Kosmos is an international oil and gas exploration and production company based in Dallas, Texas. They have a track record of success in deepwater exploration, such as discovering the large Jubilee Field in Ghana. The document outlines Kosmos' focus on under-explored areas and their self-funded exploration and appraisal drilling program. It then describes the typical 6-phase process for oil and gas exploration, which includes entering a new market, exploring a block through surveys, undertaking exploration drilling, appraisal drilling if discoveries are made, development if a reservoir is deemed commercially viable, and ultimately production. Key activities, opportunities, and challenges of each phase are outlined.

1. AN INTRODUCTION TO OIL & GAS

2. Kosmos is a premier international oil and gas
exploration and production company, based in
Dallas (US):
• Experts who are proven oil finders:
- Track record of deepwater exploration success - in 2007,
Kosmos found the massive Jubilee Field in Ghana’s deep waters
• Focused on under-explored offshore frontier / emerging basins
with substantial hydrocarbon potential
• Fully self-funded to undertake ambitious exploration and
appraisal drilling program

3. The Process Breakdown
PHASE 6
Production
PHASE 2
Exploring the
block through
site and seismic
surveys
PHASE 1
Entering a
new market
PHASE 3
Undertaking
exploration
drilling
PHASE 4
Appraisal
drilling
PHASE 5
Development

4. 1. Identify potential
under-explored or
overlooked geological
territories
3. Assess geopolitical,
operational and
financial viability of
operating in territory
2. Aquire existing
seismic surveys
4. Secure rights to
explore area through
licenses with host
governments
Timeline: up to a year
PHASE 1 Entering a new market
Key activities:

5. Opportunities
• Opening a new petroleum basin
• Exploring new horizons can
result in good commercial terms
Challenges
• Proving to investors and the stock
market that it is worth proceeding
• Ensuring that the conditions are
mutually beneficial between host
nation and company
Opportunities and ChallengesPHASE 1

6. Upstream - refers to exploration,
production and transport of oil and gas
prior to refining
Downstream - the refining of crude oil
and the processing and purifying of raw
natural gas, as well as the marketing and
distribution of products derived from crude
oil and natural gas.
Exploration licence - permits geological
and geophysical surveying and drilling of
exploratory wells
Production licence - confers exclusive
rights on the licensee to search and drill for
oil or gas
Production sharing - agreement between
parties to a well and a host country
regarding the percentage of production
each party will receive
Exploration - the search for oil and
gas deposits
Discovery - confirmation of the presence
of a petroleum-bearing reservoir
Appraisal - drilling carried out once oil or
gas has been discovered in order to assess
the extent of the discovery
Development - drilling a known producing
formation to begin production
Production - the extraction of oil or
natural gas
Abandonment - to cease work on a well
which is non-productive and to plug off the
well with cement
Equity - share or interest in an oil or gas
licence or field
Joint venture - formal relationship
between an oil company and its partner/s
(Petronas / Tullow, Kufpec, Sterling
and NOC)
NOC - National Oil Company
Block - subdivision of sea area for the purpose
of licensing exploration/production rights
PSC - production sharing contract
GSPA - gas sales and purchase agreement
POD - plan of development
Exploration phase - exploration wells are
drilled to determine whether oil or gas is
present.
Work obligations - the work that parties have
committed to
Financial obligations - the financial
commitment that the parties commit to
Contractor - 3rd party companies that
provide technical services to the Operator
Operator - the company responsible for the
exploration, development, and production of
an oil or gas licence
Farm-out - where a company decides to
assign part or all of its commercial interest to
another company, sharing some of the costs of
exploration in return for a proportion of any
income generated in the future
Key TermsPHASE 1

7. PHASE 2
Exploring the block through
site and seismic surveys
Timeline: 1 - 2 years
1. Assessment of
potential impact on
the environment
when undertaking
seismic surveys
3. Site surveys to
assess conditions
on and below
ocean floor
2. Undertake 2D/3D
seismic surveys to
establish potential
presence of oil or gas
4. If possibility of oil
or gas (‘prospects’)
shown to exist, oil and
gas company (‘operator’)
moves to exploration
drilling phase
5. Companies may
consider bringing in
other O&G companies
(farm-in) at this stage
Key activities:

8. Opportunities and Challenges
Opportunities
• Some social projects will be
started, as well as investment
in local facilities (e.g. ports)
Challenges
• Predominantly environmental:
- Increased noise levels can potentially
impact marine mammals, such as whales
- Some marine species may temporarily
migrate away from affected area
- Potential short-term impact on fishing in
area while seismic survey takes place
PHASE 2

9. Seismic survey - compressed air or sonic waves
sent to ocean floor to gauge depth, location and
structure of hydrocarbon resources beneath
Seismic acquisition vessel - vessel used for
conducting offshore seismic operations
Offshore seismic operations - general term
describing seismic exploration and surveys
offshore
Source - a device that records seismic data
using sound waves
Streamer - floating data collection device
towed behind vessel
Air guns - conduct sound waves to ocean floor
using compressed air
Hydrophone receivers - receive sound waves
reflected back from ocean floor
2D - basic ‘single line’ data recording
technique used for rapid survey of large areas
of virgin territory
3D - multiple lines of data, giving a 3D image
of surface below ocean floor
Operator - the member of a joint venture
responsible for carrying out operations
Farm-in - where a company enters into a joint
venture in return for paying a share/all of
specific future operations
Mmbbls - million barrels
Mmboe - million barrels of oil equivalent
Key TermsPHASE 2

10. PHASE 3
Timeline: 1 - 3 years
1. Exploration
drilling is
preceded by an
Environmental
Social Impact
Assessment
3. Exploration wells
are drilled into
seabed (by drillship)
to determine
presence of oil or
gas and a working
hydrocarbon system
2. An oil spill
response plan will
be developed and
approved by the
Government
4. Additional
information
on seabed and
subsea conditions
is also gathered
5. Three potential
scenarios.
See below
a. Dry hole - if no oil or gas is found, well is plugged, sealed, and secured
b. Non-commercial well – if oil or gas is found but well is not commercial, further exploratory drilling may be undertaken
c. Discovery - if well is found to be ‘hydrocarbon-bearing’, it is further tested to determine viability and companies will move to appraisal phase
Key activities:
Undertaking
exploration drilling

11. Opportunities and Challenges
Opportunities
• Potential for some local employment
• Boost to local economy from
spending and supply contracts
• Further social investment projects
Challenges
• Key concern is environmental: preventing
leaks and spillages
• Possible risk of occupational injury or
illness among workforce
• Possible local disruption due to drilling rig,
supply vessels and transport helicopters
PHASE 3

12. ESIA - a study to ensure that the environmental and social
impacts of exploration are assessed and planned for
Oil spill response plan - a contingency plan to assist in
the effective response to an oil spill, which will include
modelling
Well - a boring in the Earth that is designed to bring oil
and gas to the surface
Wildcat - a speculative exploration well drilled in search
of new oil or gas reservoirs
Spud - the process of beginning to drill a well
Rig / Drillship - a ship fitted with drilling apparatus, most
often used for exploratory drilling
Exploration well - a well drilled to confirm presence
of oil or gas
Exploration discovery - an exploration well that
finds oil or gas
Wellbore - a drilled hole or borehole
Directional well - a wellbore aimed at a target located
away from (as opposed to directly beneath) the surface
location of the well
Drilling mud - water-based lubrication fluid used when
drilling a well
Porosity - percentage of space within carbonate rock
that can contain fluids
Permeability - a characteristic that allows the oil and
gas to flow through the rock
Log - the results of exploration drilling
Key TermsPHASE 3

13. 1. In some
circumstances,
companies that don’t
find oil and gas may
look to relinquish their
licence(s) or opt not to
renew their licence(s)
3. There are three ways
in which a licensee can
give up acreage:
- Surrender part of the
licensed area while the
licence continues over
the remaining area
- Relinquish the entire
licence
- Decide not to renew the
exploration licence when
the contract expires
2. This can happen
at any point during
phases 2 and 3
4. Depending on
the original licence
agreement, the
company may have
certain obligations to
complete e.g. social
investments, before it
is released from the
agreement
Key activities:
OPTIONAL
ACTION Exiting a block

14. PHASE 4
Timeline: 1 - 3 years
1. Appraisal drilling
follows successful
exploratory drilling
2. Can involve
drilling multiple
wells
3. Assesses size
of oil or gas
discovery and
whether it is
commercially
viable
4. If discovery
is deemed
commercially
viable, the operator
can move on to
development
5. Social and
environmental
impact of
appraisal drilling
is comparable to
exploration drilling
Key activities:
Appraisal drilling

15. Opportunities and Challenges
Opportunities
• Further jobs for local people
• Increased boost to local economy
(oil industry typically creates fewer
opportunities than mining, especially
when oil industry is offshore) from
spending and supply contracts
• Continued social investment
Challenges
• Same issues as in
exploratory phase
PHASE 4

16. Appraisal - further work to establish
commercial potential of discovery
Delineation well - well drilled to determine the
size of an oil or gas deposit
Well test - a test used to asses a well’s potential
by measuring its capacity
Hydrocarbon / oil / gas kitchen - an area of
the subsurface rock containing hydrocarbons
Reservoir - an area of porous rock containing
hydrocarbon deposits
Field - an area consisting of a single reservoir
or multiple reservoirs
Structural / strategic trap - a rock reservoir
where liquid oil becomes trapped
Key TermsPHASE 4

17. PHASE 5
Timeline: 1 - 3 years
1. A development
plan is submitted
to relevant national
authorities for
approval
3. Materials,
services and
equipment
procured and
installed
4. Drilling of
production wells
takes place
5. Tests run to
verify that a stable
production level
can be achieved
6. Production
begins
Key activities:
Development
2. Carry out
assessment of all
potential risks,
including long-
term appraisal of
environmental and
social impact

18. Opportunities and Challenges
Opportunities
• Potential short to medium-term
jobs for local people
• Boost to local, regional and national
economy from spending and
investment
• Establishment of more sophisticated
local community development and
education programmes
Challenges
• Low but ongoing risk of impact on
local marine life
• Potential long-term local disruption
due to drilling rig, supply vessels
and transport helicopters
• On rare occasions, contractors
supporting development can
cause local issues
PHASE 5

19. Platform - a structure resting on, or attached to,
the seabed from which wells are drilled
Wellhead - point at which the hydrocarbons
exit the seabed / also equipment at the surface
used to control flow
FPSO - a structure used for Floating Production,
Storage and Offloading
Gas injection - pumping gas into an oil
reservoir to stimulate the crude oil
Water flooding - injecting water into oil
reservoir to increase pressure and stimulate
production
Water drive - water present in a reservoir
below the oil or gas deposit, driving it to
the surface
Gas cap drive - gas expanding as well
depletes, driving oil to surface
Water contact - surface in a reservoir
above which gas occurs and below which
water occurs
Key TermsPHASE 5

20. 1. Phased increase in
production until maximum
level is reached
3. Regular ongoing reviews
of social and environmental
performance
2. Production is maintained
at maximum level until it
begins to decline
Timeline: 10 - 30 years
PHASE 6 Production
Key activities:

21. Opportunities and Challenges
Opportunities
• Potential long-term jobs for
local people
• Long-term benefit to local,
regional and national economy
from oil revenue and spending
• Ongoing local community
development and education
programmes
Challenges
• Ensuring that economies remain
balanced and increased revenues
are used effectively
• As production ends, countries need
to ensure they plan for life after oil
and gas revenues
PHASE 6

22. Plateau level - level of peak production
reached by an oil or gas field
MMBtu - million British thermal units per day
Mmcf - million cubic feet
Mmcfd - million cubic feet per day
Mmscfd - million standard cubic feet per day
Bopd - barrels of oil per day
Boepd - barrels of oil equivalent per day
Bcf - billion cubic feet
Tax and royalty - profits and royalty tax paid
on any oil produced
GSA - gas sales agreement
Key TermsPHASE 6