OilSim Greenland 2008 January, 2008

Overview Enhance your overall understanding of petroleum exploration Common platform to work on Multidisciplinary challenge You are an exploration team in charge of a new petroleum province Your task is to get maximum return on investment (ROI)

Enhance your overall understanding of petroleum exploration

Common platform to work on

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 $200Millions You can apply for more money later Earnings: Net value of the oil fields discovered MINUS costs (surveys, wells, etc.) Winning team: highest return on investment (ROI) ROI = Earnings / Funds received Government Bonus given to the 10 best teams in Greenland the 1st day to be used in the 2nd OilSim day

You start with $200Millions

You can apply for more money later

Earnings:

Net value of the oil fields discovered

MINUS costs (surveys, wells, etc.)

Winning team:

highest return on investment (ROI)

ROI = Earnings / Funds received

Government Bonus given to the 10 best teams in Greenland the 1st day to be used in the 2nd OilSim day

Government Bonus $ 50.000.000 $ 30.000.000 $ 20.000.000 $ 14.000.000 $ 12.000.000 $ 10.000.000 $ 8.000.000 $ 6.000.000 $ 4.000.000 $ 2.000.000

$ 50.000.000

$ 30.000.000

$ 20.000.000

$ 14.000.000

$ 12.000.000

$ 10.000.000

$ 8.000.000

$ 6.000.000

$ 4.000.000

$ 2.000.000

Learning Points Where and how to find oil Surveys used in exploration Licensing rounds Farm-in and Partnerships Rigs and Sub-contractors Reducing uncertainty Economically viable volumes

Where and how to find oil

Surveys used in exploration

Licensing rounds

Farm-in and Partnerships

Rigs and Sub-contractors

Reducing uncertainty

Economically viable volumes

Oil & Gas Industry Upstream Exploration Development Production Downstream Refining Distribution

Upstream

Exploration

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

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

Schedule 09.30 Introduction to OilSim Phase 1 starts (Find Basins) Phase 1 Deadline Phase 2 (First Licensing Round) intro First Licensing Round deadline Lunch Phase 3 (Partnering) intro Deadline Partnering Drilling intro 2 nd Licensing round opens 2 nd Licensing round deadline Simulation end Debriefing 15.30 End

09.30 Introduction to OilSim

Phase 1 starts (Find Basins)

Phase 1 Deadline

Phase 2 (First Licensing Round) intro

First Licensing Round deadline

Lunch

Phase 3 (Partnering) intro

Deadline Partnering

Drilling intro

2 nd Licensing round opens

2 nd Licensing round deadline

Simulation end

Debriefing

15.30 End

Map Columns (1 to 112) Rows (1 to 152) 600 sea bed depth Cell (73,66) Block 134 134

Login www.oilsim.com

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 Buy and study magnetic and gravimetric surveys Submit 3 block numbers; one for each basin centre

Find the 3 basins in the area

Basin: Sedimentary rocks in the deep subsurface where oil and gas was generated

Procedure

Buy and study magnetic and gravimetric surveys

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 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

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

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 Buy and study Common Risk Segment Maps and 2D Seismic surveys Submit 3 bids Block number Amount offered to Government (“bonus”)

Bid to get a exploration licence

Exploration licence: A permission from the Government to explore a block

Procedure

Buy and study Common Risk Segment Maps and 2D Seismic surveys

Submit 3 bids

Block number

Amount offered to Government (“bonus”)

Migration Basin Prospect Play Migration

Prospect Migration Reservoir Seal

Common Risk Segment Prospect probability Red : low Orange : medium Green : high There is one CRS for each geological layer

Prospect probability

Red : low

Orange : medium

Green : high

Common Risk Segment Band 3 Eocene Band 2 Paleocene Band 1 Creataceous

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

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 Column Row Prospect, Reservoir Basin, Source

Wells 179

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 -)

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 -)

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

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 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

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

Remarks 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

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

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

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)

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: Study 2D Seismic surveys Submit one offer for each viable licence Amount offered Share wanted (in whole %)

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:

Study 2D Seismic surveys

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

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 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 prospects

Study 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 prospects

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

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

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

Seabed Depth

Task 3.2 Rigs

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

Limited number of rigs available

You can order a rig

use 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

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

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

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

Select Positions

Summary

Drilling position 3

Drilling position 2

Conf. & 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)

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

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

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

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