The Importance of Integration of subsurface with surface facilities design
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OPC's David Gorsuch and INTECSEA's John Harley recently delivered this presentation at the 9th Annual Offshore Production Technology Summit in London. The presentation highlights the importance of integration between the subsurface and surface facility design teams in achieving optimal field development plans for oil & gas assets.
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The Importance of Integration of subsurface with surface facilities design
- 1. The importance of integration of subsurface with surface facilities design John Harley, Regional Director INTECSEA Consulting David Gorsuch, Technical Director OPC
- 2. WorleyParsons Structure Major Engineering Project Delivery Strong FEL technical team Deepwater SURF Topsides Facilities Floating Solutions FA CAPEX Offshore commissioning Decommissioning (Aberdeen) Regulations, consents and licences UK energy market, including market reforms Energy industry policy Proven successful relationships with Governments, including DECC Transaction Services North Sea Fabrication Subsea & Topside modules
- 3. WorleyParsons Group and Friends Major Engineering Project Delivery Strong FEL technical team Deepwater SURF Topsides Facilities Floating Solutions FA CAPEX Offshore commissioning Decommissioning (Aberdeen) Regulations, consents and licences UK energy market, including market reforms Energy industry policy Proven successful relationships with Governments, including DECC Transaction Services North Sea Fabrication Subsea & Topside modules
- 4. What is Value? Value - Defined as “The material or monetary worth of something”. Maximum Value - the correct development, chosen first time, right-sized Inefficiency – Defined as “the magnitude of the value that can be lost” Risks not clearly identified and resolved
- 5. Value Destruction – an example 200 MMbbl of recoverable oil No sales gas product 1200 m water depth Fast track project (36 months to first oil) 25 year production life Oil price of $100/bbl Inflation at 2.5% 200 MMbbl of recoverable oil No sales gas product 1200 m water depth Fast track project (36 months to first oil) 25 year production life Oil price of $100/bbl Inflation at 2.5%
- 6. Initial production plateau not achieved Only 65% of intended production for 3 years Production Profile Same total oil recovered, but slower rate of recovery
- 7. Pre-Tax NPV Missed Plateau Value Impact Original FDP Missed Plateau NPV, MM$ 4,074 3,621 Delta, MM$ - -453 Delta, % - -11.1% IRR, % 22% 20%
- 8. Additional Production and Water Injector wells needed after only 2 years of operation CAPEX required for drilling, equipment procurement and installation. (Loss of production during installation/hook-up/commissioning is ignored) Additional Wells Value Impact Original FDP Missed Plateau Extra Wells DRILLEX, MM$ 1,600 1,600 2,400 CAPEX, MM$ 3,220 3,220 4,220 Total, MM$ 4,820 4,820 6,620 Delta, % - 0% +37%
- 9. Pre-Tax NPV severely eroded IRRs remain attractive (IRR by itself is not a reliable indicator of good/bad project) Value Impact Original FDP Missed Plateau Extra Wells NPV, MM$ 4,074 3,621 2,075 Delta, MM$ - -453 -2,000 Delta, % - -11.1% -55.2% IRR, % 22% 20% 16%
- 10. Value Protection FRAMING EVALUATE Integrated Production Modelling Cost/ Schedule Economic modelling AUDITRESERVES FINDINGS AllCREDIBLEOPTIONS Prospect Metrics Economic Profile Current Risk Level Understand commitments Business Plan Comparative life cycle costs New Business plan Exit strategy DSP ANALYSE Current Plan FID RECOMMENDVISUALISEDrivers AUDITFDP Non-Tech Risks
- 11. Oilfield Production Consultants (OPC) The OPC-Worley Parsons INTECSEA partnership Who are OPC? We are a specialist supplier of subsurface engineering, geosciences and production technology expertise globally for over 25 years. OPC offices – London, Aberdeen, Stavanger, Houston, Astana, Doha & Basra. The strategic partnership with INTECSEA /WorleyParsons is designed to allow proper integration of predictions of the behaviour of the sub-surface with surface facilities design. Our aim – a fully integrated Reservoir to Market (R2M) full field development planning platform Integrating reservoir understanding (OPC Group)… with surface facilities design (WorleyParsons Group)
- 12. Oilfield Production Consultants (OPC) The value of the partnership The importance of integration of subsurface with surface facilities design Communication – passing the right information at the right time and using the right vocabulary. Management of uncertainty – designing for robustness not optimisation Front-end loading of facilities design – ensuring all the appropriate options are considered. Optimal FDP
- 13. Oilfield Production Consultants (OPC) Low Oil Price Scenario (LOPS) planning Adapting to a new world… Many plans developed in the context of $100 oil no longer make sense. Assets still need to be monetised and revenue needs to be generated. In many cases, this is still possible but requires a fresh look at the development. OPC and INTECSEA/WorleyParsons can help companies to carry out Prospect Re-framing (PReF) by stepping back and taking a completely new, holistic view of developments against the backdrop of… $50 oil Low appetite for risk
- 14. Thank you David Gorsuch Technical Director Oilfield Production Consultants (OPC) Ltd 1-2 Apollo Studios, Charlton Kin’s Road, London NW5 2SB Mob: +44 (0)7585 770455 Tel: +44 (0)20 7428 1111 e-mail: david.gorsuch@opc.co.uk ww.opc.co.uk John Harley Regional Director Consulting Lansbury Estate 102 Lower Guildford Road, Surrey, GU21 2EP Direct: +44 (0) 1483 878 504 Mobile: +44 (0) 7760 669 199 john.harley@worleyparsons.com www.worleyparsons.com
Editor's Notes
- We are going to focus on the Field Development Value Chain This is where value is created in the monetisation of an asset but without protection can be destroyed through the chain. First some definitions We need to define value in our case we may see this as the correct development, chosen first time, right-sized. Prevents excessive costs in over conservative designs, prevents against post-FEED project stop / recycle, developments that are more likely to stay on schedule, developments that are less likely to miss production plateau. Inefficiency = issues not clearly identified and resolved. Much of that inefficiency comes through poor decision making. Adding data will help resolve issues and remove uncertainties and assumptions, and therefore risk. Fewer unresolved issues leads to greater efficiency and less value destruction.
- In the FDP value chain let us look at how value can be trickled away through inefficient decision making and lack of risk awareness using a modified historical deepwater field. Sanitised and simplistic – but just something to give an appreciation of the magnitude of the value that can be lost at the early stages of a development This is a “fast track” schedule – real but unusual in that it might set a benchmark for many CEO’s & banks to emulate
- Highlights: The reference a large reservoir circa 3bn bbl in place, which means this wasn’t such an issue – there was so much value in the field with high oil prices and the driver was speed….. Not necessarily so much emphasis on capital efficiency What about today? Note the underachievement in production - Somewhere in the order of 2/3 of predicted production was achieved over the first 3 years In addition, during this period, additional production and water injection wells were drilled & tied-in to increase the production The same amount of oil is recovered, it is just recovered a bit later – so how does this impact the value?
- Missed plateau production for initial years No impact on CAPEX A loss in NPV terms of $450 million Still an attractive IRR at 20% Not an insignificant amount………… (IRR still looks good though)
- The missed production in itself didn’t add anything on to the CAPEX – additional wells certainly do though An additional x production and y water injection wells (50% more wells) were required in the first couple of years to try to raise production. Reservoir was clearly (although not exclusively) the issue here – lack of definition prior to production commencing. Out of interest, typically a 15% cost reduction across all equipment, installation, drilling, commissioning etc. would produce an improvement in NPV of approximately $400 million
- $2 BILLION lost from original NPV But, you have a project with an “attractive” IRR of 16% - this could be spun as a great success This would still be considered a viable project - but it could have been so much better………..
- How do we help clients define, protect and therefore maximise value through the chain? We make sure that the business drivers are articulated and recorded. That they are agreed with all stake holders. That the strategic decisions such as whether this is a stand alone development, partnering, contract strategy and schedule duration look like all meet those drivers. That they are embedded in the decision framework going forward. That the tactical level decisions of appraisal drilling, subsea spread, production and facilities solutions are all recorded and auditable back to the strategic business drivers. We do this by bringing the right people into the value chain from our and client side and enabling them to make informed quality decisions in a formal decision framework. We help them to look at all possible options for a development and weed it down to all of the credible developments that meet the business drivers. We are geared specifically to help our clients to analyse those credible developments for technology readiness, CAPEX implications, economic metrics, robustness and importantly we help them to understand the technical and non technical risks that surround the field limits such as commercial and geopolitical risks. We see it as helping our clients to sleep better at night by helping them to make informed decisions at the appropriate time. But more than this. Aligning our technical surface strength with OPC allows us to import an understanding of subsurface risk into the client business plan. David will now take us through that.
- Why is integration of subsurface with surface facilities design important? Bullet 1 - Different things are important to those involved in understanding the subsurface and those responsible for surface facilities design. For a reservoir engineer, a fluid with a condensate gas ratio of 1 bbl/MMscf is essentially the same as a fluid with a CGR of 2 bbl/MMscf. Both are "dry gas". For a surface facilities engineer, they are very different. Engagement of the two teams from the very beginning helps to ensure that information is properly propagated from the subsurface stage of the study to the surface facilities design stage. Bullet 2 - The levels of uncertainty involved in the subsurface and surface facilities design are very different. In the context of surface facilities design, almost everything is known or knowable. In the subsurface, a great deal of stuff is unknowable. This gives different mindsets in the two communities. A surface facilities design engineer tends to focus on optimisation of the design for the expected inputs. In practice however, a design that is robust in the face of unavoidable uncertainties may be a much better bet. For example, the condensate gas ratio of the produced fluid may not be known with certainty. A design that can cope with anything between 60 bbl/MMscf and 90 bbl/MMscf may be a much better bet than a design that is optimised for 60 bbl/MMscf but will not be able to cope with 90 bbl/MMscf. Bullet 3 - Front-end loading discussions between the subsurface professionals and the surface facilities design engineers may also allow consideration of a much wider range of possibilities. For example, a gas field may be vulnerable to water production. Two approaches could be adopted. Wells could be drilled to minimise the risk of water production and Surface facilities constructed with minimal water handling capability. Alternatively, simpler and cheaper well could be drilled, increasing the risk of water production, and surface facilities constructed that could handle the produced water. Early engagement of the subsurface and surface facilities professionals will allow the best choice to be made as early as possible.