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SPE 28782 DEVELOPMENT PLANNING: A SYSTEMATIC APPROACH

Peter J. Cockcrofi: John N. Grant: KevinS. Moore*,GitaN. Warnohadjo, Energy Equity Asia
q

SPE Member

ABSTRACT
A primarygoal of an oil or gas field development is to maximize the presentvalue of the investment. A systamaticelly-prepared Plan of Development (POD) can assist operators in achieving this goal by ensuringthat all factorsare considered in evaluating, planning, and carrying out the field development. A POD should contain an evaluation of all major evants that realistically may occur during the fiald development cycle. By consideringthese events in the pianning stage their probability of occurrence, effect on operations, and risk-weightedfinancial impact can be analyzed before field development begins. Depanding upon the financial impact of the event, the field development strategy can ba planned to altar the probabilityof occurrence or to raduce the consequences of the event. The contentsof a systematicplan of development are presented and discussad: Design Basis, Exploitation, Operations & Maintenance, Engineering, and Economics. Two Southaast Aeiin FBld axamples are used to illustrate how field economics would have been enhanced had a davalopment plan been prepared using a systematic approach. evaluation. This permits management, joint venture partners, and governmentregulatorybodies to followthe reasoning which resulted in the chosen development method. A numbar of papers have addressed development planning. Behrenbruchz escribedoffshorefield development planning and d stressedthe need for flexibilii and simplicityin design and that geologic modelling of tha resawoir is essential to accurate resarve and produotiiity preditilons. The concept of riskweightingthe nat present value of the project was emphasized as nacessary for propar decision analysis. Buchananand Hoogteylings discussed the Auk Fmld, a marginal NQfih Sea . .- ._, and stressed ~he~ flQx~~~l&J in facilii dasian FMd , ... ._-... -, ---.=. . ---- -------(mainlyadd~nal well sbts) and continuous interatilon between a variety of technical disciplines ware keys to the economic successof a very complicated, marginal offshore development. Thambydurei et. al. summarized development plenning for the Jemeh tieldoffshorepeninsularMalaysia. Their work highlighted the importencaof detailed geologic and raservoir informationto properly design and plan facilities requirements. Egbogah et. al. preaanted an approach to developing Dulang, a largeoiland gas Wd offshore peninsular Malaysia. Flexibility, a multidisciplinary team approach, and a staged development were K@liihtad as key characteristics of the development plan. VVhii thesa are excellentstudiesof indhidual projects and types of developments, the detailed contents of a Fiald Plan of Davalopment were not presented. Referenca 6 contains guidelines for POD content but does not address preparation methods and the internal requirements for a POD. Both preparation and contents are discussed in this paper.

INTRODUCTION
Fold devebpment planningis not a new subje~ from very aarly in the history of the oil industry the benefits of development planning were recognized. Howevar, with the uncertainty in crudaprices,the advances in oil field technology and computhg capebi!ity, nd the smaller and poorerqualii resewoirs that are a often discovered, the breadth and detail of planning today genarally exceeds that conducted in tha past. With the large Invdmants often required today, it is necessary to examine all field development options in detail and to document the Rafsrsncas Uluetrations and
are given at the end of the paper.

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DEVELOPMENT PLANNING-A SYSTEMATIC APPROACH

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development and field oparetions compared to original plans.

DISCUSSION
Davabpmsnt of an oilor gas field, after appraisal and screening studies have shown it to be viable, consists of three major phases. Each phase includes certain documant~lon for which an appropriate management responsa is required as follows:

PREPARATION Preparationof a POD is an iteretiie process, in which concepts from various disciplines are combined into a general plan for evaluation. While one concept may be optimal from a reservoir management perspactiie, for example, when placed in the total schame it could make project economics less favorable. To - ----developan optimaipian Nom aii aiscipiines, an Wathie prcrcuSS is required it would be unlikely for individuallyoptimized POD components from various disciplines to combine into an optimized overall POD. The influence diagram in Figure 1 shows the key variables affectinga POD. To addressthese variables, a muitiiisciplinary project team is usually needed including geologic and geophysical, engineering, operations, and management personnel.Oftan one person is appointed as a project leader to coordinate, schedule and steward plan preparation. A clear delineation and allocation of responsibiliies among team members helps ensure the plan is prepared in an afficient and timelymanner. Also needed is definitionof approval and review timing and authority by management and nonparticipating experts. Periodic management review and approval of the interim status and results of the plan is essential. Tables 2 through 6 outlinethe main Setilons of a POD: Design Basis, Exploitation,Operations and Maintenance, Engineering, end E~QnQ.rn:@. ~.W SU~ry shouldalso be included, butthii willnot be dscussed here. Some Development Plans will contain a substantial amount of detail in each seotiin, while others will contain only summary information. The contents of a particular POD will vary depending upon the type of development under considerations(e.g. new fiald development versus intllldrilliig) and the projectstage being addressed by the POD (a screening study POD has lass detail than a POD submitted for Govamment and partner approval). DESIGN BASIS This section summarizes tha key planning parsrmetars of the development and includes a clear description of tha goals and objectifies of tha POD. The key parameters are used in the engineeringsetilon to develop detailed fsciliies and equipment requirements and specifications. A typical field development goal is: Developmentand depletion of a hydrocarbon resource with the minimum expenditure and environmental impact possibla wMle also maximizing recovary, net present value, and safety. Several critkal components of the Design Basis section are describedbabw, whk a more detailed list of these components is contained in Table 2. Reaamoir and Fluid Characteristics. The resewoir and fluid characteristics should be summarized and the basic data used in preparing the POD illustrated. Unusual propetiles (rock compaction, retrograde condensation, etc) that significantly affect fieia aeveiopiiierrt SiiOiuid be htghiiiiited.

Phase 1. Expbrsticn and

Prospective Project 2. Appraiaal

Resulting Documentation
a. Project Initiation b. FeaaWty study

and Davdopmanr

a. Planof Davaloprnent b. DesignBesieMamorsndum c. Project xecutbnPlan E a. ProjectStage,Computation, Cost,and Exception Reports b. YearlyFieldRaviawe

3. Production

The POD is the initial step in the development phase and explahs WTwill be done, whereas in subsequent phases all technical design and project management aspects are devebpad in detail, resulting in a Project Exectilon Plan, which explains HOW it will be done. The ptimary purpose of a POD is to serve as a project specification for the feciliies and the operational philosophy requiredfor new or supplementary produti!on from a reservoir. R provides management with evidence that all aspects of the projecthave bean identitled,considered and discussed between the relevant parties. It also provides assurance of a structured, optimizedplanwith emphasisplacedon basic data accuracy and full explantilon of facilii design and future operating requirements. By anaiogy a systematic POD can be compared to the pilots checklist prepared befora, during, and after every flight. The number of aircratl accidents thet could hava baen avoided with proper attention to the checklist is probably substantial. Likewise, the number of suboptimal developments that might have been avoided or corrected by appiicatiin of a systematic POD is substantial. Two actual cases are presented in this paper. Catilon must be exercised that a checklist-type approach does constrain creetiie soitilons, however, in many oilfield operations a systematic approach generally results in much improved results. Tabla 1 illustrates the initial stages of a typical oil field appraisalldevelopment Iiie cycia. This Table helps to illustrate an important characteristic of the POD, namely, that its scope and detailmay be adapted for use in all stages of field appraisal and devalopmant. The basic POD outline can, for example, be used (1) as a preliminary screening study after field discovary but before delineation drilling, (2) after delineation drilling, incorporating the new data, as a feasibilii study for management, (3) following management approval, as a submission to partners and to the appropriate Government --- . . R-. =-,-l A-.._,-- --4 ----- ml _...l lA\ ..,i+h esA fimmal mm mm m3vuupiTrrIL UppI UkOI =1w 1=1 WIU i .W d ,.,.1 ,=1 armrofibSS detail added, as an annual internal company review of the

396

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Production and Injection Forecasts. Final produtilon and injection forecasts should be presentad in graphical form, with high, medium and low cases presented, as appropriate. Wells. The numberand type of wells should be listed, including subsurfaceand surface equipment and operating requirements for those walls. The schedule of well and well aquipment .-, ,;.-... --4,. Wluulu alau Ue pluaulmcu. -L-.,1A ..1-.. L...-.--- ..4-4 Iubpllulllulm+ Engineering, Operating and Maintenance Philosophy. This
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upon the project, the relatiie contributions of the various components may changa, howaver, reserves, pricas, and deliverability are frequently the most impottant variablas affecting project NPV. Unfortunately, the conclusions presented in the Exploitation saction are typically tha least reliable components of a POD k---, ,-- u: Al.- UIIGUItWIL IUS -f LIIC .,--- A-:..*:-- III uumrrrmmg :- A-*-:-:----------a uuuuuac Ieselves unu deliverebilii from a limited number of exploretion/delineation walls. This being the case, it is prudent to spend a significant and in mramsrimn +h - Ewmlniktinn .,,, - bny,,.a ea~inm - ,,, m+ A+ tirma q,, affart . ,,, peya,,,,~ , rnna ,. , .,, ,, q,,, .,, ev.,,, and ensuringthat the resultingresewes and rate praditilons are properly risk-weighted. If additional data are needed, rammmendetionsshould be made to obtain that data basad on tha value of the information.7,a,g These recommendations should emphasizethe effects of not having the data on the projact in a cost-benafti analysis format. Tha importanceofthe Expb~n sectionhighlightstha naed for the development planning process to begin during the prospect evaluationphase of an exploration program. The objactiia is to maximize the value of informtiton obtained from each well and not wait until discovary before planning data requirements. In summary, the exploitation portion of the POD contains information about resarvoir characteristics, fiald resewes, deliverebilii and reservoir management options. The contants of tha Exploitation satilon ara outlinad in Table 3, whila some kay elements are discussed below. Geology and Geophysics. Basic data, maps and the final geobgii and geophysicalmodal of the raservoir and associated aquifar should be prasantad and discussad, along with commants about fault, fracture, and shale extent and transmissibilii. The degrea of uncertainty in the interpretation shouldba highliied, and alternatiia sceneries presantad along with the probabilities (of occurrence) assigned to those scanarios. Data required and plans for pariodic updates to tha geologic model should be statad. Hydrocarbons In Place. Volumetric astimates of oil, gas and condensate should be provided for each identified rasawoir or zona withthe fieldtotalsbesad on a geological model. The basis of tha calculations should be givan and their sensithfity to uncertainties in the input parameters highlightad. Calculations can be done on a probabilistic basis leading to axpectatiin curvas and/or low, madium, and high deterministic cases. If a determinii method is usad, the basis for each casa should ba presented. Reaewea. Estimatesof recoverable raaerves for each reservoir should be providad. As with the estimates of hydrocarbons in place, tha ranga of recoverable reserve astimatas should ba provided with the probabilities that tha Operator attaches to them. Resawoir simulation studieslreports that support the recovary estimates should be referenced. Resutts should be given for primary racovary and for alternative schemas of .a.*nA-n* , ../4 a.hmn.ad ,**A.-W ~~~ gg$<~~~~~~g!~ -Qi?,,s, ~,, -,, !,-,,- ,-. -,,. reservoirs, he choiceof depletionand separation method should t be discussed.

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philosophy concerning facilias design and operating characteristics, spending constraints (capital, operating, and maintananca),projecttiming, uncertainty in resarvoir description and production forecasts, flexibilii, abandonment, and safety and environmentalconcams. An axampla of a typical oparating philosophystatemant is: To minimizestaffing levels, the productionfaciliies will be monitoredand ramotely controlled,to the maximum safe and practicalextent, using supatvisory controland data acquisition (SCADA) systems. Installations. A summery of the number and location of facilities requirad to support the wells, separation, injetilon, watar disposal, gas compression, and produtilon utMies should be presented. Transportation. Tha preferred option for transportation of crude and gas to markat should be outlined. Parameters govamingtha dasignof this option(distanca to market, volumes, requirad pressures, etc.) should be covered. Infrastructure. Any infrastructure required, such as roads, buildings, runweydheliports, right-of-way clearances, that are not part of the installation saction should be included hare. Government and Third Party Consent. Details of requirad Government and Third Party Consent, such as land rights or unitization, should be summarized. The timing and plan of approach to secure consent and Government approval for development should be reviewed. Safety/Environment. Applicable regulations and standards should ba outlinad and a summary of major safety systams, environmentalstudies,and environmentalresponse plans should be prasanted. EXPLOITATION The Exploitation seti!on contains the subsurface plan for the development, and as a rasuit is the most important part of a POD. This is because the in-place volumes, reserves, field daliverebility, and reservoir managamant strategy driva the completion, facilities, and transportation schamas. The development stratagy-scanario-forecast evalu<lon cycla is besed upon tha Exploitation setiion data and results. An example NPV sensitivitytornado chart in Figura 2 shows tha
muarridimm instwtfi-n-a .-, , ,,, QJ ,, , ,p, ,a, ,g # , +ha ,, ,= Ewmlaibtkm -~,,,.a,,, ee.4.+inm h,, , eg,,, , , +ha q ,Ia.ma ,Q, ~g

sensitivityof the project nat presant valua (NPV) to the reserva and initiil rata estimates. Reasonable variation of other componentsresults in much lower changas in NPV. Depending

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DEVELOPMENT PLANNING-A SYSTEMATIC APPROACH

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Reservoir Management. The resewoir management plan should use the gaologic model and incorporate deta such as capillary pressure, relatiie permeability, etc to evaluate sensiti%iasto drivemechanism, pressure maintenance, attiicial Iii well number,well completion (vertical, horizontal, or multiple laterals) and fsciiii/well timing. Typically, depending on the point in a fields lie cycle, reservoir management studies will follow a progression from anal~lc or single well models, to cross-sectional simulation models, and finally to full-field simulation models of the major reservoirs within the development. Guidelines resulting from the reservoir management plan for production controls(ofRake rate, GOR and watercut limitations) and measures to conserve reservoir energy and optimize ultimate recovary should be highlighted.The offteke guidelines and strategiesshouldhave realisticoperstiinal constraints. The guidelines should be documented, reasons for their seletilon presented, and altematiie strategies commented upon. Workover, well servicing, and zona completion plans, by well, area and field should be discussed, highlightingtheir timing and effect on rate and recovery. Reservoir and Production Engineering. Plans for routine observations to monitor geological, petrophysical and reservoir characteristics inthe devebpment wells should be included. The program for downhole pressure surveys and other measurementsto establiih and monitor efficient depletion of the reservoir should be addressed. . - .... Development ormmg. The proposed drainage pattern and drilling sequence for produtilon wells: water in!etilon and gas injactkmlrecychng ells should be given. The degree of flexibility w and contingency with respectto number of well slots or locations available and tha timing of the drilling sequence should be d-ssed, showingthe consequences for recovery and planned level of production. The scope for future unspecified drilling requirements, such as the high recovery case or enhanced recove~ schemes, should be considered. The program for completion intervals should be described and some indication of the completion and perforation philosophy given, especially in a layered sequence where separate layers may be treated as discrete reservoir units. Completion options that reduce costs originally and throughout fmld life should be sought. Well Performance Prediction. The method of preditilng well performance predictions should be presented, including a graphical illustration of vertical flow characteristics at various anticipated water cuts. This provides an indicationof reservoir pressure levels at which the wells are likely to require artiicial Iii. Typically, nodal analysis is used for these preditilons. Production and Injection Profiles. Field life and produdlonhjetilon rates should be given along with the rsnga of uncetteinties and the assumptions underlyhg the forecasts. The consequences of the high or low recovery cases applyhg should be considered. The annualforecastproductionof oil, gas, associated gas liquids and water should be given for the anticipated lie of the field in

tabulatedand grephml form. These should be broken down into contrib~tons from each significant resetvoir and Iayar. The extentto which the forecasts are dependent upon assumptions concerning well capacity, sequence of drilling, workovers, and wellservicingshouldbe stated. Maximum and minimum profiles showing the range of such uncertainty should be given and illustratedon a graph. Injectionfluid volumes should be given for the same period and in the same breakdown (raservoir or layer) as given for the produti!on profiles. Gas Production Profiles. Where gas is subject to a supply contract or is to be used for injection, the following information shouldbe provided as a minimum: annual forecast of field daily contract quantii, field delivety capacity, fuel & flare ccnsumptiin,timingand effect on field deiiierebiiii of adding or increasing compression, volumes of condensate or associated gas liquids,and heating values of the gas.

OPERATIONS AND MAINTENANCE Organization, lines of authority, operating and maintenance needs, safety and emergency planning and provision are all important parts of this sadlon. Another element of the operationsand maintenance plans is their feedback loop to the exploitation plan - as data are gathered during the developments operationalphase, the exploitation plan should be revisited to determine if changes are needed. The operations and maintenanceactivitiesthat should be discussed in the POD are outlined in Table 4. Organization. This section includes a description of the main organizational structure, reporthg responsibilities,and lines of authority during the significant phases of the project following installation. The control of operations during the drillingperiod and produtiion period should be highlighted with a clear delineation of lines of authority, particularly for an offshore location,. This can reduce problems that might occur during
IYMMYmrant --. .--,, -,.. setiiitinc ...,.. in .,, ,., tha-

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Production Opamtions. Thii subsectionincludes all operational aspectsof the wells, fscilii and transportation system, from the pre-commissioningto normal operating mode. Contents of this section should include: a. Pmcommissioning,pm-start-uptechnical audits and timing, preparation of Operating and Maintenance manuals,cerWaticn by appropriate regulatory bodies, and safety inspection. b. 011 or gas produtilon start-up concurrent with development drilling. c. Normal operation and supervision procedures, d. Unmanned and/or remote control operation during produtiion. e. Safe workingprocedures,emergency plans and lines of control, environmental atilon and response plans, etc.

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COCKCROFT, PETER J., GRANT, JOHN N., MOORE, KEVIN S., WARNOHARDJO, QITA N.

Maintenance Operations. ActMtieswhich should be considered inthii subsectionincludereguler schedules of maintenance and shutdowns, spare parts, breakdown and repair provisions, inspectionrequirements,work order and reporthg systems, and work permit/safety systems. Drilling, Completion, and Suweillanoa. The development drilling, future workover, and well servicing and surveillance plansshouldbe presantedand discussad. Schedules should be shown, and planning for and handling of concurrent actiies discussed. ENGINEERING Thii sectioncontaJns information about the detailed engineering Usedto designthe productionfaciiii and transportation system. It should detail mathods used, major assum~lons, and alternatives investigated. In the early stages of a project, especiallybefore management or government approval, datailed design engineering will not have been completed so projact schedules for this work should be presented. An outline of the topics to be covered is given in Tabla 5. Field Installation and Drilling Facilities. An overview of field installationand drillingfacility characteristics and the schedules for engineering, procurement, construction,transportation, and installationshould be presented. Production Facilities. The design basis, methods used, arrangement, components, and scheduling of the production facilities should be discussed. The seletilon criteria for the process and arrangement of the faciliies require description along with a discussion of altematiie schemes evaluated. For example, the reasons to combine or separate compression modules from the process facilii platform might be discussed, if applicable. Safety and environmental systams should be addressed. Hydrocarbon Tranapdetion Systems. The design basis and selacted arrangement for flowlines, transfer pipelines, compressorstations, loading/unloadingsystems, and terminals shouldbe presented. Alternativesconsideredand cost raduction options(smaiier iine sizes and use of fritilon/dreg reducers, for example) should ba highlightad for aach of the major components in the system. Safety and environmental systems should also be presented. Project Organization. The organization required to execute the davebpmant plan and subsequent operational phase should be outlined. This providas a blueprint for management on tha mathod of proceeding with the development and operation followingapproval of the POD, and it allows project costs to be e.Mmated. ECONOMICS T% !%mtmics sectitirrcombines costs arid price forecasts witii output from the previous setilons to allow management evaluationof project viabilii. An important part of this setilon is the risk analysis and associated sensitii studies. Critical factors that will make or break tha project must be identiid, quantified, and their probabilities discussed. It is at this point that the value of information becomes apparent, and whera

additional information, although possibly very costly, may become economical from the overall project perepectiie.to, Table 6 is an outline of this setilon; some components ara discussed below. Capital Coat Eetimatea. The estimated capital expenditures shouldbe @vanand shown by year and as cumulatiies. A time schedule, showing both the costs and the items on a Gantt chatt is a good illustrativedevice to show critbal path itams for initialdevelopment. Estimated capital expenditures by plant, faciliiy or platform should be given, distinguishingas far as practicable between individual subsystems (oil, gas, water, ate.). For offehora feciiities, the distributionof estimated costs over modules and decks should ba given. Estimated capital axpenditura for each structure should ba presented, disthguishing between major components of both fixed (deck, substructure, piling, etc.) or floating (clacks, hull, mooring, risers, etc.) structures, as appropriate. Capital expenditures should be shown separately for flowlines, interfIeld/inter-platform pipelines, offshore loading system pipaiiies and feededlink pipelines, distinguishingbetween liquid and gas pipelines.Capitalaxpendtires for onshore and offshore trunk oil and gas pipelines should be shown. Costs for intermediate manifolds, risers and booster (puqr!ccm?pressm) stations should be included. Costs of pig launchere/receivers, manifolds and slugcetchers should be included. Estimatedcapital expandkures on terminals should be outlined, distinguishing between crude stabilization, gas processing, storage, effluent treatment, water treatment, pumping, tanker bading, meteringequipment,sefaty/firefighting,power and water supply, site acquisitionand preparation, CM engineering work, Officas,etc. Estimated capital expendhure for central base faciliies (staff housing, recreational faciliies, offices, workshops, yards) and infrastructure such as roads, wharfs, jetilas, etc. should be given. Construction,transportation, insurance, and importation costs should be presented, where significant, for the components to which they apply. Costs arising from terminating produtilon, well abandonment according to reasonably anticipated regulatory abandonment guidelines, and removal of equipment at the end of field Iiie shouldbe @an. The anticipated reaiiiation of assets disposed of or theirvalue on transfer to other projects, e.g. compressors, separators, gensets, floating produdlon equipment, should be considered.These costs should be given for the years in which they ara expected to occur, in as much detail as appropriate. -. _.Al... . . . . . . . . uperasmg uom mmmatea. Operating cost estimatas shouid include itemked Iiethgs of a. me cost of materials, supplias, fuel, catering costs and contrectad services attributable to produtilon, treatment and trensportatiin or disposal of oil, gas or water.

399

DEVELOPMENT PLANNING-A SYSTEMATIC APPROACH b. Maintenance costs of plants, equipment, sites, platforms, offshore loading systems, other offshore structures and fieldffeeder pipelines, including materials, replacement parts and contracted services for inspedlon, maintenance and repair, distinguishing for offshora between topside and subsea work (excluding well maintananca). c. Wall maintenance costs including wellhead equipment and flowhne repairs and maintenance, workovars and downhole actiiies. d. Transport costs for personnel, suppJies, meteriais,equipment nd replacement parts by land, air a or sea to the fiaid and between sites, plants and platforms. cost of a. For offshore operations: the Sta!?dbykmerger?cy vesse!s m hdkmpters or the fields share of the cost of any such mutual support arrangements in the araa. f. Any other operating expenditures that are not allocatad to tha appropriate funtilon, including head office operating expanditures, or financial charges for provision of working capital for all the cost areas describad abova, should be spacified if thay are of a signifrcentmagnitude.

SPE 28782

fractures and iow-permeabiiii matrii were conducive to aarty hydrocarbon depletionfrom the fractures with subsequent water entry from an undertyingaquifer. In spite of offset fieid axparience, the operator made no provision for artiiciai lift or for shutthg-off bottom-water. As a result, ona of the weiis ioaded-up and diad at about 80% water cut aftar producing lessthan one year. At the time it died the for well was etili producing over 1,000 BOPD, Rough estimates indicate that high voiume artiiciai iii wouid have increased oii produtilon to over 2500 BOPD (whiie handling increasing amounts of water) and resulted in sustained oil rates at high water cuts. After additional weiis watered-out and saverei workovars were conducted to sidetrack the orighal compietiins, the field is currentiy(August, 1994) producingat about 25% of the originai forecastrate. Even duringthe workovers,when the provisionfor artitidailiftcouldhave been made reiatiieiy cheapiy, no artifidai iift was instaiied. Other altematiies, such as multipie laterals wlich mighthave intersectednon-watered-out fracture systems, were not seriousiy considered. in this instance the oparator feilad on at ieast two counts: a properExploitationstudy was not conducted, and management was not committad to an optimum development. The raasons fortheee faiiureeare unknown,althoughthe operator maintained a minimsistaffand upper management were not accustomed to high technology applications. Whatever the reasons for the failures, the iesson is the same: to optimize a development propar pianning is requirad and those pians must ba implemented. Exampie 2

A brief explanation should be given of the provision that has been made by the operating company and the partnars to meet civilIiibiiii cMms for pollutiondamaga arising from any oil spills occurringduring the Iifa of tha field. Revenues. In this subsetilon the price scenarios for oil and gas are datailed and combinad with the production profilas daveloped in the Exploitation satilon to ganerete the gross revenue stream. A riskedd~bution of possible price scenarios should be presentad and discussad, with details of the distrib~lon chosen to summariza project aconomics. Overall Economics. This subsetiton contains the economic yardsticks that most managements use to evaiuate projects, inciuding net present vaiue, internal rate of return, maximum negatiie cash flow, payout, investment affrciency,ate. FIELD EXAMPLES Two exempias are presented illustratingthe banafits of proper devaiopment planning. They sarve to illustrate that if the davaiopment pian is not prepared in a systematic way, project aconomics can be seriousiy affectad. Thase ara actual cesa histories although tha field names and other information have not been inciuded for confidentiiiii reasons. Exampie 1 Thii field, iocatad in a deap water, remote location in Southeast Asia, is in a high perrneabilii Miocene Reef formation. The formation is fractured and axhibits high productivity indices Wiowingstimulation. Offeet fieids have exhib~ad strong bottomwater drive,withme oii produdioii rate rapkiiy ciiminisiiingw+ian water encroached into the waiibore. The high-permeabiiii

This smellonshore oii and gas-condensate field is in a Miocene carbonateformationwith reietiveiyiow perrrwabtiityanti pomstij. Logsand initieiDSTS indtiad tha raservoir containad an oil rim that was ovarlaid by a gas cap and underlain by water. During shotiterm production teats two welis had oii rates of up to 2,000 BOPD and gas rates of 4 MMSCF/D from aach weii. The gas rates (and GOR) wera increasing at the concision of each test and were substantially greetarthan the soitilon GOR. Based on thase 6-hour tests, savaral additional weils were driiled to maximue the oil production rate. No additional tasting was conducted on the originaltwo waiis. Tha add~inal weiis ancounterad a retrograde gas cap instead of a producible oil rim. Daspite the apparent iarge gas cap, normai temperature separation feciliiies were designed and insteiied to handie ovar 6,000 BOPD. Furtharmora, no provisionwas made to re-inject or markat the produced gas. Unfortunately, shortiy after produtilon began gas-oii ratios increaseddramaticallyinthe two oii weiis. The maximum oil rate fromthe lield eftar production beganwas 2,300 BOPD and it has continued to decrease since that tima. The thin oil rim was assentie#ybypassed by water from beiow and, at structure top, by gas from abova. Tha fteid was produced during the naxt eighteenmonths,condeneetastrippadusing normai tampareture separation, and gas flared whiie a gas contract was negtilatad ~h~f pQ@~ ver 0~CF Q 1 --~ n -== --lee. iimainetsht+ -1 mu- ~-- e-i ,S8 S--..-=. ~~~~g .=.. of gas were flarad; raiatiiely iow-cost iow-tamparature

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SPE 28782

COCKCROFT, PETER J., GRANT, JOHN N., MOORE, KEVIN S., WARNOHARDJO, GITA N. 2.

separationequipmentwould have yielded an additional 300,000 STB of condensate from the flared gas. Hed the operator systematically evaluated the uncertainties in the exploitation plan for the reservoir, the possibilityof high GOR production could have bean evaluated end expected production rates determinedon a risk-weighted basis. Based on haua tl.:- EIlaly ala, k..;lw-e +.. Upullucw ---l..-;a-ti-i-c. tqw= l;-, ii.+=.--r..,.sm, -i-h+ Lllla Iaullluva &w r-v. a, ,,,v~m,. .u-.been installed and, more importantly, a gas contract and marketingemengementnegotiated. Furthermore, since the field CQU!~ hwQ easilv, conducted a long WSS~n~h~re !h~ omrator ----------r -----term test of the oil wells and would have found that the gas-oil ratio increasad dramatically. There was evidence from offset ftektsthat hgh initiil oil rates in the producingformation declined significantly, and this also should have baen considered in the plan of development. It shouldbe notad that, in this case, several of the uncertainties iAamtii.d h, a+ umra mnt am+afi I Innn ~Q~ -a.- - ,-, ,.,,,= frw rnam-maman+ w, ,, ,,,-, ,a~ca,,s?,,. . ..-, - ,,. .- ~. . . planning to rasult in a successful outcome, management must be amenable to changes and data requirements identified in the development planning stage.

3.

Behrenbruch, P.: Offshore Oilfiald Development Planning: Project Feasibility and Key Considerations, SPE 22957, Asia Pacific Conference, Perth, Wastern Australia, 4-7 November 1991. Buchanan, Ray and Hoogteyling, Laurens: Auk Field Development A Case History Illustratingthe Need for a Flexible Plan, Journal of Petroleum Technology,
ndnhnr -.-, , 1070 , ,, i, 2fK.4 ,, -. 119

4.

5.

6.

7.

Thambydurai, F., Mustapha, A.F., Mueller, K.H, and Dxon, M.R.: JemehGas F@ldDevelopment Planning, OSEA 88199, Presented at the 7th Offshore South East Asii Conference, Singapore, 2-5 February, 1988. Egbogah, E.O., Chandramohan, S., and Embong, M. K.: A SynergisticApproach to the Development of tha Dulang Field, Offehora Peninsular Malaysia, SPE 25335 presanted at the SPE Asia Pacific Oil & Gas Conference, Singapore, 8-10 February 1993. ~ l%vkinn _,. . . G9niA9nl?n Datrnlm Im Fnminacwinr! -.= e , -., -,--,,, -,,s,-. -.-, -.-.., Department of Enargy, July, 1983. Haldorsen, Helge H. and Van Goti-Racht, Theodor Resawoir Management Into the Next Century, NMT 890023 presented at the Centennial Symposium
/Jetro/eurn Technology Into the Second Century, New

8. Throughoutthe text the POD was presentad and discussed in a saquantialmanner, however, this is not the optimum method of preparation. Indeed,the ordar presentad harein is generally not the same as the orderof work. Typically, the Exploitationsetilon and Racie is p~epe~ed f~~ ~eri~~~ eennarinc ,- ,, - tha Ilaeirin -,,, ., ... ---.~.. -.. -.-, Engineering, Operations/Maintenance and Economics sections ara combined in a strategy-scenario-forecast iteratiie loop until an optimal development strategy is identified. Often a parallel approach by a multifaceted team is the most efficiant method of conducting the work. During the process, there should be many feedback loops so that the development plan evotves towards the best available option and effort spent on uneconomical options is minimizad. Questionsthat shoukfbe asked throughout the process include: 1. What are the alternatives? 2. Are the data reliable and are additional data required? 3. What flexibilii do wa have in the plan, and how much are we spending for this flexibility? 4. What componentsshouldbe emphasized, and which should be de-emphasized (as determined by their impact on project economics)? With the properattentionto detail and periodic management and outsida review/acceptance, a POD can ensure that the project is devebped optimally,as far as the accuracy of tha geology and engineering data Wiiiaiiow. 9.

Mexico Tech, Socorro, NM, October 16-19, 1989. Lohrenz, J.: New Values of Our Information,Journal -f D,.t.,.l-..= T,,-k..,.i,-., A..e;l .Iaan UI I- WLIUIWU1l I 1 Wwnluluyy, npt II, lUWU. Satter, Abdus and Thakur, Ganesh: J.ntearated - A Team ADD each PetroleumReservoir_ement Pennwall PublishingCompany, Tulsa, OK, 199;. Edwards, K.A. and Behranbruch, P.: Tha Use of Well Test Results in Oi Fieia Daveiopment Pianning in tine Timor Sea, Journalof PetroleumTechnology, October, 1988, 1372-1382. Hartlay, R. and Bin Jadid, M.: Use of Laboratory and FwldTestingto Identify Potential Produtilon Problems in the Troll Field, SPE Production Engineering, February, 1989, 34-40.

10.

11.

REFERENCES
1.
Lester Charles: Petroleum Produtilon . . a- 011F~bDmarUj McGraw-Hill Book Company Inc., New York, NY, 1956. Uran,

401

TABLE 1. APPRAIBAIJDEVELOPMENT

CYCLE

TABLE 2 DESIGN BASIS SECTION - MAJOR COMPONENTS

EXPLOITAllON

TABLE 3 SECTION - MAJOR COMPONENTS

2.0 1.0 1.1 12 FIELD LOCATION RESERVOIR PRODUCTION 1.2.1 1.22 1.2.3 1.2:4 1.3 AND FLUID CHARACTERISTICS AND lNJECTfON FORECASTS 2.1 Resewdr Mmsgenwni ObjscWss snd Plsns Productbn and Injsclion Rsles Resewo4rs to Se Developed Baq!mrn Qf R@40Ndr laV.54Qgn&-!f

HISTORY AND STATUS 2.0.1 2.0.2 2.0.3 2.0.4 Oii q Apprsbd nd Licsnssssnd Op+rstcfs Imhad Offsst Opsrstm and Locsl Inhsstrudum Offssl snd Lwk41iko FmldCampmism

GEOLOGY AND GEOPHYSICS 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 Sdunic Osts Btrudurd lntsrpmtstbn Bt@rsDhcmd 0ff3st WsMOsts Rsssraif Dosc@on @lho Fisld Maps snd ~ms

VW3Ls
1.3.1 1.3.2 1.3.3 ?.~,~ 1.3.5 1.3.6 Production (suhses or pldfonn, singles or duds) Gas Injsdon Wsfer Injection -E..4..--,! , ,,, ,. . ... -.. ., Imat DA, .N.. Wu. ..-.f . 4,A D-, -.,, --...- Ws4 Con@sfk3nrEqulp4nsnl Outlne wing of Walls OPERATING 6 MAINTENANCE PHILOSOPHY 2,2

PEIROPl+YSICW AND RESERVOIR FLUID PAWMTERS 2.2.1 2.2.2 ~,~.~ 2,2.4 2,2s Pstroph)sical Intsrprststbn Rouths Cm #mdyds st AtmOsphaic q wdOvsii.urdm PK .AI . . .. ..b& . . . m-..,, - . . . m DA ..-. ---0 -!. .--0,... - -w r r....,., . . . . . . .,,,,, ,.- W, v,, PvT AJlslysk Rssstir FluM Propdiss

1.4 1.5

ENGINEERING, lNSTALIATfONS 1.5.1 1.5.2 1.5.3 1.5.4 1.5.5 1.5.6 1.5.7 1.5.8 1.5.9 1.5.10

2.3

RESERVES 2.3.1 2.3.2 Hydnmsrbonsh Plscs Hydrcutbon Rscowy Pisn

Wdb @3d@AsUofher) Locsdions of Wdb (onshors, psr @sfform or 6ubsea) ntd overall Dssign Rdss wwsd?%wfiw D-k Oiffia-r Sspsrdion snd StabiHom Fad31ks Wster lnjsc40nfDispmd Fsd31ies Gas Compfss@on FadMfias G@sRainjsdion FadMiss Gss Flsriw Fadhs Nduml Gss Liquids Rscaery Fsdiilies Power G.snersiion Faciiidss TRANSPORTATION SYSTEM

24

RESERVOIR wOWGEMENT 2.4.1 2.4.2 2,4,3 2,4,4 2.4.5 2.4,6 2.4,7 2,4.8 2.4.9 2.4.10 *WC sfd Etwlnmtig Modsls of Reservoir DtWs Modmnbm and Rsssrwb Contiwily W snd Fidd OsWsrsbilky ws!s$9cing an4cGm@sUmstrsbgy Rssswok Dsvsbpnmnl Plsn ~t ~ FISn - T!mJng nd Localion q %sssum Maktsnancs Bclwms #Jtifcm Lin lnsfxwsd Rscowv Fsrfmmsnds Mc+~ PROFILES

1.8 1.7 1.9 1,10

HYDROCARBON INFRASTRUCTURE GOVERNMENT

2.5

FIELD LIFE AND wa3ucnof4 2,5.1 2.s.2 2.5.3 2.5.4 F*M Lifs ProductionPrOfSss Injsctbn Profilss Gss ProductionProtilm

ND

THIRD PARm

CONSENT

SAFETYH4VlROf4MENT 2.6 PROC+JCTION & FACIL~lES ENGINEERING OVERVIEW 2.6.1 2.6.2 2.S.3 2.6.4 VW -:z~rnsnt Wsmssds %ductica FadMiss Tmnspwtstim Sptsm Mdslhuw, Wstsgy

402

.
TABLE 4 & MAINTENANCE SECTION - MAJOR COMPONENTS TABLE 5 SECTION - MAJOR COMPONENTS

OPERATING
3.0

ENGINEERING

(3PERATIOIW3PHILOSOPHY :1.0,1 :1.0,2 Gmomt 0WIW3W ot Pbnnhg S6sb - FluidRa3es,Pressures,Controb Fwi3Nyq ndWa30per63bns

4.0

IFIEIJ INSTAUTIC+4

40.1
4.0.2 4.0.3 4.0,4 4.1

3.1 3.2

ORGANIZATION f>R~T(~N <).2.1 3.2.2 :).2.3 :1.2.4 :).2.5 3.2.S :).2.7 12.S 3.2.9 :1.2.10 opp~T,oNS

Onshore Ck3 WOIK - CanW, Roads, Fhwlkw, OfblhomSub4tNcturas Camatbm and hsurmm Ovumfl 12uamy Cotsrol and QualityA8suranca

OtC

IL3131LLIFK3 FACILITIES ,4.1.1 ,4,4.2 Lowitiom AOXISSRoads mid S@Ps

G6n0r4106w@3bn of PmducdonOpOratbnsFIIases Pmans and IN4sy Cantrol Systwns S3813+Pand SMdowm PfOdUM Ma)w ~ ~s Intuibaa WSIIOLhw lns38hScms TOSSW@ P@4hn 03watbm 6uP4@401YCantrc4q Oata AcqubSim Systems nd Com)cbn Cm3m3q Monitor@ nd 0m4r @cc3s

*,2

IPROWCTION FACIL3TIE!S 4.2.1 ,4.2.2 42.3 4.2.4 4.2.5 4.2.S 4.27 4.2.S 4.2.S 4.2.10 42.10 4.2.11 4.2.12 4.2.33 4.2.14 4.2.15 General Afmngmnmt PMC-S FmNlbs as LSMZSSMand Compressbn Metofiw AJ3McblLSI FdiWies Irljwsm Plmt W4tw L3bp0841 uWIlas, Tobemwnmlm3bns and FbM Acamnwbtkm P03uL40n Pru.mmml and control Fin Suppm8bn Sys3eM sah~ q Emumtion FaciWs and P3ans nd EnMngwwy Shut-ocmn sy5t0nn Elmb3al Sys3em[ Corrprwwd Ak $l@m Conudon Monitxrirw md Con3rol Envtronnw4al Mw!410thgPbn

3,3

IUAINTSNANCE OPERATIONS 3.3.1 S.3.2 3.3.3 3.3.4 3.3.5 G41wIMIOVWVIW on Wdhn8 Pc4bYand Mdntenanco Pbns Sohmlu@ d MaMcnmca Srdkdow a)d R#r Provbbn+ P,nllws q S8fc4ySyT3ems nd Impodbm Rqukwmnb - Sta3@W/CQWImY

3.4

DRILLINQ, c(2MFtET10N MD SURVEILLANCE P3ANS :1.4.1 :1.4.2 :).4.3 :1.4.4 3.4.5 3.4.s X4.7 :1.4.8 Genoml 0wdp3im of Pbm R* l~ q Mcb3ksUm Deta38 d 6utfsIc00rw131 Fwilitbs and Equlpmmt Mud. Casha and W EW.mtbn Pmgmm Coqpb3bn T~ q Equ@msnl nd C6i3hgand COmpbSm COs34mdlwhg Rasw+oiI and WW Suwamwe Pc2we3 w ahwhtbn -~

4.3

HYOROCARW2N TRAN6PORTATIC44 SYSTEMS 4.3.1 4,3.2 4,3.3 4,3.4 4.3.s 4.3.6 4.3.7 4,3.s 4.3.0 4.3.10 4.3.11 4.3.12 Pphn d I%wwm P@4bw Pmphg and Comprosw Sm3ions Sham Ta~8b Lnatbn. CwmmhiP md LWOUI P@sm ManSold Turti Pand USlitYSYs3em4 st0f8gs TwrI?4MlMarina. Road qnd Ran Loadho Tmmhml EflNont Tma3mm4 Sahky F8c2M6s CX%horaswwc q Loaling d cwodon Monitoringq Con3rol d Pohtlon Pmv8ndbn q cordJoIM-sums d

3.5

SUPPLY ANOITRANSPORT WERATIO+43 :35.1 :3S.2 3.5.3 Gem)ml - SUPF4Y Pahb, 0NW4nd R6w Pfldng AAWlwhwl.md TMMPO13Eq@ment ad Procedures 011131)LI PmductiaI SUPW Lo@tim and

3.6

SAFETY M4CI ENVIRONMENTAL 4.4 :1.s.1 :1.S,2 .%fay Ph30snphyq Rohmw to Safety Mmwl d EnvSonm6ntdPhlbsophy md Studbs PRoJIECT ORQANIZATICW 4.4.1 4.4.2 4.4.3 4.4.4 4.4,5 4.4.s 4.4.s PMW Planning nnd Tti Es3imtes and Rehlbnshps ~mlzatkm, Re COndm* and Prwwenwh Ctuali3y Canlrol ad **umna Cost tWSMI q Re@h31 nd L3Nign CIUWOS and Consult8tbn w 3rd parties Abnndonmm3

Figure 1. InfluenceDiagramfor Field Development

TABLE 6 ECONOMICS SECTION - MAIN COMPONENTS

5.0

CAPITAl COST ESTIMATE 5.0,1 5.0.2 6.0.3 5.0.4 5.0.5 5.0,6 5.0.7 5.0.s 5.0.9 5.0.10 5.0.11 5.0,12 5.0.13 5.0.14 5.0.15 5.0.16 5.0.17 5.0.1s 5.0.19

olhhom FktbdFbating ~r. Fbld P@SIICS Trunk P@UIW SubsM FmUSSS 5km@Lodkw Tumhnb OWSII- LW.SW FaciStbS shim and k40bSaFkmtkM Ewbmd

C9i4mMd=c-

R!23&tcmb

costof Futhw Dwokww@SWdbS Imumnm q CwtkndOn nd

5.1

OPERATINQ COST ESTIMATES 6.1.1 5.1.2 5.1.3 5. f.4 5.1.5 5.I .6 5.1.7 5.1.8 5.1.9 5.1.10 5.1.11 5.1.12 5.1.13 k4w8Bmd S81mkn-EwbkW@S~m Fmdts41011 ~ Fbld Piwlkw and Anc+kmyFwNRbs M8htUmnw0fPbn3, ~< W M~nQ Lo$skiM ssw q EIWOIIIIWII nd FmSlbM Chui.r@sl ofoloathg) l%du~ TmkenT40a~83 Fmik#!l Tnmk FIPoIIM Cwm@I co* tnwmncemd @dtlmtb Tumk1810wWOIUl AMS Olhu OwmtkWEXPSIWWS -f+CIIW ~ ~a~d~-n, *C Pm LbbSlj Pi*hwl

FIOURE 2. TYPICAL NPV SENSITIVITY

MlPv,Mu$

20

5.2

REVENUSS 6.2.1 5.2.2 5.2.3 pdw *wr@Ons far Oil and GM P?OdumM Promo Grow q tW Rewmm Sbmm d

5.3

0W3?ALL ECONOMICS 5.3.1 5.3.2 5.3.3 Grws and Net Cash Flew to Cmbw+om blat Pmscnt WUO q lt!4erndRata of Return d Other Eeonon+cYudsti$ka (Paw, PII, Ac.)

011 Pflce
Inltlal ate R Calpex C)pex Startup Time

m
3 3 &Base

=
40

60

80

Case