Capital Costs Estimation Method for Arctic Offshore Oil Projects

SPE 149916
M.A. Kuznetsov, K.K. Sevastyanova, P.A. Tarasov, S.A. Nekhaev LLC RN-SakhakinNIPImorneft

Prospective projects in the Russian Arctic

Actuality: Joint development of licensed areas in the Kara Sea with foreign companies Challenges: The lack of cost-evaluation methods for the Arctic region The lack of input normals The absence of analogous fields High risks: Harsh ice conditions Reserves value uncertainty The lack of geological data The lack of coastal infrastructure

Research tasks

Current status: Existing software products: do not support estimates for Arctic conditions require large amounts of input parameters use foreign costs structure for materials and equipment Goal: Evaluation of capital investments in the early stages of project analysis Tasks: Identify a minimal set of informative parameters for costs modeling Development of econometric models for integrated structure of capital costs

Method is based on real projects

Statistically marked out homogeneous groups of fields Regression models were built for certain groups

Topside

Topside costs are modeled by 2 parameters: peak oil (Qoil) and peak gas (Qgas) Real data Model

Mtopside

Mtopside

Qgas Qoil Qoil

Qgas

Scale effect: topside costs rise slower then facilities capacity

 l oi Q 1 C

s ga

to ps id e

Gravity Based Structure (Subarctic)

GBS costs are influenced by: Topside weight (Mtopside) and water depth (hwater) at the installation point

GBS = unit GBS = unit ( aM

topside

2 h water + bh water + 0 )

Mtopside topside

GBS

GBS

hwater

hwater

Gravity Based Structure (Arctic)

GBS CAPEX in the Arctic depends on water depth (hwater) at the installation point

GBS

unit

GBS

unit

a ln

h water h0

h0 - Min water depth for GBS installation

300 250

h=30m

, .. GBS weight, 000 t

200 150 100 50 0 20 40 60 80 100 120

h=60m

h=120m

, m . Water depth,

Subsea facilities

Subsea costs are determined by: the number of wells (Nwells) in cluster and water depth (hwater) at the installation point:

0,7 subsea = unit aN wells + inst h water

350 300

hwater

, .$ Subsea costs, mln. $

250 200 150 100 50 0 0 5 10 / N /Cluster

wells

15

20

Nwells/Cluster

Forecast accuracy

Cumulative forecast error does not exceed 30% (permissible error for the conceptual design) Topside model error 30% 30% spacing error
80

GBS model error 30%

250

30% spacing error

,V

70 60

Real value, 000 cub.m. , . ..

200 Hibernia 150

Real value, 000 t. , ..

50 40 30 20 10 0 0 10 20 30 40 50 60

100

50 - 0 0 20 40 60 -

80

100

120

140

160

180

, .. Estimated value, 000 t.

Estimated value, 000 cub.m.

, V , ...

Regional component
Labor Matherials Transportation
k2 k3
Verolme Vlissingen St.Wandrille Algeciras Puerto Real Daewoo Hyundai Okpo

Tampico 1 Tamaulipas Morgan City St. Johns

k4

k5
Keppel

CAPEX = kiCAPEXtopside+ kjCAPEXGBS+ klCAPEXSubsea

An example of a typical platform evaluation

Peak oil, '000t/d Peak gas, mln.cub.m./d Water depth, m

The minimum set of parameters:

24 2,88 60

Result:
Topside CAPEX, mln.$ GBS CAPEX, mln.$ 3477 1348

GBS CAPEX

DRILLEX

Other Topside CAPEX

Unit capex >15 $/bbl (reserves 90 mln.t)

Economics

30% error in estimating capital costs leads to a shift in the NPV assembly average at 28%
. Mln.rub 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0

100%

-4%

NPV 60%

-77%
43% 38% 33% 28% 23% 18% 13%

30%
15%

-4%

-18%

-30%
-30%

0%

CAPEX 0%

-4% 30% -16% -28% -40% -52%

+30%

-15%

Transportation costs

Revenue

CAPEX

-20 000

Royalties and taxes

-10 000

-30%

OPEX

-60%

-- CAPEX conditional permanent CAPEX

Results

1. Identified a minimal set of informative parameters for capital costs modeling with an accuracy of 30% 2. Unit capex for the Russian Arctic region is estimated 3. Practical application: investment committee preparation of proposals on tax optimization development of the Declaration of Intent to develop fields

Capital Costs Estimation Method for Arctic Offshore Oil Projects

Thank you!