Al-Azhar University Faculty of Engineering

Petroleum Eng. Sec. Oil & Gas Economic Exam ( 2019)

Duration Time: 3 hours Closed Book Exam

Any Missing Data May be Assumed

Answer All Questions

1-The original value of an industrial unit is 42 MM L.E. and its

expected Salvage-Value is 12 MM L.E. The service life of the unit is
estimated to be 12 years.

 Determine the asset ( or book ) value at the end of each year

during the service-life of 12 years, using the following
depreciation methods :-
1. Straight-Line method.
2. Textbook declining balance method.
3. Double Declining Method
4. Sum of the year digits method.
5. Sinking fund method with a sinking-fund-factor of 15%.
6. Draw The relation ship between the service life and
asset value for the above methods

2- An oil company has borrowed 48 MM$ from a bank at an

annual compound interest rate of 11% for a period of 10 years
.The bank loan will be paid back in the form of annuities , the first
of which should be due just before the end of the first year of oil
production . This bank loan was used to obtain an oil lease, and
pay the pre-production costs of the newly discovered oil field. The
development lasted three years and the oil production was
started on the 4th year of the bank loan. The lands owner was
paid 8 MM$ an a contact bonus, and extra 10MM$ to be paid
when the daily production reaches 100 M bbl The following data
is available for the estimation of the depletion allowance, Net
income, and sales.

Pre-production costs 40 MM$

Estimated Reserve 266 MM bbL

Recovery Factor 70 %

Sales price $ 110

Annual depreciation $ 1.2

Year Annual Production rate,MM bbl Annual Expenses,MM$

1 36 25
2 40 21
3 40 17
4 16 19
Required :
1:- The bank loan annuities.
2:- Determine the cost per unit depletion for the first four years of
production from the oil field.
3:- Determine the fixed percentage depletion for the first four
years of production from the oil field
4:- Determine the annual net profit in case (2) and (3), given that
general corporation tax is 45% of the net income.
5:- Calculate the cumulative net profit in cases (2) and (3), and
state which of the two cases you recommend as Reservoir
Engineer.
3-A well in Agiba company is shut in after it can no longer flow
naturally. After several years, a recompletion is proposed at a cost
of US$900,000. After a cid stimulation and installation of gas lift,
the well is successfully returned to production. Cumulative oil
production in six year equal to 400000 bbl

Year Flow Revenue,M Expenses,M$ Taxes ,M$ Investement,M$

$

0 900

1 500 50 200

2 500 50 200

3 400 60 170

4 250 60 120

5 100 70 100

6 50 20 15

Calculate the following Items :

1- total profit 2- pay back time 3- cost to find and develop

reserves

4-Draw the cash flow diagram and find the item 1 and 2 from this
diagram

4- Write about 40 lines ( short Summary) to covers all topics of your

Research

Good Luck