Feasibility Study

Test Your Knowledge

Quiz: Drilling Down on Feasibility

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 government permits for a project. b) To assess the financial viability of a project. c) To identify the best location for drilling. d) To determine the type of oil or gas present.

2. Which of the following is NOT a key component of a feasibility study?

a) Resource assessment b) Production technology c) Market analysis d) Project branding

3. What does a social impact assessment in a feasibility study analyze?

a) The potential environmental impact of a project. b) The potential impact of a project on local communities. c) The potential impact of a project on global markets. d) The potential impact of a project on the company's reputation.

4. How can a feasibility study reduce risk for an oil and gas company?

a) By guaranteeing project success. b) By identifying potential challenges and risks before investment. c) By eliminating all uncertainties associated with a project. d) By predicting future market prices for oil and gas.

5. What qualitative factor is crucial for a successful feasibility study?

a) The availability of advanced drilling technology. b) The size and quality of the oil or gas reserves. c) The political stability of the operating environment. d) The projected revenue generated by the project.

Exercise: Assessing a Hypothetical Project

Scenario: An oil and gas company is considering a project to extract natural gas from a remote location in a developing country. The company has conducted preliminary investigations and identified a significant deposit of natural gas. However, the area is politically unstable, with frequent protests against foreign companies.

Task: Based on the information provided, identify two key areas of feasibility that the company needs to thoroughly investigate in their feasibility study. Briefly explain why these areas are crucial for the project's success.

Techniques

Chapter 1: Techniques

Drilling Down on Feasibility: Techniques for Assessing Project Viability in Oil & Gas

This chapter explores the various techniques employed in conducting feasibility studies for oil and gas projects. These techniques are critical for gathering comprehensive data and understanding the project's potential for success.

1.1 Resource Assessment:

• Seismic Surveys: Utilizing sound waves to map subsurface geological formations and identify potential oil and gas reservoirs.
• Well Logging: Analyzing data from wells to determine reservoir characteristics, fluid types, and production potential.
• Core Analysis: Examining physical rock samples to understand reservoir properties and fluid flow characteristics.
• Petrophysical Evaluation: Integrating data from various sources to estimate reservoir volume and recoverable reserves.

1.2 Production Technology:

• Reservoir Simulation: Using computer models to simulate reservoir behavior and predict production performance.
• Well Design and Completion: Analyzing wellbore design, completion methods, and artificial lift technologies to optimize production.
• Production Optimization: Implementing strategies to maximize production rates and minimize operating costs.
• Enhanced Oil Recovery (EOR): Evaluating the feasibility and effectiveness of EOR techniques for extracting additional oil from mature reservoirs.

1.3 Infrastructure Requirements:

• Pipeline Design and Routing: Assessing pipeline capacity, materials, and optimal routes for transporting oil and gas.
• Processing Plant Design: Evaluating processing requirements, equipment selection, and environmental considerations.
• Transportation and Logistics: Analyzing transportation options, infrastructure needs, and logistics management.

1.4 Environmental Impact Assessment:

• Environmental Baseline Studies: Establishing pre-project environmental conditions and identifying sensitive ecosystems.
• Environmental Risk Assessment: Identifying potential environmental impacts and their severity.
• Mitigation Measures: Developing and evaluating strategies to minimize environmental impacts and comply with regulations.
• Environmental Monitoring and Management: Establishing protocols for monitoring environmental performance and ensuring compliance.

1.5 Market Analysis:

• Demand Forecasting: Estimating future demand for oil and gas based on economic growth, energy consumption, and market trends.
• Price Analysis: Evaluating historical and projected prices for oil and gas to determine revenue potential.
• Competitive Analysis: Identifying competitors, market share, and potential for market disruption.
• Contract Negotiation and Risk Assessment: Evaluating potential sales agreements, market risks, and pricing strategies.

1.6 Financial Analysis:

• Cost Estimation: Estimating project capital costs, operating expenses, and potential decommissioning costs.
• Revenue Projection: Predicting future revenue based on production rates, prices, and sales volume.
• Cash Flow Analysis: Modeling project cash flows and evaluating potential profitability.
• Financial Modeling: Using sophisticated software to simulate financial scenarios and assess investment risks.

1.7 Social Impact Assessment:

• Community Engagement: Establishing communication channels and seeking input from local communities.
• Social Risk Assessment: Identifying potential social impacts, such as displacement, cultural heritage, and economic development.
• Stakeholder Management: Developing strategies to manage relationships with key stakeholders and address concerns.

These techniques provide a structured approach for collecting and analyzing information to assess project viability and guide decision-making. By employing a combination of these techniques, feasibility studies can provide a comprehensive understanding of the project's potential risks and rewards.

Chapter 2: Models

Models for Feasibility Studies in Oil & Gas: Simulating the Future

This chapter delves into the various models used in feasibility studies to predict project performance and assess potential risks and rewards. These models are essential for simulating complex scenarios and providing insights into the project's future.

2.1 Reservoir Simulation Models:

• Black Oil Models: Simpler models that represent oil and gas as single-phase fluids and are suitable for early-stage feasibility studies.
• Compositional Models: More complex models that account for the composition of oil and gas mixtures and their interactions.
• Thermal Models: Models specifically designed for simulating thermal recovery techniques, such as steam injection.
• Geomechanical Models: Models that incorporate rock mechanics to predict reservoir behavior under stress and deformation.

2.2 Production Optimization Models:

• Well Test Analysis Models: Models used to interpret well test data and estimate reservoir characteristics.
• Artificial Lift Optimization Models: Models that simulate the performance of various artificial lift methods and optimize pumping schedules.
• Production Allocation Models: Models that allocate production from multiple wells to maximize overall production.

2.3 Environmental Impact Models:

• Air Quality Models: Models that simulate the dispersion of air pollutants from oil and gas operations.
• Water Quality Models: Models that assess the potential impact of drilling and production activities on water resources.
• Habitat Models: Models that predict the potential impact of oil and gas development on ecosystems and biodiversity.

2.4 Financial Models:

• Discounted Cash Flow (DCF) Models: Models that project future cash flows and discount them back to present value to assess project profitability.
• Monte Carlo Simulation Models: Models that use random variables to simulate multiple scenarios and evaluate project risk.
• Sensitivity Analysis Models: Models that evaluate the impact of changes in key variables, such as oil price or production costs, on project outcomes.

2.5 Social Impact Models:

• Social Network Analysis Models: Models that analyze social networks and identify key stakeholders and their influence.
• Community Development Models: Models that evaluate the potential impact of oil and gas development on local communities and economic growth.
• Risk Assessment Models: Models that identify potential social risks and develop mitigation strategies.

By employing these models, feasibility studies can simulate a wide range of scenarios and assess the project's viability under different conditions. These models provide valuable insights for decision-making and help reduce the uncertainty associated with oil and gas projects.

Chapter 3: Software

Software for Feasibility Studies: Tools for Data Analysis and Modeling

This chapter explores the software applications commonly used in feasibility studies to analyze data, run simulations, and generate reports. These software tools are crucial for streamlining the study process and ensuring accuracy and efficiency.

3.1 Reservoir Simulation Software:

• Eclipse (Schlumberger): A comprehensive reservoir simulation software used for simulating reservoir behavior, optimizing well placement, and forecasting production.
• Petrel (Schlumberger): A powerful software package for reservoir characterization, geological modeling, and well planning.
• CMG (Computer Modelling Group): A suite of reservoir simulation software for a wide range of applications, including thermal recovery, unconventional reservoirs, and complex fluid flow.
• Interwell (Roxar): A reservoir simulation software focused on well-scale modeling and optimizing well performance.

3.2 Production Optimization Software:

• WellPlan (Halliburton): A well planning software that analyzes wellbore design, completion methods, and artificial lift systems.
• WellView (Schlumberger): A well monitoring and optimization software that analyzes production data and identifies potential problems.
• Prosper (Roxar): A production optimization software that helps manage production from multiple wells and maximize overall output.

3.3 Environmental Impact Assessment Software:

• ArcGIS (ESRI): A geographic information system (GIS) software used for mapping environmental data, analyzing spatial relationships, and assessing potential impacts.
• AirMOD (EPA): An air quality modeling software used to predict the dispersion of air pollutants.
• QUAL2K (EPA): A water quality modeling software used to assess the impact of pollutants on water resources.

3.4 Financial Modeling Software:

• Excel (Microsoft): A widely used spreadsheet software that can be used for basic financial modeling.
• Capital Budgeting Software: Specialized software for project evaluation, such as investment analysis and discounted cash flow (DCF) calculations.
• Risk Analysis Software: Software that uses statistical models to simulate multiple scenarios and evaluate project risk.

3.5 Data Management and Visualization Software:

• Tableau (Tableau Software): A data visualization software that enables creating interactive dashboards and reports from various data sources.
• Power BI (Microsoft): A business intelligence and data visualization software that allows users to connect to data sources and create interactive reports.

These software applications provide a range of tools for analyzing data, running simulations, and generating reports, making them invaluable for conducting feasibility studies. By utilizing the right software, companies can streamline the study process and ensure accurate and efficient analysis.

Chapter 4: Best Practices

Best Practices for Conducting Feasibility Studies: Ensuring Accuracy and Relevance

This chapter outlines best practices for conducting feasibility studies in the oil and gas industry to maximize their value and ensure their accuracy and relevance.

4.1 Clear Objectives and Scope:

• Define clear and specific objectives for the feasibility study.
• Establish a well-defined scope, including the project's boundaries and the areas to be investigated.
• Ensure all stakeholders are aware of the study's objectives and scope.

4.2 Data Quality and Integrity:

• Utilize reliable and verified data sources.
• Implement quality control measures to ensure data accuracy and consistency.
• Document all data sources and assumptions used in the study.

4.3 Robust Analysis and Modeling:

• Employ appropriate analytical techniques and modeling tools.
• Conduct sensitivity analyses to evaluate the impact of key variables on project outcomes.
• Validate model results and ensure their consistency with available data.

4.4 Transparency and Communication:

• Document all assumptions and uncertainties in the study.
• Communicate findings clearly and concisely to stakeholders.
• Encourage open discussion and feedback throughout the study process.

4.5 Stakeholder Engagement:

• Engage with relevant stakeholders, including local communities, government agencies, and investors.
• Seek input from stakeholders and address their concerns.
• Communicate study findings and decision-making processes transparently.

4.6 Continuous Improvement:

• Regularly review and update the feasibility study process.
• Identify areas for improvement and implement changes to enhance the study's effectiveness.
• Adapt the study process to address emerging technologies and industry trends.

By following these best practices, companies can ensure that their feasibility studies are comprehensive, accurate, and relevant, providing a strong foundation for informed decision-making and reducing the risk of project failure.

Chapter 5: Case Studies

Feasibility Studies in Action: Real-World Examples of Success and Lessons Learned

This chapter presents real-world case studies that demonstrate the practical application of feasibility studies in the oil and gas industry. These case studies highlight the successes and challenges encountered in conducting these studies and provide valuable lessons learned.

5.1 Case Study 1: Offshore Wind Farm Development:

• Objective: Assess the feasibility of developing an offshore wind farm in a specific geographical area.
• Methodology: Conducted environmental impact assessment, geological surveys, and market analysis.
• Outcomes: Identified significant challenges related to environmental regulations and marine ecosystem impacts, leading to a revised project scope and mitigation strategies.

5.2 Case Study 2: Shale Gas Exploration:

• Objective: Evaluate the potential of a shale gas play and determine the best approach for exploration and production.
• Methodology: Utilized advanced seismic imaging, well logging, and reservoir simulation techniques.
• Outcomes: Identified a commercially viable shale gas play, leading to significant investment in exploration and production activities.

5.3 Case Study 3: Deepwater Oil Development:

• Objective: Evaluate the feasibility of developing a deepwater oil field using advanced drilling and production technologies.
• Methodology: Conducted extensive technical feasibility analysis, cost estimations, and risk assessments.
• Outcomes: Identified significant technological challenges and high capital costs, leading to a phased development approach and strategic partnerships to mitigate risk.

5.4 Case Study 4: Carbon Capture and Storage (CCS):

• Objective: Assess the feasibility of deploying a CCS project to reduce greenhouse gas emissions from a natural gas processing plant.
• Methodology: Evaluated the technical feasibility of capturing and storing CO2, the economic viability, and potential environmental impacts.
• Outcomes: Identified significant challenges related to CO2 capture technology, storage site selection, and regulatory approvals, leading to a revised project plan with a phased rollout.

Lessons Learned:

• Early and Comprehensive Analysis: Thorough feasibility studies conducted at the initial stages of project development are crucial for identifying potential risks and opportunities.
• Collaboration and Communication: Effective communication and collaboration between stakeholders are essential for ensuring successful feasibility studies.
• Adaptability and Flexibility: The dynamic nature of the oil and gas industry requires adaptability and flexibility in feasibility studies.
• Focus on Sustainability: Integrating environmental and social considerations into feasibility studies is increasingly important in the oil and gas sector.

These case studies demonstrate the importance of conducting comprehensive and well-structured feasibility studies to guide decision-making and maximize the chances of project success. By drawing lessons from these examples, companies can improve their feasibility study practices and enhance their ability to navigate the complexities of oil and gas development.