Africa (Sub-Sahara) ExxonMobil will drill its first exploratory well offshore Liberia this month, the company announced on 18 October. A deepwater well is planned on the Liberia-13 Block, which is about 50 miles off the coast of the West African country. Solo Oil plans to spud the Ntorya-2 appraisal well in Tanzania next month. The drilling pad is a mile southwest of the 2012 Ntorya-1 discovery well, which was tested at rates of 20.1 MMcf/D of gas and 139 B/D of condensate. An independent report estimated the discovery to hold 153 Bcf of gas in place, of which 70 Bcf is considered a gross best-estimate contingent resource. A gross best estimate of more than 1 Tcf of gas in place has been made for the Ntorya prospect as a whole, in which the company has a 25% interest. Asia Pacific BP has decided to abandon drilling plans in the Great Australian Bight offshore southern Australia, an area in which prospective drilling has long been contested by environmentalists.
Gas is flowing in the second phase of the West Nile Delta development offshore Egypt, operator BP reported this week. Production, currently at around 400 MMcf/D, is expected to reach 700 MMcf/D at peak. Developed as a long-distance deepwater tieback to an onshore plant, the second phase includes eight wells producing from the Giza and Fayoum fields. The West Nile Delta project as a whole consists of five gas fields across the North Alexandria and West Mediterranean Deepwater offshore concessions, 65–85 km off Alexandria. Phase 1 of the project, launched last year, consists of gas production from the Taurus and Libra fields.
Production strategy is an important component of the oil reservoir development phase. Among,the main parameters are the geometry, number and position of wells and platform liquid capacity, influencing the level of the project investment required, which all depend on geological characteristics, economic scenarios and fiscal regimes. In the oil industry, companies produce under a fiscal system imposed by the government, which has a strong impact on economic and operational indicators, influencing production strategy.
Recently, the Brazilian government established a law changing its fiscal terms on pre-salt areas from Royalty and Tax (R&T) to Production Sharing Contract (PSC) to increase the government take. Previous works have shown that, in optimistic scenarios, an optimal recovery strategy presents low discrepancy in the production strategy configuration across both fiscal regimes. This study considers four economic scenarios for further evaluation. For this purpose, a simulation model was submitted to the production strategy selection process for both fiscal systems.
In more pessimistic economic scenarios, the results indicate that the number of wells and the level of investment tend to be lower under PSC than under R&T system. Thus, the new system could lead to fewer industrial investments, which would reduce the government return compared to the former tax system. In the most pessimistic scenario considered, profitable production could be expected under R&T, while under PSC it would be unprofitable, generating lower revenues.
It is still not clear whether a company, under PSC, will also be able to develop its strategy plan based on NPV or whether negotiation with the government regarding a minimum oil recovery factor will take place. Regardless, this study identifies the impact on production strategy selection for the new Brazilian PSC system compared to optimized strategy for R&T, and in both cases the objective-function is the company’s NPV. From the company’s point of view, depending on the economic scenario, the prevailing fiscal system will influence decisions at the level of the investment to be made. The results show the importance of considering the impact of the new fiscal system when selecting production strategies.
Key words: Production Sharing Contract, Production Strategy, Reservoir (Simulation), Economic Scenarios, Petroleum Engineering
Selecting a development strategy is a very important task for the oil industry and has the purpose of enabling the exploitation strategy plan, which considers some variables such as physical, operational and economic restrictions. The great majority of cases select production strategy aiming to maximize revenues, choosing as objective-function the Net Present Value (NPV) as it also includes discount rate in its calculation. The strategy plan will then be assigned for an oil field, the result of which has to be in accordance with both company and government goals.