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**OilSim day 2 Today’s Challenges Task 3 yesterday Task 5 Task 4**

Licence award, spread risk-negotiations Exploration & appraisal drilling Depletion plan & prodution profile 3D seismic maps Drilling rigs , Suppliers for The drilling phase Recovery factor, Depletion strategy Number of wells, Tube size Today’s Challenges

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**Choose rig Single Rigs Double Rigs Triple Rigs**

Drilling Rigs comes is different sizes and prices. Single Rigs are relatively light and capable to drill relative shallow holes only. Double Rigs are larger and more capable that truck-mounted Rigs. Triple Rigs are the largest onshore Rigs included into Oilsim in current version. They can drill deeper holes than anyone of the other types.

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**Choose Rig Max drilling depth is important**

Rig cost = drilling days * day rate The next task is to choose which rig to use to drill the exploration well. The rigs have different costs per day, and the drilling days depend on how deep you drill into the subsurface and which service providers you choose

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Service provideres Base camp (accomodation, cantine,+storage of equipment) Transport on land, cars/trucs Transport by air (personnel, equipment) Well services (pipe, casing , drilling mud Well analysis (electrical logs, cores)

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**Service providers Upto 9 Star quality- Good: normally costs more**

Bad: cheaper, but reliability is low, so you risk extra drilling time and extra costs Rig service providers are needed to operate the rig properly. Analysis, Shore base, Vessels, Well Services, Airways High-star-providers are expensive, but you may be more sure that the operation wil be smooth. Avoid though to use expensive providers everytime, as you will run out of money too soon. Medium-star-providers are medium-priced, as the risk involved are a bit higher than with the expensive ones. Few-star-providers are low-priced, and may be a good choice when you shall drill many and non-critical wells.

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**Environmental Impact Assessment**

EIA survey: more knowledge about the area. Less probability for drilling problems. Less severe consequences if you run into problems.

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Drill Position EIA: enviromental impact analysis shows where it may be difficult to drill. Place your mouse where to drill Place your drill string on a green cell. Red cells must be avoided.

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**Drilling position Layer 3 Eocene Layer 2 Paleocene Layer 1 Cretaceous**

As this figure illustrates, you can drill through all three horizons in one well. You can even drill a deviated well, so that the position is not exactly the same in all horizons. The deviation can be 1 cell for each horizon. Layer 1 Cretaceous

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Drilling Days To determine how long it will probably take to complete drilling, check out the “drilling Information” tab.

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Estimated cost Inputting estimated cost of drilling gives you credibility points. You need to add all the costs of the rig and the service providers together and multiply this by the number of days you think it will take you to drill. The oil spill control is voluntary but costs 5% of the drilling amount per day but will earn you more credibility points and cost you less to clear an oil spill if it happens.

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**Drilling Result Proven volume (MBOE) counts**

Test may increase proven volume Remember to tick the boxes! Drilling is instantaneous in OilSim and this is an example of how the drilling results might look like: In this particular case the well was drilled through all three layers (horizons). One prospect has been found in the Cretaceous layer Most interested in the Volume range as a measurement of the amount of oil and gas there Here we can see that we have found 8MBOE of PROVEN reserves but think that there is a POSSIBLE 1433. To prove up those proven reserves, we can test the well, by clicking on ”Do you want to test this prospect”

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After testing

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Reprocess seismic Cost $100000

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Value and ROI Volume Range, e.g Proven Reserves e.g. 1

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**Calculation of Value The total proven oil and gas = 18MBOE**

Allowing for 25% recovery factor 0.8 Production profile factor and 10% discount factor per year We have a total proven amount of 18mboe of oil and gas in our 2 prospects Now at a price of $50 a barrel but taking into account that only 25% of field is likely to be recovered. Behind the scenes a complex calculation taking into account: that the production will not be the same each year of the field’s life – so a production factor of 0.8 is used for this purpose That a discount factor is applied of 10% each year to take into account unforeseen issues that will affect the sales value

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**Behind the scene calculation**

18MBOE x 25% recovery factor = 4.5MBOE Sales price without discount factor -> 4.5MBOE x $50 = $225,000,000 Sales price allowing for production profile -> $225,000,000 x 0.8 (production factor) = $180,000,000 Reduced sales price with 10% discount factor per year = $ 67,397,022 So for those that are interested the behind the scene calculation is 18MBOE x 25% recovery factor = 4.5MBOE Sales price without discount factor -> 4.5MBOE x $50 = $225,000,000 Sales price allowing for production profile -> $225,000,000 x 0.8 (production factor) = $180,000,000 Now the system calculates that if there was no discount factor we would make £180,000,000 divided by 25 = 7,200,000 per year To this annual amount a discount factor of 10% is applied per year, so in year 1 our sales would be 7.2 million, but in year 2 it would be 6.48 million, etc. And then all these individual sales values per year are added together to give us our total expected sales value of 67,397,022

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**Appraisal From Probable volume to proven reserves**

When you have drilled the first well, you only have a small sample of the new- found oil or gas field. This is evident by the wide ranges of the area, thickness, quality, and volume variables. These wide ranges tell you that you actually do not know much about the field. After drilling and testing, your next step therefore is to drill another well – and test it. This is called an appraisal well. Normally it takes at least three or four wells into a field before the license block becomes economically viable. Sometimes it takes much more, and therefore you should not give up if the first wells into a field do not give any license value. However, you should give up if the upper boundaries of the field become so low that there is no chance that it becomes economically viable. This is often the case in deep-water blocks, where the CAPEX are very high.

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**Narrowing ranges Exploration well: First appraisal well:**

0 to 1572 MBOE (after drilling) 11 to 1266 MBOE (after testing) First appraisal well: 25 to 1033 MBOE (after drilling) 34 to 910 MBOE (after testing) Second appraisal well: 65 to 850 MBOE (after drilling) 101 to 752 MBOE (after testing) Only proven MBOE counts Here you can see an example of how the volume range narrows for each test and each well

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**Increasing proven volumes**

Appraisal wells - proven reserves increase Range between proven and possible is decreased So looking at another example of a different block. Here we can see 4 prospects that have had many appraisal wells drilled. Now the proven volumes are nearly the same as the possible volumes on 3 of the prospects.

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**Effect on calculation of licence**

Expected costs if you developed the field (CAPEX) and produced the oil (OPEX) So for the 4 prospects we have a Sales value of $1.473 billion , achieved through much higher proven reserves. We can deduct the expenses and have a positive value of our licence Now total expenses are lower than the sales value and so we have a positive licence value

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Drilling Summary After your first drill in each well, reprocess seismic Decide which discoveries to drill how many appraisal wells into Ultimately, you should either: Get a positive net present value, Or a conclusion that additional appraisal wells will not result in a net present value

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**Apply for more funds Click on Apply for More Funds Tab.**

1 KP for each $100,000 applied for. Answer the questions: All correct gives cash and you can keep CPs. One wrong gives cash and you keep ½ of your CPs. Two wrong gives ½ cash and you lose all CPs. All wrong, you get no cash and lose all CPs. Expensive money if less than 10 knowledge points: Apply for cash and be fined $5million for each $20million requested. If you run out of cash, you can apply for more money from the headquarters. This is done through Apply for more funds on the menu to the left.

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**OilSim day 2 Today’s Challenges Task 3 yesterday Task 5 Task 4**

Licence award, spread risk-negotiations Exploration & appraisal drilling Depletion plan & prodution profile 3D seismic maps Drilling rigs , Suppliers for The drilling phase Recovery factor, Depletion strategy Number of wells, Tube size Today’s Challenges

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**Challenge Make a well plan for each reservoir in your block, choosing:**

Number of production wells Tubing size Aiming to choose a plan that maximises value of block Increased sales value Decreased drilling costs

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**Nodal analysis Read the maximum well flow rate Most suitable Tube size**

Highest well flow rate

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**Expected production profile**

Maximum amount of multiphase fluid in one year

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**Reservoir information**

1. Click the Reservoir tab 2. Click the magnifying glass for the reservoir 3. Study the data for the reservoir

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Click on Drilling Rig

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**Reservoir information**

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Submit well plan Submit a plan for each reservoir.

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Combined Plan Adding more wells to the reservoir will decrease the average flow rate per well Because any additional well will be in a less favourable location than the previous ones have a drainage area that overlaps with a previous well In OilSim, the reduction is 2% for each additional well

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**Improve value-revise well plan**

Submit plans with different number of wells and tubing sizes Review Reservoir information after each revised plan Aiming to maximize sales value and minimize drilling costs, whilst increasing Recovery Factor You can amend your well plans until the deadline Credibility points – upto 100 kp if plans are optimal for all your reservoirs After deadline – Value of Licence will be adjusted based on final Well Plan submitted

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**Prospect evaluation ¯, S hc Depth Degree of fill Reservoir- thickness**

Area Input data Hydrocarbon saturation Oil shrinkage / Formation volume factor Gas-oil-ratio Gross rock volume Net to Gross Porosity GRV x N/G x Phi x Shc x Bo/FVF x GOR = In-Place resources In place resources x Recovery factor = Recoverable oil/gas Minimum – Most likely – Maximum - of each parameter Monte Carlo simulate in GeoX Results P90 – Mean – P10 recoverable resources

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