Methodology for growth opportunities selection in international oil and gas market

Written by
Marel Sanchez

After five years of inactivity, cost management, and budget reduction, companies are now looking for growth opportunities in exploration and production during the low oil price environment. These Opportunities are to be found in a highly volatile business environment. In this presentation, we will discuss our proposal on how to address opportunities, data, risks, uncertainties, and dependencies to be managed during the selection of the best decision. This material was originally presented for Actus Veritas Geoscience in annual mini-conference 2017

Oil & Gas companies tend to optimize projects AFTER acquiring E&P blocks under general assumptions and without full understanding of critical risks and their impact on the economics of the opportunity.

Typical limitations during an opportunity assessment and decision making are:

1. Limited time and data for evaluation.  

  • Basin evolution, tectonics,sediment supply, charge, reservoir characterization, and oil & gas resource potential,
  • Poorly calibrated geology from outcrop to subsurface,
  • Limited available coverage of2D/3D seismic data, inadequate depth products/conversion due to imaging and processing limitations

2. Constraints in access to the technology and skills:

  • Lack of scientific foundation in digital geospatial data management.
  • Inadequate level of adoption of digital methods in business intelligence and analysis (country specific)
  • Limited access to the skills and talent with regional knowledge

3. Inefficient integration of geoscience & engineering skills throughout of exploration/drilling/development/EOR/production activities in low oil price environment.

As a result- limited understanding of the components of the petroleum system and use of general/uncalibrated assumptions in economic assessment.

In the diagram below a simplified value chain of Exploration and Production Activities appears to have a continuous sequential flow of activities in the corporate diagrams.

Simplify Value Chain of Exploration and Production Activities

It should be rooted in understanding of geology of the opportunity but companies often rush into economic evaluations without deep understanding of where the numbers are coming from. Any E&P opportunity screening requires efficient integration of a wide range of technical capabilities within vertically organized functions of the organization with distinct barriers in the information flows. While the picture appears integrated and the process continuous, in reality E&P organizations remain highly divided by vocabulary, applications used, digital/non-digital practices and workflows, regulations, skill levels of personnel, and protective/individualistic human behaviors.

Cost managementacross the life cycle of the organization is also siloed and needs to be optimized for the organization as a whole and not individual department and/or division needs. The term “technical success” has to be understood and measured and opportunities are ranked based on the economic success. Projects must meet a threshold of a minimal economical field size (MEFS), impactful risks and uncertainties have to be identified, managed and reduced by planning a play-based exploration drilling campaign. Access to the skilled talent with regional/local knowledge is essential for the success.

Framework for screening opportunities are based in analyzed country risk, critical petroleum risk and understand the uncertainties that define the petroleum in-situ and their performance in production. Country risk identification is critical for economic assessment of the opportunity related to geopolitical, economic and fiscal, contractual including legal,environmental regulation, operational considerations, legal government failure, environmental regulation, operational considerations, security and safety, technological and social. The risk associated with the petroleum system: source, trap, reservoir, charge,seal, HC recovery. The uncertainties in the petroleum system related with the static characteristics of the rock that affect the HC in place the the dynamic elements affecting the reservoir performance

Framework for Screening Opportunities

An integrated business approach is based on a COMMON LANGUAGE which unites knowledge around an opportunity, based on data and is driven by a common goal of strategic decision making. New opportunities could beopened in new or proven basins by challenging old paradigms, defining a new play concept, creatively applying new technology or going into previously closed to business countries at the right moment of the business climate change. Full and unbiased description of the opportunity could be done only by collaborative multidisciplinary teams.

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Domains
Opportunity Maturation
Exploration
Field Development
Production
Asset Divestment
Geology
MEFS
Play/Prospect Risk Evaluation
Business Intelligence
Screening Opportunities
Geography
West Africa
South America