Feasibility

Test Your Knowledge

Quiz: Feasibility in Oil & Gas

Instructions: Choose the best answer for each question.

1. What is the primary purpose of a feasibility study in the oil and gas industry? a) To obtain environmental permits. b) To determine the potential profitability of a project. c) To secure funding from investors. d) To establish a timeline for project completion.

2. Which of the following is NOT a key aspect of feasibility in oil and gas? a) Technical feasibility b) Economic feasibility c) Marketing feasibility d) Environmental feasibility

3. How does a feasibility study help reduce risk in oil and gas projects? a) By identifying and mitigating potential challenges early on. b) By ensuring all stakeholders are in agreement. c) By predicting the price of oil and gas in the future. d) By eliminating the need for environmental impact assessments.

4. Which of the following professionals would NOT typically be involved in a feasibility study? a) Geologists b) Engineers c) Marketing managers d) Environmental specialists

5. What is the main advantage of conducting a comprehensive feasibility study? a) It ensures the project will be completed on schedule. b) It guarantees the project will be profitable. c) It increases the chances of success in a competitive industry. d) It eliminates all potential risks associated with the project.

Exercise: Feasibility Assessment

Scenario: An oil and gas company is considering drilling an exploratory well in a remote area. They have identified a potential site with promising geological indicators.

Task: Imagine you are part of the feasibility study team. List at least three key aspects of feasibility you would need to assess for this project, and briefly explain why each is important.

Techniques

Feasibility in Oil & Gas: A Deep Dive

Chapter 1: Techniques for Feasibility Assessment

Feasibility studies in the oil and gas industry rely on a diverse range of techniques to thoroughly assess each aspect of a project. These techniques are often iterative and interconnected, providing a robust analysis. Key techniques include:

• Data Collection & Analysis: This foundational step involves gathering geological data (seismic surveys, well logs), reservoir simulations, production data from analogous fields, and economic forecasts. Statistical analysis, trend analysis, and risk assessment methodologies are applied to this data. This might involve techniques like Monte Carlo simulations for uncertainty analysis.

• Reservoir Simulation: Sophisticated software models are used to simulate reservoir behavior under various operating conditions, predicting production rates, ultimate recovery, and pressure depletion. This helps optimize extraction strategies and assess long-term production potential.

• Economic Modeling: Discounted cash flow (DCF) analysis is a cornerstone of economic feasibility assessment. It projects future cash flows, considering capital expenditures, operating costs, revenue streams, and the time value of money. Sensitivity analysis and scenario planning help understand the impact of variations in key parameters (e.g., oil price, production rates).

• Environmental Impact Assessment (EIA): EIAs employ various techniques, including life cycle assessment (LCA), environmental risk assessment, and spatial analysis using GIS software. They quantify potential environmental impacts, such as greenhouse gas emissions, water usage, and habitat disruption, enabling mitigation strategies to be developed.

• Social Impact Assessment (SIA): SIAs employ participatory methods, such as surveys, focus groups, and stakeholder consultations, to understand the potential social impacts of a project on local communities. This helps identify potential conflicts and design community engagement strategies.

• Legal and Regulatory Review: This involves meticulously reviewing all relevant laws, regulations, and permitting requirements at local, national, and international levels. Techniques include legal research, permit application analysis, and risk assessment related to regulatory compliance.

Chapter 2: Models Used in Oil & Gas Feasibility Studies

A variety of models are employed to quantitatively and qualitatively assess the feasibility of oil and gas projects. These models often work in conjunction with the techniques described in Chapter 1:

• Geological Models: These represent the subsurface geology, including reservoir properties like porosity, permeability, and fluid saturation. These models are crucial for reservoir simulation and production forecasting. Common models include 3D geological models built from seismic and well data.

• Reservoir Simulation Models: These sophisticated software programs simulate fluid flow in reservoirs, predicting production performance under different operating conditions. Models vary in complexity, from simple analytical models to complex numerical simulators incorporating detailed reservoir characteristics.

• Economic Models: These include DCF models, which project future cash flows to determine the net present value (NPV) and internal rate of return (IRR) of a project. Other models incorporate sensitivity analysis, Monte Carlo simulations to assess risk, and real options analysis to value flexibility in project decisions.

• Environmental Models: These assess the environmental impacts of projects using various tools. For example, atmospheric dispersion models can predict air pollutant concentrations, while hydrological models assess water quality and quantity impacts.

• Social Models: While less quantitatively driven than other models, social impact assessment often employs frameworks and matrices to categorize and evaluate potential social effects on stakeholders.

Chapter 3: Software for Feasibility Studies

The complexity of oil and gas feasibility studies necessitates the use of specialized software:

• Geological Modeling Software: Petrel (Schlumberger), Kingdom (IHS Markit), and GeoModeller are examples of software used for creating 3D geological models.

• Reservoir Simulation Software: ECLIPSE (Schlumberger), CMG (Computer Modelling Group), and INTERSECT (Roxar) are industry-standard reservoir simulators.

• Economic Modeling Software: Spreadsheets (Excel) are commonly used for basic economic calculations, while more sophisticated software like Aegis, Crystal Ball, and specialized add-ins for Excel are employed for advanced risk analysis and scenario planning.

• Environmental Modeling Software: Various specialized software packages are used depending on the specific environmental impact being assessed, ranging from GIS software (ArcGIS) to dedicated air quality and hydrological modeling packages.

• Project Management Software: Software like MS Project or Primavera P6 is vital for scheduling and tracking project progress, critical for ensuring feasibility within the specified timeframe.

Chapter 4: Best Practices for Feasibility Studies

Conducting a successful feasibility study requires adherence to best practices:

• Clearly Defined Objectives and Scope: The study's objectives and scope should be clearly defined upfront, ensuring all relevant aspects are considered.

• Robust Data Collection and Validation: High-quality, validated data is crucial for reliable results. Data sources should be identified and verified.

• Transparent Methodology: The methodology employed should be documented transparently, allowing for scrutiny and replication.

• Expert Collaboration: A multidisciplinary team with expertise in geology, engineering, finance, environment, and law is essential.

• Risk Assessment and Mitigation: Potential risks should be identified and quantified, and appropriate mitigation strategies developed.

• Sensitivity Analysis and Scenario Planning: Exploring variations in key input parameters helps understand the robustness of the feasibility assessment.

• Regular Communication and Reporting: Regular communication among stakeholders is essential to keep the project on track and ensure buy-in.

• Independent Review: An independent review of the feasibility study can provide valuable insights and enhance confidence in the findings.

Chapter 5: Case Studies in Oil & Gas Feasibility

(Note: Specific case studies would require detailed information about real-world projects. The following is a general outline.)

Several case studies could illustrate the importance of feasibility studies and different approaches. Examples might include:

• Case Study 1: Successful deepwater exploration: A case study showcasing how a thorough feasibility study, including detailed reservoir modeling and risk assessment, led to a successful deepwater oil discovery and development. This case would highlight the value of investing in detailed pre-project analysis.

• Case Study 2: Project abandonment due to unforeseen challenges: A case study of a project that was abandoned after encountering unforeseen technical or environmental challenges that were not adequately addressed in the initial feasibility study. This case would emphasize the importance of comprehensive risk assessment.

• Case Study 3: Community engagement leading to project success: A case study demonstrating how effective community engagement and social impact assessment contributed to the successful implementation of an oil and gas project with minimal social disruption. This case would highlight the significance of social feasibility.

• Case Study 4: Optimization through advanced modelling techniques: An example illustrating how the application of advanced reservoir simulation and economic modeling techniques optimized project design and improved profitability. This case would demonstrate the value of using advanced software and analysis techniques.

Each case study would detail the specific techniques, models, and software used, the key challenges faced, and the lessons learned. This section would provide practical illustrations of how feasibility studies contribute to project success in the oil and gas industry.