1. PetroChallenge
Nigeria

2. You are an oil & gas
company...

3. Your Role
 …and your team’s challenge is to explore, develop and
produce oil and gas in a fictitious petroleum province

4. Money and Credibility
 You start with $400 million cash
You can apply for more money later.
 Maximise profit
 Creating highest company value possible, measured by the net
value of the oil and gas fields discovered MINUS all costs
involved.
 Correct answers and sensible decisions are awarded with
Credibility Points (CPs)

5. Course Challenges
Upstream

6. Learning cycle

7. Login
 See your login slip

8. Challenge 1
Upstream

9. First task
 Challenge: Nominate 10 blocks to be included in the
licensing round
 Procedure: Buy and study Environmentally Sensitive
area map, magnetic and gravimetric surveys; consider
water depth and block position in sedimentary basins

10. Map
Columns e.g C1 and C54
Rows e.g R15 and R97
Blocks are divided into
smaller cells
e g. R45,C92

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

12. Rock cycle and sedimentary
basins
Sedimentary
basin
Source: http://www.geolsoc.org.uk/rockcycle

13. Earth’s gravitational pull
 The Earth experiences
gravitational pull towards
the Sun
 Anomalies of the expected
pull are found in different
different sub-surfaces
 Lower gravitational fields
indicates likelihood of low
density rocks
 Sedimentary rocks are low
density and porous
 Can contain hydrocarbons

14. Gravimetric surveys
 Real Gravimetric survey
 The lower the
gravitational pull – the
thicker the sedimentary
rock is likely to be
 Red on a gravimetric
survey indicates thickest
sedimentary rock

15. Survey shop
 Survey tab
 But Gravimetric surveys
 South-east quadrant
 The red and yellow areas
indicate basin

16. Earth’s magnetic fields
 The Earth’s core creates
magnetic fields
 Anomalies of the expected
magnetism are found in
different sub-surfaces
 lower concentration of
magnetic materials can
indicate sedimentary rocks
 Can contain hydrocarbons
Source: http://www.glossary.oilfield.slb.com

17. Magnetic surveys
 Sedimentary rocks in the
basins have a lower
concentration of magnetic
materials than the
surrounding crystalline
rocks
 Basins have low magnetic
field
 Pink area is thickest rock
of low magnetism
 Magnetic survey:
North-west quadrant

18. Compare basins and blocks
E.g. block 520
Inside basin?
Water depth?

19. Check water depth

20. Nominate 10 blocks
To nominate a block –
click on it
To deselect a block –
click on it

21. Recap
 Environmentally sensitive?
 In a sedimentary basins?
 Water depth?
 Shortlist possible blocks you would be interested in
buying 2d seismic for in next challenge
 Click on a block to nominate
 Nominate 10 blocks
 Up to 100 credibility points awarded- based on water
depth and position in basin

22. Challenge 1
Your turn

23. Challenge 2
Upstream

24. Identify promising blocks
 The government has
decided which blocks to
offer in the first licence
round
 Challenge: Identify the 3
most promising blocks
and submit a bid to the
Government for these
licences
 Bid includes 3 blocks, well
commitments and CSR
project completion

25. Source and migration
5.STRUCTURAL OR
STRATIGRAPHIC TRAP
2. MIGRATION ROCK 3. RESERVOIR ROCK
where hydrocarbons Rock with porosity
are driven through and permeability
1. SOURCE ROCK 4. CAP ROCK
where organic material Impermeable rock
is put under sufficient that stops
pressure and migration of
temperature hydrocarbons PROSPECT

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

27. Play element mapping

28. Common Risk segment maps
 Play elements are converted to risk segment maps
 Risk maps for each element are combined into
Common Risk Segment map - CRS
Source: www.prweb.com

29. Common risk segment maps
Highest probability
Moderate probability
Lowest probability
Surface
Layer 3 Eocene
1500m below the seabed
Layer 2 Paleocene
2500m below the seabed
Layer 1 Cretaceous
3500m below the seabed

30. 2D Seismic surveys
 Traps can be found with
seismic surveys
 2D seismic survey is a
cross section of the
geological layers in one
direction
 2D seismic surveys are
used for locating
prospects

31. Order seismic
 Survey Tab
 Order from Survey Shop

32. Order seismic
What type of data do you want?
 Columns or Rows
 Unprocessed or processed data
 Interpreted or not
 Move yellow hatched area to block you want to order

33. View the Seismic

34. 2D seismic in OilSim
Unprocessed Processed
Interpreted Red is top of the
cap rock
Green is top of the
reservoir rock

35. Anticlinal traps

36. Fault traps
Leakage? Sealant rock

37. Leakage?
The cap rock

38. Whole block seismic
R17
R19 R17
R19
R21
R21 R23
R23

39. Prospect counting
1
 How many prospects can you see in
each block?
1
2
3 4
5 6
2
 How many wells should be committed to?
5 6  Can deviate the drilling by one cell per layer

40. Cross section
Column
Row
Basin,Source Prospect, Reservoir

41. Enter bids
 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

42. Corporate Social
Responsibility
 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 license awards

43. CSR tab

44. CSR projects
 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

45. Project Example
 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

46. Results

47. Limitations
 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

48. Learning points
 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

49. Recap on challenge 2
 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
 Increase CPs with CSR project completion

50. Challenge 2
Your turn

51. Challenge 3
Upstream

52. Identify promising blocks
 The government has
decided which blocks to
offer in the first license
round
 Challenge: Identify the 3
most promising blocks
and submit a bid to the
Government for these
licenses
 Bid includes 3 blocks, well
commitments and CSR
project completion

53. Partnerships
 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

54. Real 3D seismic
 Shows the subsurface structure in a cube.

55. 3D Seismic
in OilSim
Prospects
are no
Layer 3 Eocene
guarantee
of oil or gas
Layer 2
Paleocene
Layer 1
Cretaceous

56. Why partner?
 Spread the risk
 Increase probability of profit

57. Farm-in

58. Farm-in
Enter the
percentage and
total amount you
have agreed to
offer
Minimum
$100,000 per %
Add a message to
the seller
Press “Send
offer”

59. Farm-in
When a team receives a Farm-In offer it appears under
Financing. This is where a team can receive finance or
money for a % of their own blocks

60. Farm-in
 License OWNER
decides whether to
ACCEPT or REJECT
the offer
 Partnerships
established every
time a license
owner accepts an
offer.

61. Farm-in
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

62. Partnerships
 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
 Operators can farm-out up to 70% of licence, but must
keep 30%

63. Challenge 3a
Your turn

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

65. Choose Rig
 Choose the right rigs for your water depths
 Jack-up rigs for shallow waters
 Up to 100m
 Semi-submersible rigs for middle waters
 Up to 600m
 Drillships for the deepest waters
 Over 600m
 Rig cost = drilling days * day rate

66. Rigs available
 Limited number of rigs
 20 minutes to complete
each drill
 Queues
 Prices can change

67. Service providers
 Up to 9 Star quality-
 Good: normally costs
more
 Bad: cheaper, but
reliability is low, so you
risk extra drilling time and
extra costs

68. Environmental Impact
Assessment

69. Drill
Layer 3 Eocene
Layer 2
Paleocene
Layer 1 Cretaceous

70. Selecting drill cells
 Can choose a cell on all three layers
 Deviate by only one cell per layer, either
vertically, horizontally or vertically

71. Controls and estimated costs
Oil spill or
Gas Blowout
control
Estimated
cost

72. Drilling days

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

74. After testing

75. Reinterpret seismic

76. Value

77. Discovered prospects

78. Assumptions

79. Value calculation
25% of 8 MBOE @ $50
Expected costs if
you developed the
field (capex) and
produced
the oil (opex)
If total expenses are
higher than the sales
value, the value of the
license is zero

80. Appraisal
 From Probable volume to proven reserves

81. Drilling – Wildcats &
Appraisals
Wildcats Appraisals
 Drill into every
prospect once
(Wildcat)
 Continue appraisal
drilling if possible
to increase the
proven and reduce
the potential

82. Appraisal drilling

83. Increasing proven volumes
 Appraisal wells - proven reserves increase
 Range between proven and possible is decreased

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

85. Challenge 3 decisions
 After your first drill into a prospect, reinterpret the
seismic
 Decide which discoveries to drill how many appraisal
wells into
 Ultimately, you should either:
 Get a positive net present value,
 Or a conclusion that additional appraisal wells will not result in a
net present value

86. Challenge 3b
Your turn

87. Apply for more funds
 Click on Apply for More Funds Tab.
 1 CP for each $100,000 applied for.
 Answer three questions:
Outcome Cash Credibility
Points
All Correct Full Amount Keep All
One Wrong Full Amount Keep Half
Two Wrong Half Lose All
All Wrong None Lose All
 Expensive money if less than 10 credibility points: Apply
for cash and be fined $5million for each $20million
requested.

88. Challenge 4
Upstream

89. Challenge
 Make a well plan for each
reservoir in your block,
choosing:
 Number of production wells
 Tubing size
 Aiming to choose a plan that
maximizes value of block
 Increased sales value
 Decreased drilling costs

90. Nodal analysis
 Read the maximum well flow rate
 Most suitable Tube size
Most
suitable tube
Sand
production
limit
Highest well
flow rate

91. Expected production profile

92. Create well plan
 Click on Drilling Rig

93. Reservation information
1. Click the Reservoir tab
2. Click the magnifying
glass for the reservoir

94. Updated information

95. Amend well plan

96. Combined Plan

97. Improve value-revise well
plan
 Submit plans with different number of wells and
tubing sizes
 Review Reservoir information after each revised plan
 Aiming to maximize sales value and minimize drilling
costs, whilst increasing Recovery Factor
 You can amend your well plans until the deadline
 Credibility points – upto 100 CPs if plans are optimal
for all your reservoirs
 After deadline – Value of Licence will be adjusted
based on final Well Plan submitted

98. Challenge 4
Your turn

99. Challenge 5
Upstream

100. Facilities planning
 Plan the facilities to produce
the oil and gas that has been
found in the block
 Maximize the value of the
license block
 Maintain sales value
 Decrease facilities costs
 Reduce risk

101. Environmental surveys
Earthquake survey Hurricanes
legend
Earthquake
survey legend

102. Finding Production Profile

103. Combined Production Profile

104. Facility selection
Click on facility List

105. Choose facility type

106. Platform parameters

107. Platform parameters
 Connect pipelines to Gas terminal and an Oil terminal
 No gas flaring allowed or shipping tankers available

108. Transport volumes
 Estimated no. of barrels can be
transported per day Different
flowline (riser) and pipeline sizes =
Different no. of barrels
 Flowline size :
 Multiphase fluid to platform
(acting as flowline and riser)
 Pipeline size :
 Oil and condensate to storage
tanks
 Gas to processing plant

109. Flow overview

110. Challenge 5
Your turn

111. Challenge 6
Upstream

112. Challenge
PART A
Plan the construction of facilities required to operate your
platform
Submit a financial summary of the plan
1. Maximum capital expenditure
2. Total local content budget
3. Expected time period in which First Oil or Gas to be reached
PART B
Execute construction plan
Minimize capital expenses
Amend construction plan as issues occur
Get to FIRST Oil or Gas!

113. Planning construction
PART A
Activity Hierarchy Survey – study activity dependencies
Vendor report - compare providers/local content
Prepare construction plan
Use Challenge sheets and prepare Gantt chart
Submit Planning Summary

114. Activity Hierarchy
Where a solid
arrow
Choose only connects
1 activity – activities,
where a commenceme
Dotted line nt of an
connects activity is
activities dependent
upon the
preceding
activity(ies)
being
completed

115. Vendor report
 Considerations:
 Reach First Oil or gas within
11 periods of 180 days –
TOTAL 1980 days
 Time V. Cost
 Local Content

116. Planning summary
A possible tax credit from the government
For achieving the three objectives of project
management: budget, time and quality

117. Recap
 PART A
 Activity Hierarchy Survey – study activity dependencies
 Vendor report - compare providers/local content
 Prepare construction plan
 Submit Planning Summary

118. Challenge 6a
Your turn

119. Construction execution

120. Activities in 1st period

121. Activity feedback
Delay in
starting
activity
Activity in
progress
Activity
completed

122. Period information

123. Timeline

124. Updated hierarchy

125. First oil and bonuses

126. Recap
 PART B
 Execute Plan - as many activities as possible within each
period; provider for each activity
 Check Timeline chart to see progress
 Reassess/alter providers as issues occur

127. Challenge 6
Your turn

128. Team review
 Performance of company
 Effects of partnerships
 Economic viability of asset
 Learning experiences from course
 Important knowledge learning points or skills used