Risk Analysis of Oil and Gas Drilling Investment

Risk Analysis of Oil and Gas Drilling Investment

Investment in upstream oil and gas industries has high risk and high cost properties, where the risks faced in investing in oil and gas industries include: geology, technical, political, market.

Drilling is one of the important activities in the upstream oil and gas industry where the average oil and gas company is budgeting investment costs for drilling 50-70% of the total captex (CAPEX) expenditure, drilling techniques will face the risk of kick, loss, shale problems, equipment failure, sticking, where if it is not resolved it will result in very large losses, in this article we will discuss some drilling risks that are correlated with budget increases and decrease contractor shares with the assumption of 80% cost recovery, with some drilling risk sensitivity with revenue obtained expected papers this could be a preliminary study in investing in oil and gas drilling

In general, oil and gas drilling investments reach 20% of capital and 80% of non-capital. Oil and gas drilling as one of the main activities in field development must be managed properly, the purpose of drilling not only lies in the availability of wells as oil and gas producers, but also technical and orderly administration. Planning a drilling based on HSE factors, Technical, Budget.

Some realization of drilling costs by engineer estimate exceed the budget (AFE) budgeted, and the core will affect the profit plan. The basis for calculating the economics of wells is made from well production and costs incurred

with sensitivity to the variable oil and gas prices. Sensitivity can be done for several economic parameters as project risk analysis.

Risk analysis before drilling needs to be assessed to give the economic value of the well more if drilling is done by dealing with the existing risks, in this paper the risk involved is a hole problem that is often encountered during drilling which causes an increase in drilling costs. Drilling evaluated is drilling conducted by an Oil company in an Area.

Mapping the Hole Problem of an Area

Drilling carried out by Drilling an Oil company in a Region in this case, the writer calls Sumatra has a depth range of 400-2750 mMD, with oil production targets of 100 - 300 BOPD and Gas 1 - 4 MMSCFD, Rig available capacity 350 - 1500 HP, the number of wells drilled in 2008 was 21 wells. The drilling realization data is the basis of the calculation of the risk analysis for this paper.

Drilling in the area penetrates the formation: seurela, upper ketapang, lower ketapang, baong (BRS), Belumai, while drilling in the area of ​​sumbagteng and sumbagsel penetrates formations: estuary enim, Air Benakat, Gumai, Talang Akar.

Technical Hole Problems that occur include:

• shale
• Loss & Kick
• Depleted zone
• Loose formation.

Drilled formations and potential problems and action plans can be seen as follows:

H2S, CO2, and high temperature content were found in drilling in the Wampu structure. The mud system used for drilling in the Sumbagut area is OBM (base fluid SF-05) and the source area for Sumbagsel uses KCL-Polymer.

Evaluation of Cost / ft Due to Hole Problems

Some parameters for drilling evaluation can be done such as:

• Cost / ft
• Non Productive Time (NPT)

The drilling performance indicators used in this paper use the cost / ft parameter, where evaluation of hole problems will be compared with the cost / ft of the drilling program to get a correction of the total cost / ft of the well, analysis of the increase in cos / ft 2 - 6% against the hole problem can seen in the following table.

Risk Analysis of Drilling Investment

The risks of the project are technical and non-technical uncertainties that affect profits. The preparation of the budget in the AFE submission does not include a contingency plan, but the oil company must continue to provide material and services to solve the problem (hole problem) if it occurs. Part of the drilling risk may not be included in the cost recovery, with the analysis risk and the possibility of cost recovery drilling is only 80%.

Investors have an estimate of the profit that will be obtained before the execution of drilling. This drilling risk analysis has added value in decision making by calculating several other sensitivity variables such as oil prices, Rig rental prices, which can help provide input on whether the drilling project can be done or delayed, after the well economic evaluation is based on IRR, NPV indicators.

The economic evaluation of drilling wells in the Region such as Sumatra can be seen in the following graph.

 

Additional risk data input analysis that causes an increase in the total cost of the profits obtained (contractor share) will give the effect of "level confidence" to management to assess a project. Calculations for this risk analysis use parameters for the budget:

• Cost per ft = 569
• Rig cost = 24.74 USD / cellphone
• Qoi = 100 bopd
• Qgi = 1 mmscfd
• Exchange rate: 10,500 USD

As for the technical parameters

• Total Depth = 2500 m
• Rig of 1000 hp
• 4 level chassis sets
• Pressure rating of 5000 psi
• Temperature rating <320 F

The advantage of drilling risk sensitivity analysis:

• Helps identify values ​​that affect profits.
• Prepare additional budgets if needed.
• Ensure that drilling projects can be continued.

Conclusion

1. Risk analysis causes a correction of cost / ft for the purpose of the economic sensitivity of the well, from the calculation of the increase in cost / ft by entering the risk analysis into 12% -25% of the proposed budget (AFE)
2. Economic value of drilling with sensitivity to oil prices for drilling in the Sumatran area by including the highest risk analysis reached at a price of 40 USD / Bbl.
3. Economic value of drilling with sensitivity to oil prices for drilling in the Sumatran area by including the highest risk analysis and 80% cost recovery reached at the price of 50 USD / Bbl.

References:

• Widagdo, Widjajono, 2009, “Minyak dan gas Dan Energi Di Indonesia”, Development Studies Foundation, Bandung.
• Kadir, Abdul Wahab, 2004,”Resiko Bisnis Sektor Hulu Perminyakan (Analisis Teknis Dan Finansial) Pradya Paramita, Jakarta
• Ali Sundja, Anas Hanafiah, 2009, Analisa Resiko Investasi Pemboran Minyak dan gas Area Sumatera, Makalah Profesional, IATMI

Petroleum Drilling & Well Completion - An Overview

Petroleum Drilling & Well Completion

Petroleum Drilling commonly comprises The Drilling Preparations consist of The Rigs type, Drilling Procedures and Engineering Challenges, the Aim, Conditions location, And Drilling Program, Location Accessibility, Tools and Equipment, then The Rigs Systems Elements And Proses comprises The Rotating System, The Hoisting System, The Circulating System, The Prime Mover, Pressure Control System. Drilling Crew and Personnel’s consist of The Rigs Operating Crew, The Support Personnel’s. Then Routine Drilling Procedures such Drilling A Head, Making Connection, Round Tripping, Formation Drilling Data, Well Logging Operations, and MWD, LWD & SWD.

Well completion means preparing the well for production, of course well completion is worded only when the well have sufficient amount of oil and gas to be commercially viable. In running casing and cement the initial cementing called primary cementing creates a sheet or cover of hard cement that fills the annulus space between the outside of casing and the well bore well. Its primary function is to block fluid movement and pressure transmission up or down and the annulus, subsequent cementing is called squeeze cementing, and it’s done to repair the primary cementing or in connection with a work over a well that is being rework because of declining production.

The Process of Running Cement

The process of running cement, first dry cement is mixed with additives made up of accelerators, retarders, and density adjusters. The function of these additives is to adjust the dry cement properties to fit the conditions of the well, accelerator speed up the setting time of the cement, retarders to the opposite they prevent premature setting in deep high temperature well. Density adjusters increase the cement weight to reduce pumping pressures or to permit a higher cement column without fracturing the formation.

After the casing in place, the cement is properly blended with water and the hole does prepared for pumping, first a hard rubber rupture plug is inserted into the casing followed by the cement slurry, this plug will separate existing mud from the new cement. Pumps to the bottom of the hole the cement slurry pushing the plug in front as it flows down forces the rupture plug into the seat in the float collar. Once in place the driller slightly increases the well pressure to break through this rupture plug. Once the plugs broken the cement slurry displaces the existing mud in the annulus, when adequate cement has been pumped a second plug called seal plug is then inserted. This seal plug serves the separate the cement slurry from the fresh mud that follows. Finally the cement slurry is displaced out of the casing into the annulus. The cement job was completed when the second plug the seal plug land in seats in the grooves in the floats valve, this landing is signal at the surface by a sharp pressure increase. The pumps are then shut down which allows the pressure to drop.

The decreasing pressure causes the flow valve to close preventing the heavier cement in the annulus from running back into the casing. After the pumps or shut down well operations or suspended for from twelve to twenty four (12-24) hours, so the cement can set.

PERFORATING

With the cemented casing in place the next task is to perforate the casing in the zone of interest, called the pay zone. Perforating mean blasting through the walls of the casing, the cement sheets and continuing on for about one (1) meter into the formation rock, it is through these holes that hydrocarbon fluids will pass to the surface when production begins (Pic. 44). To blast through the casing and cement jet perforator are set to 4-8 holes per foot, each shot is rotated ninety (90) degrees or one hundred eighty (180) degrees from the one above throughout the pay zone, to blast these jet perforators through the casing and into the formation, casing guns are used. The retrievable and reusable these casing guns are made of strong wing constructed steel which are run with an electric wireline.

Before first firing, the gun and the hole is filled with salt water. This salt water is called water blanket or load brine, when the well has perforated the water rush out through the new perforations killing the well and preventing a blow up. With the potential for further damaging the formation near the wellbore using over balance conditions the engineering team made decided to stop for the perforations until the world has been prepared for production. This means that the well will be outfitted with tubing packers and the Christmas tree there accommodate perforating in underbalanced conditions. In addition many of the subsequent well treatment processes described, then the next segment of this book are optimally done after the well has been outfitted with these three components, they include the wellhead and the various processes of preparing a well for production and will be discussed here. In preparing the well for production smaller diameter pipe, called tubing is installed down the casing with a packers at the bottom. Let we point out here that the permanent casing is rarely used as a conduit to get oil and gas to the surface. Remember it's main function along with the annulus is to seal the wellbore and keep it sealed.

TUBING

Instead smaller tubing installed through the casing is used to bring the fluids to the surface. Manufactured in joints a thirty (30) feet with threaded couplings the diameter of tubing can vary, depending the fluid amount projected to be produce. For example small tubing that is to and three eight 35 inches 2 3/8” outside diameter is used for shallow low productivity wells. While large six inch 6” outside diameter tubing is used in high volume gas well.

In any case tubing is smaller than either the drilling casing pipe and is relatively lightweight when compared to them, because of two the smaller size and weight it can be run in and out of the hole by work over rig out fit with small or a hoisting equipment when you would find any drilling rig.

Here you can see that these strings hang from the tubing hanger in the wellhead and irretrievable unlike the permanent casing strings. Keep in mind also that although only one set of casing is ever run tubing because of its smaller size can be run through the casing and single, dual or multiple strings.

CHRISTMAS TREE

Finally a Christmas tree is installed, containing valve manifold that controls flow in the tubing, they must be strongly constructed to contain full of reservoir pressure, a christmas tree function is to control the pressure. In the illustration, the main valves that control the well pressure or labeled, they are choke, master valve, crown valve, the wing valve, and the safety wing valve.

Youtube:

References:

• Google.com
• Youtube.com
• https://www.amazon.com/PETROLEUM-DRILLING-OVERVIEW-Andi-Anriansyah/dp/1792194684
• https://www.amazon.com/PETROLEUM-WELL-COMPLETION-OVERVIEW-1/dp/1792195575

Petroleum Exploration Drilling – An Overview

Petroleum Exploration Drilling – An Overview

Geologists & Geophysicists have agreed on the existence of a “prospect”, a potential field. In order to find out if Hydrocarbons are indeed trapped in the reservoir rock, we have to drill the prospect location.

Setting up – Installation

The best position for set up drilling equipment is determined. The drilling conducted, sometime difficult, small diameter (20-50cm) the hole generally down to depth 500-4000meters. Exceptionally, certain wells exceed 6000m.

The Drilling Well

The derrick is the visible part of the drilling rig. It is used to vertically introduce the drill strings down the hole. These drill string are made up of metallic tubes screwed end to end. They transmit rotating movement (rotary drilling) to the drilling tool (the drill bit) and help circulate a liquid (mud) down to the bottom of the well.

The Drillbit some are tric-cone, through the drill pipes, at the extremity of which the drill bit rotates, a mud is injected, which the mud engineer prepares and controls. This mud cools the drill bit and consolidates the sides of the borehole. Moreover it avoids a gushing of oil, gas or water from the layer being drilled, by equilibrating the pressure. Finally, the mud cleans the bottom of the well, carries the rock fragments (cuttings) to surface.

The Geologist examines these cuttings to discover the characteristics of the rocks being drilled and to detect eventual shows of HC. Sometime core sample is taken. The core gives the inclination of layers, structure, permeability, porosity, fluid, and fossil. The measurments down the hole called logging, commonly lowering electronic tools into the well to measure the physical parameters of formation rocks.

The well completion and Test

When HC are found (discovery), and the pressure is sufficient to allow them come to the surface naturally and calibrated by test. The quantity recoverd is measured, as are changes in pressure at the bottom of the well. In this way, a little more knowledge is gained about the probable productivity of the field.

The assessment

If the field is promising, the exploration team ends the first discovery well and goes on to drill a second, even several others, several hundred or thousand meters near the well. The exploration team is able to refine its knowledge about the characteristic of the field.

The Different types of Platform offshore

The decision to stop drilling is made only when all these appraisal wells have provided sufficient information or to envisage future production.

Youtube:

References:

• Google.com
• Youtube.com
• https://www.amazon.com/PETROLEUM-DRILLING-OVERVIEW-Andi-Anriansyah/dp/1792194684
• https://www.amazon.com/PETROLEUM-WELL-COMPLETION-OVERVIEW-1/dp/1792195575