Introduction Petroleum Exploration, Development and Production Consultative Meeting with Turkana County Leaders 24 th July 2014 Mohammed Amin Adam (PhD) Africa Centre for Energy Policy 1
Oil and Gas Project Chain Exploration Appraisal Development Production Closure Cost Phase Value Addition Phase Revenue Phase
Pre-License Prospecting/Reconnaissance Pre-License Prospecting Geological Evaluation Purchase of geological and geophysical data Researching and Analysing geological data Carrying out G&G studies No physical access to site. Need to obtain permission from resource owner.
CUMULATIVE CASH FLOW ($MILLIONS) GAINING ACCESS EXPLORATION APPRAISAL DEVELOPMENT PRODUCTION DECOMMISSIONING 400 300 200 100 0-100 1 3 5 7 9 11 13 15 17 19 21 23 25 TIME (YEARS) -200-300 -400 4
Right acquisition/contracting The Mineral right simply grant the contractor the right to Explore for Develop Produce the reserves The national government retains ownership of the reserves. This legal rights are acquired by entering into agreement with the mineral rights owner: Concession PSC Risk Service Agreement Hybrid
Exploration Phase Activities Similar to Prospecting Concentrated in smaller areas Involve drilling of Exploratory wells Topographical Studies Geological Studies Geochemical Studies Geophysical Studies Seismographic Studies 6
Eight (8) six (6) km long Streamers were used to record the Jubilee three (3) Dimensional seismic data Seismic Operation
Exploration- drilling Seismic can tell us that a structure is present but drilling a well is the only way to find out whether hydrocarbons are actually present in that structure.
Exploration Phase Oil and gas deposits are concealed underground. The deposit usually consists of gas, oil and water contained within porous rocks to allow their movement. The whole deposit is under pressure and the pressure is contained by a cap rock that is impermeable. Since oil is concealed, it therefore must be found and this requires Geographical studies using satellite and aerial photography are done to narrow down the area of search; Geophysical studies involving magnetic and gravity surveys are used to reduce the area of search further and Seismic surveys are used as the final step before undertaking exploratory drilling. Drilling is the last stage of any exploration process. This is used to confirm the existence of the underground resources identified through other exploratory methods.
Drilling Multi-lateral Vertical Horizontal We can drill deviated, horizontal and multilateral wells to maximise recovery and minimise the environmental impact
How much does a well cost? Much depends on total depth, anticipated problems, and location Offshore rigs, especially for deep water or high temp & pressures, are very expensive compared to land rigs Onshore could be shallow and cost less than US$1 million Deep water wells can cost >US$50 million Developing a field is very complex and expensive The initial 17well development of Jubilee Field cost ~$3.2billion 18 th August 2011
Drilling Depth
Evaluation and Appraisal Phase Additional drilling done after discovery to determine Size of the recoverable reserves Dimension of the fields Establish Development cost Economic viability/commerciality Often 3-10 appraisal wells Success rate may be 50% Less costly than exploratory drilling (30-40% less) When an appraisal is successful, commerciality is declared. 13
Proven Oil Reserves in Top 15 Countries, end - 2009
Having made a discovery, the next stage is to decide whether or not to develop the field. The outcome of exploration is to find oil in place. This outcome is random. Even after oil is found, uncertainty remains The amount of oil in place Recovery factor Development is essentially an investment decision. To develop it or not? When to develop it? How to develop it? Development Phase The Amount Of Original Oil In Place (OOIP) How much oil is in a reservoir? Vertical and horizontal limits of the field Recovery Factor The proportion of oil-in-place that will actually be recovered Variability 30 35 percent (rising) Porosity of rock, pressure etc Recovery method etc Oil Price
Development Phase Usually starts with Plan of Development Drilling of development wells Constructing of platform Constructing of treatment plant Equipment and facilities for jetting Storing and Processing/FPSO Constructing pipelines Waste disposal System Host Country can exercise its right to participate up 51%
Production Phase Deals with extracting/lifting the oil and gas from the reservoir and treating it to meet marketing and transportation standards Production preparation Well completion. Well Testing and Reservoir simulation Gathering and Storing Treating to remove basic sediments Field Separation of gas from oil production activities 18
Production Facilities: It depends on water or land depth Slide 19
Slide 20 Tullow Ghana Offshore Drilling Process
Production Phases Plateau phase Decline phase Development phase Tertiary recovery Primary recovery Secondary recovery Time Exponential declining curves
Conventional Oil Discoveries and Production World Wide
Closure Phase/Asset Retirement Involves the restoration of the site its pre-existing condition Plugging of wells Abandoning of wells Removal of equipments and facilities Rehabilitation and restoring the operational site Decommissioning Fund Under most Contract e.g. PSC the ownership of the facility passes to the host country 23
Local Content
What is Local Content Local content Solutions - Value contributed to the national economy through expenditure on goods and services (indirect economic impacts and multiplier effects) Nigeria - The quantum of composite value added or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human, material resources and services in the Nigerian oil and gas industry. Ghana - The use of Ghanaian human and material resources, services and businesses for the systematic development of national capacity and capabilities for the enhancement of the Ghanaian economy.
Key Players Government MNCs Key Players Local Suppliers, Goods and Services
Local Content: Government Objectives The purpose is to increase national wealth through economic growth and more employment of locals Most successful local content countries have focused on Value creation in the country e.g. Norway, UK, Brazil and the new Nigerian policy Most countries in Africa look at elements like Ownership Expenditure in the local economy Employment
Tullow Oil signs MOU on Northern Kenya Operations
Local local Content
Environmental Issues
Environmental Regulations Important issues include Environmental Impact Assessments Oil Spills Gas flaring Decommissioning Pipeline leakages The role of County Government Kenya Constitution, Fourth Schedule, Part 2. 3. Control of air pollution, noise pollution, other public nuisances and outdoor advertising. 8 electricity and gas reticulation and energy regulation
At the Policy level Some Environmental Tips Develop Oil Spill Response Plan/Emergency Response Plan Establish an Oil Spill Fund/Polluter Pay Principle Establish Decommissioning Fund Implement Zero tolerance for gas flaring except for operational purposes but within allowable limits At the County level Establish a Rapid Response Team to monitor environmental matters and report appropriately Participate effectively in the development of Environmental Impact Assessments and to use it to evaluate the environmental performance of oil companies Work with oil companies to create awareness about the environmental effects and remedies of production facilities, pipelines, etc
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