The long and bumpy road for oil from the underground to your tank, is called the oil and gas industry value chain.The value chain is divided further into these parts:Upstream is about getting the hydrocarbons up from the ground, and comprises of activities related to exploration, field development, construction, production and abandonment. By its nature, the exploration phase is common for both oil and gas, but soon afterwards, the oil and gas value chain will segregate into two parallel value chains.Midstream is about transportation and storage, as well as oil refining and gas processing.Downstream is about distribution and retail sales of gas, fuels and lubricants, plastics and other hydrocarbon derivatives to industrial and consumer markets.OilSim Exploration is all about the exploration part of the oil and gas industry. Exploration is about finding the hydrocarbons and proving that they are in sufficient quantities to start producing. OilSim Field development and Production is about actually taking the oil or gas out of the subsurface.
So this is what it looks like when you are trying to find the midpoints for the 3 basin centres.
When you have found out where you think the basin centres are, you enter your centre coordinates into the form on the home page.When you press Submit, the simulation receives your guesses.If there is a green line across the right hand side of the page when you have submitted, the coordinates have been registered in the system.You can change your mind as long as the deadline has not passed and enter altered coordinates and press the Update button below the form.
To determine which blocks are likely to offer the greatest return on investment, an analysis of data is needed. This analysis can be split into 3 parts:Finding out where you are not allowed to explore, areas that are environmentally sensitive – this means researching the Spawning grounds surveyFinding out where geologists have identified subsurface structures that indicate higher probabilities of hydrocarbons. These structures are called Risk Segments. All the risk segments are combined into a common survey, the Common Risk Segment map (CRS map) which shows areas of high and low probability of hydrocarbons. Finding out where the hydrocarbons are “trapped” using the 2D seismic surveysThe combination of this analysis will help you decide which blocks are the most likely to have the best potential hydrocarbon reserves and therefore be the blocks you should be submitting bids for.
In real life to assess the exploration risks and prospects on a bain scale, geologists use “Basin and Play Fairway Analysis” and is conducted using special GIS software and other specialist programmes. In OilSim this analysis has been simplified into one Common risk segment map to show the probability of hydrocarbons in an area. The geologists ask a number of questions to determine the probability of finding oil or gas, including:Is there a sedimentary basin and a migration route into the prospects in the area?Is there porous reservoir rock so that the oil or gas can be stored?Is there a sealing rock, so that the oil and gas can be trapped?The CRS map helps to answer these questions by combining a number of maps, surveys, charts and data analysis into one map and represents the probability of finding oil and gas in a particular geological layer or horizon.If the answers to all 3 questions mentioned are ”YES”, then the area is shown as green – a high likelihood of finding hydrocardonsIf one is negative, then the area is shown in orange – with a medium probabilty of hydrocardonsIf the answers to 2 or 3 questions are “NO”- then the area is red and has a low probability of containing oil or gas.Since the CRS show the probabilities of prospects in only one particular horizon or layer, it is necessary to purchase the CRS for all 3 layers so that you can determine which area within the licensing area contains the highest probability of containing oil and gas. So on the CRS maps shown here the area circled in black on the OilSim map and each of the CRS shows that the area in question is within the licensing area and is green on all three CRS layers, indicating high probability of oil and gas on all 3 layers within the same area or blocks. Potentially an area that requires further investigation for individual prospects.
Seismic surveys are made from sound waves that are sent into the subsurface, reflected, and measured when they get back to the surface.This slide shows an example of a real seismic line. It shows a cross-section of the subsurface with the blue and red lines indicating changes in velocity of the wave and therefore changes in geological structures in the subsurface.The black, red, and green lines are lines added as interpretation of the data by geologists.black lines are so-called faults, which have happened for instance after earth quakes or other dramatic geological events.green lines are where geologists think the reservoir rock beginsred lines are where the geologists think the sealing rock begins In this particular case there is a prospect indicated under the orange arrow, within the grey triangle.
Here the area between the reservoir and the sealant rock has been shaded in to show you whether you still have a seal at the fault or a gap where leakage could occur.
When collecting 2D seismic for an area, the data is collected for both the rows and columns.Now when you are looking for a trap, you first find your sedimentary basin. CLICK Lets use a cake as an example. You want to choose the piece of cake that has the most cream or jelly, make sure your slice will have the most. How can you do this?CLICKWell if you cut the cake in half you can see if any part appears to have more cream or jelly in the layer, but how do you know that the cream or jelly is thicker in the whole slice?CLICKThe only way to find out is to make another intersecting cut, or make a slice and see if the cream or jam continues to be thicker in a particular part the whole way through.
Corporate social responsibility is the term used for explaining how companies impact the environment, consumers, employees, communities, stakeholders and all other members of the public sphere in the areas in which they operate. The attitude and behaviour of a company affect’s their reputation, the manner in which it is seen as an employer, it’s credibility in the market place and wider world and therefore, has a direct affect on its share price.Oil and gas companies are no different to any other large organisation that need to consider their actions on the world stage. The reasons for doing this are debatable, for example:Tax advantagesConsideration in licensing roundsBe seen in a better public lightBe seen as a considerate employer Being clear on responsibilities to the public/governmentWhatever the reasons for having a CSR programme, there can be a wide number of benefits for a variety of groups. In OilSim, before each licensing round, companies are going to be able to participate in CSR projects which will enable them to earn additional credibility points, that are looked after during the license bidding process.Also, just like in Norway in real life, the responsibility of a company to commit to a well drilling programme, to ensure that the government and the wider public will benefit from the oil and gas exploration process, companies will have to set a work programme as part of their licence bid. This means that when a team chooses which block it wants to be awarded a licence for, it will promise to drill a certain number of wells in an attempt to find the oil and gas in the block.
So after completing each project, your company will need to decide, whether it wishes to complete any more before concentrating on the remainder of the licensing round bidding process. You do not have to spend all the $30million open to CSR projects, in fact, on the CSR page, you can see how much of your budget you have spent on CSR, how much is remaining of this particular budget and how many points you have earnt in total on CSR. CSR funds that you don’t spend in one round are transferred to the next one.If you wish to continue and complete more some projects, just review the suggested CSR projects and initiate the ones you are interested in.
Now there are a number of suggested projects, some more worthwhile than others, depending upon the priorities and interests of the people working in each company.CSR is about caring for the local society – and making a difference for the people living where you operateNot all projects are soundBribery does not paySome projects cost a lot, but do not give so much returnSome projects are riskier than others
Before each licensing round, a team is able to spend up to $30 million on CSR projects that will earn them more credibility points. However, the $30million comes from the whole company budget and so companies will need to decide on what is more important, cash or credibility points and try and find a balance their teams are happy with.So to determine what companies should spend their CSR budget on, click on the CSR tab. Here a number of projects are listed.Some are grayed out, because the team does not have enough CP, enough CSR budget, or enough cash to do themEach has a cost, and a number of possible outcomes - Each outcome has a probability and either negative or positive CPIn the CSR tab you can see the minimum and maximum CP you can get, as well as the probability for getting the maximum CP
So in this example, a company is able to set up a Geoscience Institute with a local university and there is no requirement for them to already have CPs- it shows as zero.The project will cost $8million but might also help provide the company with a pool of geologists, geophysicists it can employ in the future. So if the plans for the Institute go well, the company will earn itself 40 Credibility points. Now because of project planning, local politics and building regulations etc, there is probability that the project will be completed and successful of 60%, so a 40% chance of something not working out and the institute not being established.So, if everything goes to plan the company will earn 40CPs and be well known for being involved in the new Geoscience Institute, and be well worth the $8million investment.But if it goes wrong, they will still have to pay $8million, but will be awarded 0 CPs.If you decide this is the project you want to invest in then click on the “Initiate” button.You cannot initiate a project if it has the potential to make your CP’s go into negativeYou cannot initiate a project if you don’t have the cash for itEach project can only be run once per team
A pop up box appears to check that you definitely want to spend your money, once you click OK you cannot get your money back.If you realise you chose the wrong project, click on cancel to take you back to the previous screen.
Once intiated, you will immediately be informed whether the project was a “Success” or “Failure” as the project moves to the top of the CSR page, under Completed CSR projects.Also, on the “Credibility” page, you are able to see all the Credibility points that a team has been awarded and the reasons why, throughout all the challenges in OilSim, including the CSR projects.
- You can get extra CP for doing CSR projectsTeams choose 3 blocks to try and increase the chances of getting a block they think has good prospects, but once all the bids are in and the government has evaluated the bids, each team will be awarded one block.License bids are evaluated according to the following formula: CP (from 1st challenge and CSR) + 100 * wells committed
So teams select the blocks they want and submit bids in order of preference. The block with the most “Wells committed” is considered to be the preferred block, even if not entered into first Block.A team can promise to drill between 1 to 4 wells. The Bid is disregarded if a team commits to more wells than there are prospectsWhen deciding who gets which blocks, OilSim looks at the accumulated credibility points and adds 100 points for each well committed. The accumulated points at this point include credibility points from the find basin task and credibility points from completed CSR projects, but does NOT include any credibility points for choosing good blocks. AFTER deciding who gets which blocks, each team gets additional credibility points based on how good the blocks you bid for were. The maximum here is 300 credibility points.
In this example, you are able to drill one exploration well, since the drill can deviate by one cell as it progresses through the geological layers. So you can reach the prospect in R37 in the Paelocene and in R38 in the Cretaceous.
Bidding points are used to evaluate the licence. CPs awarded are based upon how good the blocks are.Remember a bid is disregarded if a team commits to more initial exploration wells than are needed to reach all prospects.When deciding who gets which blocks, OilSim looks at the accumulated credibility points and adds 100 points for each well committed. The accumulated points at this point include credibility points from the find basin task and credibility points from completed CSR projects, but does NOT include any credibility points for choosing good blocks. AFTER deciding who gets which blocks, each team gets additional credibility points based on how good the blocks you bid for were. The maximum here is 300 credibility points.
Your primary target is to find the limits of each prospects, not just plounge the drill string into the middle of each reservoir.Thus you shall drill into the periphery of each prospect, not in the middle.
When reviewing a farm-out offer you can either accept the amount or % the license owner requests, or amend the amounts to your own offer. Add a message to the seller explaining why they should choose your team and press “Send offer”
Financing – Is where a team is able to accept offers, and therefore receive money or “finance” for a % of their own blocks When a team receives a Farm-In offer it appears under financing on the right hand side of the homepage
All your farm-in offers to other teams are shown under “Investing” on the right-hand side of the homepage . This is where a team offers investments to other teams for a % of their blocksRemember you must have farmed-out 20% of your own block before you can drill.
If you decide you no longer want to make an offer to a team, or you realise that an offer is not going to be accepted by another team. You need to take the offer back so that the money you were going to invest in that team, does not sit with the bank, but is returned to you.To do this click on the Review Farm in button, next to the licence, for which you want to take the offer back.
Then click on “Take Back” and the money, in this case $1,000,000 will be returned to you.
Before you begin to drill you need to know the water depth so that you choose the right type of rig. You can find this information by clicking on your block and scrolling to the bottom of the screen where a map of the whole block’s water depths are shown. By scrolling over each cell you can see the water depth for each particular cell.
The next task is to choose which rig to use to drill the exploration well, but you will need to know how deep the water is in the area you wish to drill, so check out the water depths under your block information.There are three types of rigs: jack-up rigs for shallow waters, semi-submersible rigs for middle waters and drillships for the deepest waters. When choosing the rig ,, and.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
In most cases there are fewer rigs than teams, so you need to be fast to get good and cheap rigs for your wells.When you order a rig you need to start using it within 20 minutes.If you do not use it within the 20 minutes, you will pay for 20 days of use.You can release a rig that you have ordered on the home page.The rig rates are dynamic, so that popular rigs tend to have increasing prices, while less popular rigs become cheaper.
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.When we get to the drilling phase and we get to drill exploration wells, the wells can go through all three horizons.If you choose to drill to the bottom most horizon, whatever is in the horizons above will be discovered as well.Only one in five prospects actually contain oil or gas, so you will encounter a lot of dry prospects.Thus, it makes sense to look out for prospects that are on top of each other in the 2D seismic surveys, as this increases your chances in finding something.
To determine how long it will probably take to complete drilling, check out the “drilling Information” tab. The water depth is the distance from the water line to the seabed.Layer 3 is approximately 1500 meters below the seabed, layer 2 is 1000 meters further down, and layer 1 is 3500 meters below seabed.
Inputting estimated cost of drilling gives you credibility points, since you are keeping an eye on your accounts. 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 knowledge points and cost you less to clear an oil spill if it happens.
When you have discovered a field the first decision you need to make is whether you want more information about that field right away and BEFORE you drill another exploration well.You can get more information by doing a production test, which is a process in which you try to produce oil or gas from the field.In OilSim production tests take 10 days per oil and gas field and you use the same providers as before.
However, if you can get the proven volume up, the block might become economically viable.This is done through production testing, and appraisal wellsWhen 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.
PetroChallenge Norway 2010
You are an exploration
team in charge of a new
Multidisciplinary challenge: Enhance your
overall understanding of petroleum
exploration and field development.
Create a Return on Investment
You start with $200 million
Net value of the oil and gas discovered MINUS
all costs involved
Credibility points awarded
Sensible decisions and correct answers
CPs are a measure of ability and
Considered when bidding for blocks
Used when applying for funds
Where and how to find hydrocarbons
Corporate Social Responsibility
Farm-in and Partnerships – negotiations
Economically viable volumes
Team work, Critical decision making
Columns e.g C1 to C112
divided into 64
e g. R52C110
Challenge: Find three sedimentary basins
Buy and study magnetic and gravimetric surveys
Submit the coordinates for each centre
Column and row number for each basin centre
Gravimetric surveys indicate
changes in the gravitational
pull of the Earth in different
areas of the sub-surface.
Lower gravitational fields
indicates likelihood of low
density rocks –Sedimentary
rocks, porous and hopefully
Magnetic surveys show
anomalies in in the expected
magnetic field of the Earth in
Sedimentary rocks in the basins
have a lower concentration of
magnetic materials and lower
magnetic field than the
surrounding crystalline rocks.
Locate edges of
thus basin centre
Top basin on both
= C55 and R105
3 centres – one Centre
midpoint for each basin
Example: C55, R105
Solve before deadline. All
submissions are evaluated
after the deadline (and not
You may get 0-100 CPs. All
three centres must be located
to get full knowledge points.
The government has decided
to put the blocks in one of
the basins on offer.
Determine 3 best blocks to
Initiate Corporate Social
Commit to Exploration
Any restrictions involved? - Spawning grounds
What are we looking for? - Prospects
Where do we find prospects?
In basins, where hydrocarbons have been
1) are produced and 2) trapped
How do I find them? - Geoscientific analysis
Common Risk Segment maps, 2D seismic
1. SOURCE ROCK
material is put under
2. MIGRATION ROCK
are driven through
3. CAP ROCK
rock that stops
hydrocarbons 4. PROSPECT
Salt dome trap
Geological “pockets”, that might contain hydrocarbons.
You will not be awarded
blocks that contain any
red spots (spawning
Blocks in area may be
Layer 3 Eocene
1500m below the seabed
Layer 2 Paleocene
2500m below the seabed
Layer 1 Cretaceous
3500m below the seabed
CRS. Common Risk Segment
surveys tell you about the
probability of a structure in
the block/cell containing oil
Traps can be found with
seismic surveys and
sound waves bouncing
2D seismic survey is a
vertical cross section of
the geological layers
along either a column or
Interpreted Red is top of the
Green is top of
the reservoir rock
What type of data do you want?
Columns or Rows
Unprocessed or processed data
Interpreted or not
Only buy maximum
of 1 block of data
at a time to speed
It takes time to process your request
Created to order
Moves to surveys once processed
Red circles – navigate
through the 2D seismic
Yellow square – Row 1
from Column 1-56
Corporate Social Responsibility
Affects a company’s reputation and their credibility
Increase Credibility by initiating CSR projects
CSR points considered when bidding for a block
Commit to work programme, as part of licensing
State how many exploration wells you promise to
Bids are evaluated based on work programme and
Safety training center
Fact finding mission
Wave energy plant
Social welfare study
• Max Round spend:
$30M on CSR projects
• Each project:
Financial cost and CPs
• Projects in grey:
not enough cash or
CPs to do
earnt on completion
Teams can increase their competitive position
by initiatingCSR projects
Choose 3 blocks with good prospects
Commit to a number of exploration wells
Bids evaluated using the following formula:
Each well is worth 100 Credibility Points
Bidding points = CP + 100 * No. of wells committed
If 2 teams choose the same block and same no.
Of wells – the team with the highest CPs will
be awarded the block
Government awards one block per team
Select number of exploration
wells that are to be drilled
Team’s first choice block = block
with most committed wells
Bid disregarded if overcommit no
of exploration wells
Minus 10 credibility points for
each bid where the number of
committed wells is higher than
the number of prospects
areas – blocks to avoid
Common Risk Segment
surveys – areas of higher
probability of prospects
2D seismic – blocks with
Final tip - Check water depth
- shallow water blocks
Message sent to all
Results and CPs
One license per
The headquarters of your company has
evaluated the license that you were awarded.
Although the possibility of finding oil is fair,
the costs involved are large.Thus the
headquarters want you to spread the risk.
Challenge:You shall farm-out minimum 20%
from your license – and farm-in as much as
you can in other good licenses.
Acquire 3D Seismic interpretations for the
block you operate, and study the results from
the licensing round
Farm-out: Get others to invest 20% or more
in your license – you can send them surveys
Farm-in: Send offers to other teams to buy
shares in their viable licenses. Submit an offer
for each viable license, with amount offered
and share wanted in whole %.
Layer 1 Cretaceous
Layer 2 Paleocene
Layer 3 Eocene
oil or gas
Spread the risk: e.g Investing in other blocks
divides the risks amongst all partners, much
more preferable than keeping 100% of one
field and all the risk.
Increase probability of profit: investment in
only 1 field which could be a dry prospect is
possible, whereas the likelihood of investing
in 5 fields which are all dry is unlikely.
Either accept the
amount or % the
requests, or amend
the amounts to your
Add a message to
Press “Send offer”
$100000 per %
When a team receives a Farm-In offer to appears under Financing.
This is where a team can receive finance or money for a % of their
decides whether to
ACCEPT or REJECT the
established every time
a license owner
accepts an offer.
Overview: On the main
page, you can see all
licenses. 1) licenses
you operate, 2)
licenses you have
invested in, and other
All your farm-in offers to other teams are shown under “Investing”
on the right-hand side of the homepage .
This is where a team offers investments to other teams for a % of
Partners pay a proportional share of all future
Partners receive a proportional share of the
net proceeds from oil and gas
The operator team makes all decisions
Teams can farm-out up to 70% of licence
Operators must keep 30% of licence
•Before choosing a
rig, you need to
check your water
Find this at the
bottom of the
Choose the right rigs for your water depths
Jack-up rigs for shallow waters
Semi-submersible rigs for middle waters
Drillships for the deepest waters
Rig cost = drilling days * day rate
Few: limited number of rigs available.
If you get one: start using it within 20
If you don’t: wait in a queue, if another team
is using the rig.
Price can change: rig day rates are dynamic.
Upto 9 Star quality-
but reliability is
low, so you risk
extra drilling time
and extra costs
not to drill.
Certain problems can occur if Service
Provider Selection is poor quality
Other penalties can occur if you drill in areas
indicated as problematic in the
As in real life, problems can occur randomly
and these are also applied with fines levied
Earn extra CPs by calculating the estimated drilling
Proven volume (MBOE) counts
Test may increase proven volume
Remember to tick the boxes!
Only if you discover a field – find Oil or Gas
You decide whether you want more
information about that field
More information by doing a production test
(and other tests)
Tests costs:Tests take 10 days per field.Tests
have the same day-rate as the drilling if you
use the same providers.
25% of 8 MBOE @ $50
Expected costs if
you developed the
field (capex) and
the oil (opex)
If total expenses are
higher than the sales
value, the value of the
license is zero
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
Initial $200million investment
Funds from partnerships
Funds from the bank
Valuation of licences
(operators and partners) based
on oil and gas found less
expected costs if these
licences were to be developed
Click on Apply for More FundsTab.
1 CP 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 credibility
points: Apply for cash and be fined $5million
for each $20million requested.
Narrow uncertainty: Drill appraisal wells to
get proven volumes
Drill into other prospects to find more proven
Farm-in and -out: Get into other good blocks.
Two additional licensing rounds: Repeat the
Money: Apply for more money, if you run out