OilSim Exploration

OLF OILSIM 2008

Overview

• Purpose: Enhance your overall

understanding of petroleum exploration

• Multidisciplinary challenge • You are an exploration team in

charge of a new petroleum province

• Your task is to get maximum return on investment (ROI)

Money

• You start with $200 Million – You can apply for more money later • Value: – Net value of the oil fields discovered – MINUS costs (surveys, wells, etc.) • Winning team: – highest return on investment (ROI) – ROI = Earnings / Funds received

Learning Points

• Where and how to find oil • Surveys used in exploration • Licensing rounds • Farm-in and Partnerships • Rigs and Sub-contractors • Addressing environmental issues • Reducing uncertainty • Economically viable volumes

Oil & Gas Industry

• Upstream – Exploration – Field Development – Production • Downstream – Refining – Distribution

Structure

• Phase 1: Find Basins • Phase 2: Bid for Licences • Phase 3: Drilling – 3.1 Farm-in – 3.2 Order Rig – 3.3 Select Providers – 3.4 Select Position – 3.5 Testing

Map

Columns (1 to 112) 134 600 sea bed depth Cell (73,66) Block 134

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Main screen

First task

• Find the 3 basins in the area • Basin: Sedimentary rocks in the deep subsurface where oil and gas was generated • Procedure 1.Buy and study magnetic and gravimetric surveys 2.Submit 3 block numbers; one for each basin centre

Surveys

Gravimetric surveys

• Gravimetric surveys show the gravity in the sub-surface • Sedimentary rocks (“basins”) have lower densities than the surrounding crystalline rocks • Low gravity (green) -> Basins • High gravity (red) -> Crystalline rocks

Gravimetric surveys

Magnetic surveys

More detail

North East

Quarter map survey

Enter decision

Task 1

• Possible to get between 0 and 100 knowledge points (KP) – KP’s can be used e.g. when you apply for money • Must be solved before deadline • After the deadline, all submissions are evaluated

Task 1 solved

• All basins are located • Message sent to all teams with the results • Oil and gas is close to the basins • Next step: First licensing round – The blocks around one of the basins are on offer

Second task

• Bid to get a exploration licence • Exploration licence: A permission from the Government to explore a block • Procedure 1. Buy and study Common Risk Segment Maps, 2D Seismic surveys, and Spawning Ground Maps 2. Submit 3 bids – Block number – Amount offered to Government (“bonus”)

Migration

Basin Prospect

Migration

Play

Prospect

Migration Reservoir Seal

Real Seismic

2D Seismic surveys

• A 2D Seismic survey is a cross section of the geological layers – along either a column or a row • Is used for locating prospects • Look out for traps • Three separate geological layers

2D Seismic example

Prospects

Top of sealing rock Top of reservoir rock

Cross-sections

Row Basin, Source Column Prospect, Reservoir

Wells

Remarks

• In OilSim, there is only one type of trap: the four-way closure structural trap – in reality, there are several other types • Three prospecting systems – 3. Eocene (1.500 m below seabed) – 2. Paleocene (2.500 m -) – 1. Cretaceous (3.500 m -)

Common Risk Segment

• Prospect probability – Red : low – Orange : medium – Green : high

There is one CRS for each geological layer

Common Risk Segment

Band 3 Eocene Band 2 Paleocene Band 1 Creataceous

Spawning Grounds

• There are spawning ground areas in the map – these are environmentally sensitive areas where fish breed • Some spawning grounds might be in the blocks that have been offered • However, no licences will be awarded in blocks that are spawning grounds • To find out which blocks are spawning grounds, you can buy a Spawning Ground Survey

Spawning Ground Survey

Red Area: Spawning Grounds You will not be awarded blocks that contain any red area Blue Area: Not Spawning Grounds The survey covers the whole area

Tips

• Study spawning ground maps to see which blocks to avoid • Use CRS to see which blocks to study • Buy and study many 2D surveys • Focus on shallow water blocks – It is cheaper to drill exploration wells in shallow water – It is more economically viable to produce oil and gas in shallow water

Enter bid

Bidding

• Minimum bonus: 1000000 • Maximum bonus: 30000000 • You will only get one licence • Highest bid gets the licence • If you lose on all three blocks, you will get a random licence (of the ones that are left) • Do submit 3 bids -> more KP’s and higher probability for success

Task 2

• Submit your bid before the deadline • After the deadline, all bids are evaluated, and each team gets one and only one licence

Task 2 solved

• Every team has got one exploration licence • Message sent to all teams with the results • Knowledge Points: a measure of how prosperous the blocks the team bid for were • Next step: Farm-in

Farm-in & -out

• The headquarters of you company has evaluated the licence that you got awarded • Although the possibility of finding oil is fair, the costs involved are large, and the headquarters wants you to spread the risk. • This is accomplished by: – investing in other licences (farm-in), and – letting other invest in your licence (farm-out)

Task 3.1 Farm-out

•

Get other’s to invest 20% or more in your licence (“farm-out”)

• You can only send farm-in offers (!) – Offers to buy parts of other licences • Procedure for farming in: 1. Study CRS and 2D Seismic surveys 2. Submit one offer for each viable licence – Amount offered – Share wanted (in whole %)

Farm-in

Send an offer

Partnerships

• Partners pay their share of all future costs incurred by the partnership.

• Partners receive their share of the

net proceedings from any oil found

on the licence • The operator team takes all decisions regarding acquirement of 3D seismic, drilling of wells and testing of wells

Task 3.1

• Study CRS and 2D seismic surveys of the other licences • Submit your bids – Minimum amount 100,000 for 1% • You are not allowed to drill before at least 20% of your licence has been farmed out • You can farm-in & -out at any time • Partners in a block get all info about drilled wells and discovered oil and gas fields

Task 3.1

• Partnerships will be established every time a seller accepts an offer • On the main page, you can see all the licences – The licences you operate – The licences you have invested in – Other licences • Next task: order rig

Task 3.2 Rig

• 3 rig types – Drillships – Semi-submersibles – Jack-up rigs • Different water depths, Different day rates – Rig cost = drilling days * day rate

Available Rigs

Drilling days

Drilling Depths

Seabed Layer 3 Eocene Layer 2 Paleocene Layer 1 Cretaceous “water depth” 1500 m below seabed 2500 m below seabed 3500 m below seabed

Seabed Depth

Task 3.2 Rigs

Rigs

• Limited number of rigs available • You can order a rig – Start using it within 20 minutes • Not enough for all – Wait in a queue, if another team is using the rig • Rig day rates are dynamic

Task 3.3 Providers

Track Record

Select Providers

Task 3.4 Position

• You have to choose where to drill – Which cells?

• ..and how deep to drill – Either to the Eocene horizon – Through the Eocene to the Paleocene horizon, – or through the Eocene, the Paleocene, and to the Cretaceous horizon

Environmental Impact Assessment

• Buy an EIA survey to get more knowledge about the area • EIA equals • Less probability for drilling problems • Less severe consequences if you run into problems • In the EIA you can also see which drilling locations to avoid

3D Seismic

• Shows the structure: – in one (of the three) horizons – in one block • Look out for “tops” – a top = a trap = a prospect

3D Seismic

Three targets

Column 60, Row 79 Column 60, Row 78 Layer 3 Eocene Layer 2 Paleocene Layer 1 Creataceous

Select Positions

Drilling position 3

Drilling position 2

Budget

Drilling results

Drilling result

Task 3.5 Testing

• If you discover a field-> decide whether you want more information about that field • You get more information by doing a production test (and other tests) • Tests take 10 days per field • Tests have the same day-rate as the drilling (you use the same providers)

Test decision

Field value

Prospects

Licence Value

Appraisal

Appraisal

– From Probable volume to proven reserves

Narrowing ranges

• First well: – 0 to 572 MBO (after drilling) – 11 to 266 MBO (after testing) – Proven volume: 11 MBO • Second well – 11 to 233 MBO (after drilling) – 35 to 210 MBO – Proven volume: 35 MBO

Continue...

• Drill appraisal wells to narrow the uncertainty (get proven volumes) • Drill into other prospects • Farm-in and -out • Two additional licensing rounds • Apply for more money, if you run out of cash • Winner: highest ROI