Petroleum Economics & Risk Analysis

Your team has been selected to study an interesting prospect – a sour gas reservoir on-shore in a foreign country which is Oman. The host government is proposing two alternative methods to develop the field, with gas used in local power generation, but at present only limited data is available, primarily from one well test and other reservoirs in the same country. You need to supplement existing data by consulting the literature and/or making engineering estimates as required.

Carry out the following tasks:

a. Develop a cash flow model using Excel spreadsheets based on the development plan for two contract scenarios:

i. The first scenario is concession contract in which all costs are handled by the operator, products are sold at market rates, and the government charges royalties and corporate tax.

ii. The second is a special service contract where your company handles all costs and is paid a fixed price per unit of gas produced (with ownership of any oil or condensate produced being transferred to the host government). There are no royalties in this scenario, but there is corporate tax. (You are advised to create a simpler version of the first spreadsheet for this scenario.)

b. Plan for the entire field to be decommissioned and abandoned by plugging and abandoning wells and removing and scrapping all facilities or other more-economic option. Costs should be spread over the life of the project by using an annuity. (This can be set up as a separate sheet in the Excel file).

Sample Solution