Here are the key steps to follow based on the exploration results: 1. Reprocess seismic data for your discovery to better define the reservoir. 2. Drill at least one appraisal well into your largest discovery to determine if it can be commercially developed based on the size of recoverable reserves. 3. If the appraisal well looks promising, consider drilling a second appraisal well to further assess the field size. 4. Once you have a better understanding of the field size from appraisal drilling, evaluate if development costs can be recovered from future production revenues based on current oil/gas prices. 5. If the field is economically viable, proceed with field development planning. Otherwise, consider selling the license

1. PETRO CHALLENGE
NORWAY
2011

2. OilSim – An
overview of the Oil
and Gas Upstream
value chain

3.  Environmental issues
 Team work and negotiation
 Critical decision making, analytical skills,
multi-tasking
 Learn through experience
 Economically viable volumes- reducing
uncertainty
 Return on Investment
 Function appreciation

4.  You start with $200 million
You can apply for more money later.
 Create value
Measured by the net value of the oil and
gas fields discovered MINUS all costs
involved.
 Correct answers and sensible decisions
are awarded with CPs

5. Complete Value
Chain
Upstream

6.  www.oilsim.com

7. Columns e.g C1 and C54
Blocks are divided into
smaller cells
e g. R1C1
Rows e.g R15 and R97

8.  Challenge: Find three sedimentary basins
in the area. Basins are sedimentary rocks
in the deep subsurface where oil and gas
has been generated.
 Procedure: Buy and study magnetic and
gravimetric surveys; and to submit the
coordinates, column and row number for
each basin centre.

9.  Gravimetric surveys show
the gravity in the sub-
surface. Measured by
airborne sensors.
 Sedimentary rocks have
lower densities than the
surrounding crystalline
rocks. Low gravitational pull
means high probability of a
basin below.

10.  Magnetic surveys show
similar information as
gravimetric surveys. The
sedimentary rocks in the
basins have a lower
concentration of magnetic
materials than the
surrounding crystalline rocks.
 Sedimentary basins are the
areas with the lowest
magnetic field.

12. C50
 Example:
Top basin on both
R100
maps
 Calculate the
midpoint
between the
C60
gravimetric and
magnetic
R110
centres found
 = C55 and R105

13.  3 centres – one Centre
midpoint for each basin
 Example: C55, R105
 Solve before deadline. All
submissions are evaluated
after the deadline (and not
before).
 You may get 0-100 CPs. All
three centres must be
located to get full CPs.

14.  All teams have submitted their answers.
Basin centres are located.
 Message in Inbox. All teams have
answers and CPs awarded.

15.  Sedimentary basins may contain oil
and gas
 The government has decided to put
the blocks around one of the basins
on offer
 Challenge: Identify the 3 most
promising blocks and submit a bid to
the Government for these licences

16. 2. MIGRATION ROCK
where hydrocarbons
are driven through
1. SOURCE ROCK 3. CAP ROCK
where organic Impermeable rock
material is put under that stops
sufficient pressure migration of
hydrocarbons 4. PROSPECT

17.  Geological “pockets”, that might contain hydrocarbons
Anticline trap Salt dome OLF
(c)
Stratigraphic trap
trap
Fault trap

18. Environmentally Sensitive areas
Red areas
You will not be awarded
blocks that contain any
red spots
Blue areas
Blocks in area may be
awarded

19. CRS. Common Risk Segment
surveys tell you about the
Surface
probability of a structure in
the block/cell containing oil
or gas
Layer 3 Eocene
1500m below the seabed
Layer 2 Paleocene
2500m below the seabed
Layer 1 Cretaceous
3500m below the seabed

20.  Traps can be found with
seismic surveys
 2D seismic survey is a cross
section of the geological
layers along either a column
or a row
 2D seismic surveys are used
for locating prospects

21. Unprocessed Processed
Interpreted Red is top of the
sealing rock
Green is top of
the reservoir rock

22. Anticline and Fault Traps
Leakage
Text

23. What type of data
do you want?
 Columns or
Rows
 Unprocessed
or processed
data
 Interpreted or
not
The yellow hatched area on
Only buy maximum of 4
map can be clicked on and
blocks of data at a time to
dragged to blocks of interest
speed up processing

24.  Red circles – navigate
through the 2D
seismic
 Yellow square – Row 1
from Column 1-56
 Click on seismic to see
close up view

25. Column
Row
Basin,Source Prospect, Reservoir

26. 26
• Chose which blocks you
want to bid for
• For each block, say how
many exploration wells you
are willing to drill
• Do NOT promise to drill
more wells than there are
prospects
• An estimated cost is shown
• You will initially only be
awarded one block

27.  Activities that oil and gas companies do to serve the
communities they operate in
 CSR projects usually to develop the local communities in
education, social welfare, and business
 In OilSim teams are rewarded with CPs when choosing
their CSR projects
 CPs a company has is considered by the Government
when deciding upon licence awards
27

28. CSR Tab
28

29.  Some are greyed out, because the team does
not have enough CP, enough CSR budget, or
enough cash to do them
 Each has a cost, and a number of possible
outcomes
 Each outcome has a probability and either
negative or positive CP
 In the CSR tab you can see the minimum and
maximum CP you can get, as well as the
probability for getting the maximum CP
29

30.  This project costs $8M
 If it goes well, the team gets 40 CP
 The likelihood of this is 60%
 If it goes badly, the team gets zero CP
 Minimum required CP is zero
30

31. 31

32.  Lots of different types of Projects to choose from
 You only have $30M budget for CSR in each licensing
round
 CSR funds that you don’t spend in one round are
transferred to the next
 You cannot initiate a project if it has the potential to
make your CP’s go into negative
 You cannot initiate a project if you don’t have the cash
for it
 Each project can only be run once per team
32

33.  CSR is about caring for the local society –
and making a difference for the people
living where you operate
 Not all projects are sound
 Bribery does not pay
 Some projects cost a lot, but do not give
so much return
 Some projects are riskier than others
33

34. 34

35.  Environmental Sensitive Areas map to see
which blocks to avoid
 Common Risk Segment surveys to see
which blocks to examine closer
 2D surveys seismic to identify which ones
have the most (big) structures
 Check water depth, and go for shallow
water blocks if possible
 Remember to submit 3 bids
 Choose CSR projects to increase CPs
35

36.  Message sent to all
teams with the results
 Credibility Points are
given for prosperity of
the blocks you bid for
 Every team has got
one exploration
license

37.  HQ is happy with the license awarded.
 Challenge: 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
 Get others to invest 20% or more in your license
– you can show/send 3D seismic

38.  Shows the subsurface structure in a cube.

39. 3D Seismic
in Oilsim
Layer 3 Eocene
Layer 2 Paleocene
Layer 1 Cretaceous

40.  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.

42. Enter the
percentage and
total amount for
have agreed to
offer
Minimum
$100,000 per %
Add a message
to the seller
Press “Send
offer”

43. 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 own blocks

44.  license OWNER
decides whether to
ACCEPT or REJECT
the offer
 Partnerships
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 licenses.

45. 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 blocks

46.  Partners pay a proportional share of all
future costs
 Partners receive a proportional share of the
net proceeds from oil and gas
 The operator team makes all decisions
regarding drilling
 Teams can farm-out up to 70% of licence
 Operators must keep 30% of licence

47. •Before choosing a
rig, you need to
check your water
depth
Find this at the
bottom of the
BLOCK page

48. 48
Commence Drilling
• When you have sold at
least 20% of the license
you can start drilling
exploration wells to
determine the value of
the block
• Click on Drill

49.  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

50. Choose drilling rig
Scroll down the page
to see the Drillships,
Semi-subs and Jack-
ups

51. Upto 9 Star quality-
 Good: normally costs
more
 Bad: cheaper,
but reliability is low,
so you risk extra
drilling time and
extra costs

52.  EIA survey: more knowledge about the
area.
 Less probability for drilling problems.
 Less severe consequences if you run into
problems.
 = Which drilling locations to avoid.

53. Drill Position
 EIA:
enviromental
impact analysis
shows where it
will cost you
more to drill.
 Place your
mouse where to
drill

54. Layer 3 Eocene
Layer 2 Paleocene
Layer 1 Cretaceous

56. Oil spill or
Gas Blowout
control
Estimated
cost

57.  Volume Range
in MBOE
counts
 Test may
increase
Proven MBOE
if oil or gas
found

58. Proven Possible

61. Assumptions

62. Value calculation

63.  From Probable volume to proven reserves

64. Exploration well:
 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

65. Effect on calculation of licence
Now total
expenses are lower
than the sales
value and so we
have a positive
licence value
Expected cost if you developed the field
(CAPEX) and produced the oil (OPEX)

66.  After your first drill in each well, reprocess seismic
 Decide which discoveries to drill how many appraisal
wells into
Ultimately, you should either:
 Continue appraisal drilling to achieve positive net
present value and an ROI
 Conclude that additional appraisal wells will not result
in a net present value and think about selling your
Licence to Big Oil
 Decide that your value will not increase sufficiently and
decide to sell to Big Oil

67.  Click on Apply for More Funds Tab.
 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 Credit points:
Apply for cash and be fined $5million for each
$20million requested.