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Lesson # 2:
The correlation between field economy and size and type of
development concept is either not fully understood, or the tools
required to investigate this correlation to its full extent are not
available. As a result the optimum development option is often
overlooked.
Economic analysis in connection with early field
development work suffers from lack of analysis tools. For a given
site and given recovery two questions need to be properly addressed
before a reliable economic analysis can be made:
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What is the most economic field development
solution – what type of subsea arrangement, type of platform,
pipeline or offshore loading, etc.?
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For a given development solution what is the
optimum production rate.
Obviously politics and market circumstances are
crucial issues in this picture, but if we assume that these issues
are known, we are still left with points 1 and 2 above. So the next
question is, how do we derive at the most optimum solution?
To most companies analysis of this
sort is very costly and ties down a large number of experts for a
considerable length of time. Yet, way too few options are
investigated thus making it impossible to find the most profitable
solution. Ultimately, marginal fields are inadvertently left
undeveloped.
Fig. 1 illustrates how the IRR may peak and fall
as the design production rate increases. It can be shown that for a
lot of existing field installations, this peak was never found.
Granted, a lot of variables determine the optimum design rate – we
have already mentioned politics and market issues – but all things
considered it is our belief that the optimum - most economical –
alternative is often overlooked.
Fig. 1
But this is too easy, it does not stop here. Fig.
2 gives and even more realistic picture . The IRR vs. production
rate may have several peaks. This situation occurs different
production rates requires different technology, or different
contract strategy, or alter market issues, etc.
Fig. 2
Reaching the ideal situation is impossible.
However, it should be obvious to everyone that an approach to solve
this problem is to develop many and reliable estimating
models/algorithms that may bring both the analysis costs and time
consumption down. This is why we have developed the CERA Databank
EXEC formulas. These formulas will of course not solve all the
problems, but they may mean the difference between failure and
success and between go and no go.
Edited
April 2005
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