asie &
Nord
America Sud FSU) Orient
Middle East Pacifique
Pacific
America
Key
Production Consommation
5. Gas uses
5. Gas uses
1200
Key
1000 Residentiel Commercial
800
600
400
200
5. Energy in chemical cost – US 2012
Key:

5. Energy in manufacturing cost – US 2012
Nitrogen
fertilizer
Organic
chemicals
Industrial
gas
Cement
Iron &
Steel
Primary
aluminium
Inorganic
chemicals
Pulp & Key:
paper
Electriciy
Glass & glass Fuel
product Feedstock
Source: World Energy Outlook, IEA 2013
5. Gas to Oil supply / GTL – 2013
Countries Projects Capacity (Boed) Companies Year
South Africa Mossel Bay 22 000 PetroSA 1992
Malaysia Bintulu 14 700 Shell 1993
32 400 QP & Sasol 2007

Qatar Ryx & Pearl
140 000 QP & Shell 2011
Nigeria Escravos 34 000 Chevron & Sasol 2014?

6. Strategy on unconventional
O&G
6. Main hydrocarbon producers
> 1 Mboe
> 2 Mboe
> 4 Mboe
(...) Kazmunaigas
> 10 Mboe
Libya
Surgut

6. Orinoco belt
Source : Caracas Chronicles
6. Orinoco Belt development
Source: PdVSA, Global Insight, Wood Mackenzie 2012
6. Oil sands development
 Majors:
• Exxon Mobil, Total (Deer Creek acquisition – Joslyn), Conoco, Shell
(Athabasca), ENI (Congo)
 Independent players:
• Syncrude (biggest Canadian producer), CNR, Suncor Energy, Petro Canada,
Imperial Oil, etc.
 NOC:
• CNOOC
(Nexen acquisition)
Source: 2012, various sources (Wikipedia)
6. Arctic
 Shell / Chukchi. Exploration today

 Exxon Mobil, imperial / Beaufort sea Mckenzie delta ~600 M$. First well around 2013
 BP / Beaufort sea Mckenzie delta 1,2 g$. First well around 2014
 Cairn / Exploration drilling near Greenland on the Pitu block in 2014 (after 1 g$ lost)
 Partnership (Rosneft, EM, Gazprom, BP, etc)
 Samsung delivers russia’s first arctic shuttle tanker (dec 2007)
Challenges:
 One of the world’s most valuable ecosystems
 The arctic is home to high winds, extreme storms, waves up to 20 feet at times, heavy fog
and sub‐zero temperatures
 Burning the spilled oil, a tactic used in the gulf, won’t work in sea ice
"The Arctic: no big bonanza for the global petroleum industry", “the Arctic's share of global oil
production will remain around 8 to 10 % between now and 2050, while its share of gas
production will fall to about 10 % from the current level of 22 % ”, Norwegian Researchers
"At one point, the Arctic was the Holy Grail ... Today, we're no longer in that situation since there
are many other places in the world where there is potential," (Patrice de Vivies, head of
northern European exploration at Total).
6. From conventional to new growth themes
 Development capital is progressively moving from conventional assets to more complex

projects associated with new resource themes
• The Majors generally will become more dependent on LNG, deep water and
unconventional oil and gas to drive growth
63%
40%
Investment in conventional assets falls from 63% (2001‐2005) to 40% (2011‐2015)
6. Who are these guys?

6. Natural gas producers in US – 2013
6. Value of acreage

6. Acquisition 2005‐2012
6. Asian NOC strategy in Shale gas ‐ exemples

 PC buys 50% Arrow Energy (B$ 3,7 Md ‐ 2010)
 PC buys Shell assets in Canada (B$ 1 Md ‐ 2012)
 PC partnership Petrochina Shell, and Encana (dec 2012)
 Sinopec buys 1/3 of Devon Energy (in Tuscaloosa et Niobrara) & Daylight Energy (B$ 2,1 ‐ 2012)
 Sinopec partnership Total (march 2012), & ConocoPhillips (february 2013)
 Sinochem buys 40% assets Wolcamp Shale of Pioneer Resources for 1,7 Md USD (2013)
 CNOOC owns 19% of Igas (since 2011)
 Petronas buys Progress Energy Resources for 5,2 Md USD (2012) & sells assets
 Petronas JV with YPF for Argentina (2014)
 KOGAS buys assets from Encana in 2010
 ONGC in partnership ConocoPhillips (march 2012)
 MOU PTT & Statoil (2011)
 Other acquistion in North America: Chubu, KNOC, Marubeni, Mitsubishi, Osaka gas, Posco,
Reliance group, Tokyo gas, SK, etc
Innovation / Development / Acquisition / Partnership / Integration / Valorisation
6. Strategy in Shale
 Innovation
 Development
 Acquisition
 Partnership
 Integration
 Valorization
6. Is it strategic?
 Resources
 Focus on sweet spot
 Wet wells
 LNG
 Petrochemicals
 Etc.

6. In theory, LTO should collapse…
US$/b
March* December
WTI $48 WTI $59
Market theory
• 5 Mb with a relative high cost of production
• High depletion rate
• Limited ROCE
• Weak players
• Will cut the investments
Bankrupts soon
Production will collapse
A ponzi scheme?
Source : G.Charon, Ed Technip, 2014, IHS Cera
6. Impacts on shale players
 On average, E&P companies have hedged 40% to 50% of oil production in 2015
 Capex cut by 30% ‐ 40%

6. Shale players bought time…
US high‐yield bonds
 Buying extra time

• Hedging
• Debt restructured
• Cut investments
Slow down the investments
Adapt to cash flow
Debt payment workflow
7
6
Chesapeake
5 Antero
4 Cabot O&G
3 EQT
Cimarex
2
Pioneer
1
Continental R
0
2015 2016 2017 2018 2019 2020 2021 2022 2023
Source : Industrie
6. And adapt their strategy
 New priorities Debt payment terms

• Focus on sweet spot Production Capex
• Reorganization SWN
• Cost cutting & supply management EQT
• Efficiency is the key Cabot O&G
Carrizo
• Better value through new Antero
infrastructures
Devon E
• Gas as an alternative Chesapeake
Oxy
Decrease the breakeven Anadarko P
A race to efficiency ConocoPhillips
EOG Resources
Marathon O
Apache
Pioneer
Continental R
‐80% ‐60% ‐40% ‐20% 0% 20% 40% 60%
Source : Industrie
Conclusion
Shale gas revolution in N A
 On North American gas market

• Gas production increase
• Gas price crash
• Gas demand increase (Power), wave of investments (Petro,
transport & others)
• Infrastructures revolution
• M&A & financing solutions
• New O&G leaders, new O&S leaders
• Competition with CBM, Tight
• Energy imports and deficit decrease
• LNG exports ready to grow
For how long will the gas demand grow?
Shale gas potential, production cost and prices?
LNG exports volume?
Shale gas revolution up to Europe – uncertainty
• On European gas market

• Atlantic LNG away
• Gas price differentials with North America
• NBP spot gas price decrease
• Impact on LTC in Europe (more spot, shorter period, less
destination)
• Some LNG re‐exported
• Shale gas exploration in Danemark, Hungary, Poland, UK, Ukraine,
Spain, etc.
• Some E&P/pipe/LNG gas projects delayed
• Energy mix
Will Europe gas demand recover?
Will shale gas production emerge?
Which Atlantic projects to be launched?
When (for how much) to expect Panama Canal & NSR to be open?
Shale gas revolution up to Asia – wake up
 On Asia/Pacific gas market

• Gas price differential with North America/Europe
• LNG projects arriving on the market (Australia, US)
• Floating LNG in Malaysia (2015, 2017+) / others are waiting…
• LNG spot gas price down
• LNG spot versus LTC
• New gas pipe from Russia
• Shale gas developments in China
• Shale gas exploration in India, Indonesia, Australia, etc.
• Gas versus Coal?
• Climate change policy
“Some fear for expensive projects ”

More LNG on spot, less commitment for LT?
Impact of oil decrease on LNG LTC (4‐6 months differences)?
10 advices to develop shale
 Negotiate your fiscal terms

 Test & test & test
 Be unconventional
 Follow the demand and the market
 Don’t underestimate the surface issues
 Don’t underestimate the financing needs
 Fast and active on permits
 Control costs
 Control operations
 Discuss with the population

Appendix
6. Independent
2006 Burlington Resources by ConocoPhillips for 36 Md USD
Oxy buys 3,2 Md USD in shale (Dakota & Texas), Hess buys 0,5 Md USD via
2010
Zaza Energy (Eagle Ford)
Marathon buys 3,5 Md USD of permits (Eagle Ford), Apache buys Cordillera
2011
Energy Partners for 2,8 Md USD (Anadarko), etc.
2013 Oxy buys Eagle Ford Shale, Devon buys Geosouthern for 6 Md USD, etc.

6. Depreciation 2008 to 2010
Devon 22,4 Md USD

Encana 14,6 Md USD
Chesapeake 14 Md USD
Exco 4,4 Md USD
Petrohawk 3,7 Md USD
Quicksilver 1,7 Md USD
6. Super major shopping
BP buys Chesapeake permits in Woodford for 1,8 Md USD & 25 % of portfolio in Fayetteville shales (1,9 Md
2008 USD)
Shell ‐ Duverney Oil for 5,7 Md USD. (tight gas in Canada)
2009 BP partnership with Lewis Energy in Eagle Ford Shale
Eni buys shares in Quicksilver Resources (Barnet Shale)
ExxonMobil ‐ XTO Energy for 41 Md USD
Total buys 25 % of Chesapeake portfolio in Barnett (2,3 Md USD)
2010
Shell buys East Resources for 4,7 Mds USD (Pennsylvania)
Exxon buys Ellora Energy (700 M USD)
Exxon buys assets of Petrohawk in Fayetteville (650 M USD)
Chevron buys Atlas Energy for 3,2 Md USD (Marcellus)
2011 Total buys 25% of Chesapeake portfolio & Enervest in Utica shales for 2,5 Md USD
BHP Billiton buys Chesapeake assets in Arkansas for 4,8 Md USD
BHP Billiton buys Petrohawk for 12 Md USD (Eagle Ford, Haynesville, Permian)
ExxonMobil buys Denbury Resources assets in Bakken, pour 1,6 Md USD

2012
Royal Dutch Shell buys Chesapeake Energy assets in Texas pour 1,9 Md USD, etc.

6. NOC partnership
 Sonatrach & Total in tight gas (2010)

 Sasol & Chesapeake in South Africa (2010)
 Sonatrach & ENI (2011)
 TPAO & Shell in shale gas (nov 2011)
 Partnership Petrochina Shell, and Encana (dec 2012)
 Partnership Sinopech & Total (march 2012), & ConocoPhillips
(february 2013)
 Partnership ONGC & ConocoPhillips (march 2012)
 Partnership ExxonMobil & Rosneft (april 2012)
 YPF et Chevron (juillet 2013)
6. NOC acquisition
 Petrochina & Shell buy Arrow Energy for 3,7 Md USD in CBM
(2010)
 Sinopec buys 1/3 portfolio of Devon Energy (Tuscaloosa et
Niobrara) & Daylight Energy for 2,1 Md USD (2012)
 Petrochina buys 1 Md USD assets Shell in Canada (2012)
 Sinochem buys 40% assets Wolcamp Shale of Pioneer Resources
for 1,7 Md USD (2013)
 Sasol buys Talsman assets (Montney Shale) for 1 Md USD (2011)
 Petronas buys Progress Energy Resources for 5,2 Md USD (2012)
 Statoil buys Chesapeake assets in Marcellus for 3,3 Md USD &

Brigham Exploration for 4,4 Md USD (Baken Shale and Three
Forks)
6. What to do?
 « Loosing our shirt » Rex Tillerson, ExxonMobil.
 « acquisition with a 6 USD asumption » « limit dry gas »,

Christophe de Margerie, président de Total.
 Chesapeake Energy almost in bankrupt (22 GUSD deficit)
 Depreciation: 2,8 Md USD BHP Billiton (assets bought 4,8 Md

USD), 1,3 Md USD for BG Group Plc, 800 M USD for Total, 2,1 Md
USD for BP, 2,1 Md USD for Shell in Utica, 1,7 Md USD for Encana,
1 Md USD for Quicksilver Resources, etc.
 Assets for sale (RDS, Petronas, BHP)
319
Unconventional Gas
Environmental impact & social issues
 INTRODUCTION
a. Noise & local perturbation
b. Surface footprint
c. Water consumption & treatment
d. Seismic events
e. Greenhouse gas emissions
2. Social issues – Protagonists of the debate
a. The pro (O&G producers and contractors, organization, energy
consumers)
b. The cons (some O&G producers, environmental & anti‐globalization
associations, renewable industry, some consumers)

c. Position of the population & evolution of the debate worldwide

Introduction
Environmental issue
 Brent SPAR
 EXXON VALDEZ
 Bhopal
 Macondo
 Prudoe Bay
 Sakhalin 2
 Etc.

Ultra Deep & Arctic
Global warming...the green house gas effect
+2ppm/y
+0,6%/y
Source : Villeneuve & Richard (2001).
Source: IPCC Intergovernmental Panel on Climate Change
Alpin glacier in 1900
Not predictions
but Facts!
+
Ocean acidification
+
Geopolitical conflicts
same location in 2008
How to deal with energy demand and global warming
(sustainable development…)
CO2 management:
a mitigation tool for
the Oil & Gas industry
and its partners
The unbalanced 1.1%!
We can do something!
1,1%
2%
Note: significant offset with IEA CO2 related‐energy emissions to be considered, but interesting on the principle
World primary energy demand and related CO2 emissions
by Intergovernmental Panel on Climate Change (IPCC) scenario
CO2
The global energy system, 2010 (Mtoe)
Less CO2 emission by replacing Coal by gas
Hybrid cars + CCS less CO2 too Improvements & innovation
expected
Source: IEA WEO 2012
“Unconventional” hydrocarbons:
i.e. Hydrocarbons in unconventional settings
 Tar sands / Oil shale
Green River Formation in Utah.
(Photo Utah Geological Survey)
 Heavy oil in carbonates

reservoirs
 Tight reservoirs
Source JPT
 Coal Bed Methane Hydraulic fracturing
 Shale gas / Shale oil
 Gas hydrates Source IEA 2012

Shale Oil & Gas, Tight and CBM – Environmental impact
 Noise, trafic and local pollution
 Visual footprint
 Water
• Water consumption
• Water waste
• Soil pollution
• Acquifer pollution
• Seismic event
 CO2 emissions

1a. Noise, traffic and local pollution
 Preparation
 Drilling ‐ 2 to 4 weeks (100 to 200 trucks voyage).
 Fracking – 10 trucks with pumps
 Completion
1a. Activity per well

1a. Noise, traffic and local pollution / fracking
Source : Baker Hughes
Barnett Shale fracture treatment in progress, with the skyline of Fort Worth, Texas,
visible in the background (JPT 2008/09 ‐ Image courtesy of BJ Services)

1b. Jonah field ‐ 2005
1b. Unconventional gas footprint
Completion site (past) Completion site (2014)

1b. Footprint Horizontal versus vertical
1b. Unconventional gas footprint
1b. Marcellus Shale drilling site during drilling
Well site during active drilling to the Marcelllus Shale formation in Upshur County, West Virginia, in 2008. (An
additional water storage pit is not in the photo.) Copyright WVSORO, June 2008.
1b. Marcellus Shale drilling site after drilling
150 m
Photo of the site after reclamation. Copyright WVSORO, June 2008.
1b. Before / After
1b. Unconventional gas footprint – Benchmark
1c. Water consumption
Source: Water/Energy Sustainability Symposium at the 2010 GWPC Annual Forum Pittsburgh, PA Chesapeake
1c. Water need

1c. Well integrity
1c. Aquifer pollution
The make‐up of fracturing fluid varies from one geologic
basin or formation to another
1c. aquifer pollution?
Source: Risk Study Fracking / ExxonMobil
1c. Frack monitoring
Mapping more than 15,000 frac jobs during the past decade
Source : Pinnacle 2012
1c. Fracture length/ height
The data from these two shale reservoirs clearly show the huge distances separating the fracs from the
nearest aquifers at their closest points of approach, conclusively demonstrating that hydraulic fractures
are not growing into groundwater supplies, and therefore, cannot contaminate them
Source: Kevin Fisher of Pinnacle, a Halliburton Company for the July 2010 edition of the American Oil and Gas Reporter
1d. CO2 emissions

1d. CO2 emissions
1d. CO2e emissions
MToe Gas price collapse MTCO2

6 600 700
Gas
6 400 600
Coal
500
6 200
400
6 000
CO2e
300
5 800
200
5 600 100
5 400 0
2000 2002 2004 2006 2008 2010 2012
1d. Global efficiency / global warming?
1d. Risks associated with massive hydrates dissociation
The Storrega underwater slide
Age: ‐30 000 to ‐8150 years in 3 major steps
Rock mass: 5500 km3
Path length: > 800 km
Last step is characterized by a tsunami with
important wave highs:
Norway coast: 10 to 30 m
Scotland coast: 5 to 12 m
Global warming!

2. Social issues
2a. Heavy oil – Global impact
Local impact: Population, Water, Nature
Global impact: CO2 emissions

2a. Heavy oil – Local support
 Canada: 72% respondents have a favorable view of developing

the oilsands and think the best approach is to develop the
resource while limiting the environmental impact (Alberta 85%,
Quebec 67%), Montreal Economic Institute, 2012
 Venezuela: 98% of exports come from Petroleum Industry
Limited density
Workers involved in the industry
Massive economic contribution
No Kyoto targets
2a. Context
 Oil industry
 Politicians
 Risk
 Industry

2b. The cons
 NGO
 Greens
 Conventional producers
2b. The cons
 http://fractual.co.za (South Africa)

 www.no‐moor‐fracking.de (Germany)
 http://argentinasinfracking.org (Argentina)
 http://nofrackingway.org.au (Australia)
 http://nofrackingwayquebec.org (Canada)
 http://www.americansagainstfracking.org (US)
 http://nofrackingfrance.fr (France)
 www.nofracking.it (Italy)
 http://frack‐off.org.uk (UK)
 http://gasdrillinginbalcombe.wordpress.com (UK)
2b. The pro
 Unconventional gas producers
 Gas consummer
 Heavy industry
2b. The pro
 http://www.chevron.com/deliveringenergy/naturalgas/shalegas/
(Chevron)
 http://aboutnaturalgas.com (ExxonMobil)
 www.gaznonconventionnelseurope.org (ExxonMobil)
 http://polishshalegas.pl (PGNiG)
 http://www.shell.com/global/future‐energy/natural‐gas/gas.html (Shell)
 www.shell.us/aboutshell/shell‐businesses/onshore/shale‐tight.html (Shell)
 http://www.statoil.com/AnnualReport2012/en/Sustainability/CaseStudies
/Pages/ShaleGasAndTightOil.aspx (Statoil)
 http://total.com/fr/energies‐savoir‐faire/petrole‐gaz/exploration‐
production/secteurs‐strategiques/gnc (Total)
 http://www.politiques‐energetiques.com/ (Total)
2b. The pro
 http://www.api.org/oil‐and‐natural‐gas‐overview/exploration‐and‐
production/hydraulic‐fracturing (American Petroleum Institute)
 www.Energyindepth.org (Independent Petroleum Association of America)
 http://www.capp.ca/canadaindustry/naturalGas/ShaleGas/Pages/default.aspx
 (Canadian Association of Petroleum Producers)
 http://www.ogp.org.uk (International Association of O&G producers)
 http://marcelluscoalition.org (Marcellus)
 http://www.shalegas‐europe.eu/en/index.php/about‐us/about‐shale‐gas‐europe
(Chevron, Cuadrilla, Halliburton, Shell, Statoil, etc.)
 http://www.ukoog.org.uk (United Kingdom Onshore Operators Group)
2b. what about?
 AIE ‐ Unconventional Gas Forum
 OPEC – cometee – « it is a 5 years wave »
 FPEG ‐ LTC
 Gazprom ‐ shale gas study end 2014
 Qatar
 Statoil

2c. Shale & population – US
Key
Population density
2000
>200
100‐
200
50‐99
20‐11
10‐24
5‐9
1‐4
<1
2c. Pedagogy
Promised Land GasLand Truthland
(2012 film) (2010 documentary) (2012 documentary)


2c. Communication
2c. Tone of media coverage – US
2c. A complex debate – Example in UK
346

PRO - ECO1 - S8-G1 - 14-18 Juin

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PRO - ECO1 - S8-G1 - 14-18 Juin

Uploaded by

Copyright:

Available Formats

FORMATION PROFESSIONNALISANTE PRO/ECO1 – GROUPE 1

 INTRODUCTION 3. Resources & reserves

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 1

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

 INTRODUCTION 3. Fiscal impact

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 2

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 5

 Adjective, not conventional, not bound by or conforming to convention,

Conventional Transition Unconventional

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

 "unconventional oil include extra‐heavy oil, natural bitumen (oil

Dissolved Gas CTL

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 9

 Associated / non associated

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 13

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 14

 Hydrocarbons production depends on

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 18

 Two main types of reservoir rocks

Sandstone Shale Shale (clay rich/pressure)

 Grain texture : The rounder the grain, the higher permeability

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 22

Mississi Duvernay (Canada)

 Permeability ‐ high or high brittleness

 Ro ‐ 0,5 to 1% for oil

 Tight gas reservoir refer to:

Conventional sandstone: well connected pores (dark blue)

Tight gas sandstone: pores irregularly distributed and poorly

 CBM reservoir refer to:

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 28

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 29

 Shareholders & investors

 States and resources owners

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 30

 Volumes of hydrocarbons in place

 TRR: Technically Recoverable Resources

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

Reserves Contingent Prospective

 Geological institute (BGS, PGIP, etc.)

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 32

 Mathematical modeling of reservoirs

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 33

 Technically Recoverable Shale Oil and Shale Gas Resources, EIA,

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 34

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 35

More than 100 spots

Gas volume in hydrates

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 36

G b R/P Tcf G boe R/P

Proven reserves 1 642 52 6 741 1 162 57

Unproven reserves 1 370 44 8 842 1 524 75

Proven reserves (shale & tight oil) n/a 97 17 1

Unproven reserves (shale & tight oil) 345 11 7 796 1 242 66

3 357 107 23 476 3 945 198

EM ‐ Sonatrach PRO/ECO1 2015 ‐ Module 8 ‐ G Charon 37

Countries Projects Capacity (Boed) Companies Year

South Africa Mossel Bay 22 000 PetroSA 1992

Malaysia Bintulu 14 700 Shell 1993