Professional Documents
Culture Documents
SKPP 3113
2015/16-II
SECTION 1, GROUP 08
GROUP MEMBERS:
1.
2.
NG LIN ZHI
LECTURER:
DATE OF SUBMISSION:
Table of Contents
1.0 Introduction ............................................................................................................................................ 4
2.0 Economic Evaluation ............................................................................................................................... 5
2.1 OBJECTIVES OF ECONOMICS EVALUATION:........................................................................................ 5
2.2 Scope of work...................................................................................................................................... 5
2.3 TASK LIST OF THE ECONOMICS DEPARTMENT.................................................................................... 6
Table 1.0 General profile of task list of economy department ............................................................. 6
2.4 STRATEGIES OF PLANNING STAGE ...................................................................................................... 7
3.0 DEVELOPMENT PERIOD .......................................................................................................................... 8
3.1 DEVELOPMENT PHASE ........................................................................................................................ 8
3.2 Production phase ................................................................................................................................ 9
4.0 COST ESTIMATIONS................................................................................................................................. 9
4.1 CAPITAL EXPENDITURE (CAPEX) ........................................................................................................ 11
5.0 ECONOMICS EVALUATIONS ASSUMPTIONS ......................................................................................... 15
6.0 REVENUE ITEMS .................................................................................................................................... 16
7.0 FACTOR INFLUENCING THE EVALUATIONS ........................................................................................... 16
7.1 RESERVES .......................................................................................................................................... 16
7.2 PRODUCTION RATE ........................................................................................................................... 16
7.3 DEVELOPMENT COST ........................................................................................................................ 16
7.4 OIL PRICE ........................................................................................................................................... 16
7.5 OPEX .................................................................................................................................................. 17
8.0 UPSTREAM PROJECT ............................................................................................................................. 17
8.1 EXPLORATION COST .......................................................................................................................... 17
8.2 DEVELOPMENT COST ........................................................................................................................ 17
8.3 OPERATING COST .............................................................................................................................. 17
9.0 ECONOMICS MODEL ............................................................................................................................. 18
9.1 ITEM .................................................................................................................................................. 18
9.2 ECONOMIC INDICATORS ................................................................................................................... 18
10.0 ECONOMICS EVALUATION .................................................................................................................. 18
Table 2: Plan A..................................................................................................................................... 19
Table 3: Plan B ..................................................................................................................................... 23
11.0 SENSITIVITY ANALYSIS ......................................................................................................................... 24
Table of Figures
Figure 1: Planning stage................................................................................................................................ 7
Figure 2: CAPEX schedule for plan A ........................................................................................................... 11
Figure 3: Map of pipeline ............................................................................................................................ 12
Figure 4: CAPEX schedule for plan B ........................................................................................................... 13
Figure 5: Map for FPSO ............................................................................................................................... 13
Figure 6: Production rate for both plan ...................................................................................................... 19
Figure 7: Project Cash flow for plan A......................................................................................................... 19
Figure 8: Contractor cash flow for plan A ................................................................................................... 20
Figure 9: Petronas cash flow for plan A ...................................................................................................... 20
Figure 10:NPV Project cash flow for plan A ................................................................................................ 21
Figure 11: NPV Contractor cash flow for plan A ......................................................................................... 21
Figure 12: NPV Petronas cash flow for plan A ............................................................................................ 22
Figure 13: Project cash flow for plan B ....................................................................................................... 23
Figure 14: Contractor cash flow for plan B ................................................................................................. 23
Figure 15: Petronas cash flow for plan B .................................................................................................... 24
Figure 16: NPV Project cash flow for plan B ............................................................................................... 24
Figure 17: NPV Contractor cash flow for plan B ......................................................................................... 25
Figure 18: NPV petronas cash flow for plan B ............................................................................................ 25
Figure 19: Sensitivity analysis for plan A ..................................................................................................... 27
Figure 20: Sensitivity analysis for plan B ..................................................................................................... 28
Figure 21: Project cash flow both plan ....................................................................................................... 29
Figure 22: Contractor cash flow for both plan ............................................................................................ 29
Figure 23: Petronas cash flow for both plan ............................................................................................... 30
Figure 24: NPV Project cash flow for both plan .......................................................................................... 30
Figure 25: NPV Contractor cash flow for both plan .................................................................................... 31
Figure 26: NPV Petronas cash flow for both plan ....................................................................................... 31
Figure 27: Sensitivity analysis for plan A and B........................................................................................... 32
1.0 Introduction
Hanuman field is a big oil field, it contains two reservoir layers, so in order to
develop the field and gain profit, we have to develop the field with a low capital
expenditure (CAPEX) and choose very profitable income.
By using data from the development team, a cash flow model based on the 1985
Production Sharing Contract (PSC) will be used. The cash flow will determine the
revenue, expenses and expected return from the investment. From the cash flow,
several common economics indicator such as NPV (Net Present Value), IRR (Internal
Rate of Return) and others detected. Some analysis such as the Sensitivity Analysis
has been done to determine the factors that affecting the project. All these items briefly
discuss later. The political risk in Malaysia is considered insignificant due to current
issue and historical data.
For plan A, we have decided to build 82.29km pipeline from the production
platform to connect with the existed pipeline and rent 42.83km pipeline SK314A from
Murphy to Bintulu Crude Oil Terminal. While for plan B, we have decided to rent FPSO
to transport our crude oil to the terminal.
Task
Serve as one of the
backbone in planning,
budgeting and scheduling
the entire plan.
Understand both the
business and technical
condition of the plan.
Evaluate the
profitability and
feasibility of the field
development plan
Input
Data from the other
departments, especially from
the reservoir simulation and
production department for
providing production
profile.
Petroleum Sharing
Contract (PSC).
Fiscal term and non-fiscal
term in project
Data valuable for price
assumptions, production
profile and cash flow
developing.
Company policies and
budgeting.
Necessary assumptions
Cash flow without fiscal
term should be considered
if project not feasible to
develop base on fiscal
term.
Available risks in project.
Financial and non-financial
risks.
Issues regarding the oil
and gas industry.
Sensitivity Analysis
Method
Data from the previous
analysis.
Details analysis from all
department
Output
Data valuable for price
assumptions, and cash
flow developing.
Feasibility and
profitability.
Accuracy of forecast
economic evaluation
with consideration of
risk and uncertainty in
project.
Potential risk
management.
Suggestions and
alternative
plans for the
development
plan.
Alternative plans for
the development plan.
Meeting the technical, safety and integrity needs of facilities operating typical
development stage:
c) Development drilling: Drilling operation only can start after the construction
phase and all the facilities are completed.
Classification of Cost
1. Capital Expenditure (CAPEX)
Fixed CAPEX
- Platform
- Substructure
Facilities +Tangible CAPEX
- Topsides
- Pipelines
- Drilling Tangible
Intangible CAPEX
- Drilling Intangible
2017
584,000,000.00
9,874,800.00
-
2018
19,749,600.00
-
2019
220,000,000.00
29,624,400.00
-
2020
140,000,000.00
192,000,000.00
220,000,000.00
19,749,600.00
330,000,000.00
2021
260,000,000.00
448,000,000.00
440,000,000.00
19,749,600.00
330,000,000.00
Total distance, km
125.12
42.83
Build pipeline, km
82.29
Development Cost
Component
4 Leg Jacket
Topside
Topside&CPP
Pipeline
Well Cost
Total
RM
400,000,000
640,000,000
880,000,000
98,748,000
660,000,000
2,678,748,000
2017
584,000,000.00
273,750,000.00
-
2018
273,750,000.00
-
2019
220,000,000.00
-
FPSO
2020
140,000,000.00
192,000,000.00
220,000,000.00
330,000,000.00
2021
260,000,000.00
448,000,000.00
440,000,000.00
330,000,000.00
RM
400,000,000
640,000,000
880,000,000
273,750,000
660,000,000
2,853,750,000
For this anticipate of monetary assessment is under 1985 PSC game plan insignificant
the joint endeavor component. There were around three situations that our gathering
recommended for the creation. From the area of the given direction, 113 10' 12"E 417'
24"N, we found that it was situated at the seaward of Sabah region which evaluated
around 125.12 km.
The getting ready for field improvement venture have been talked about and concoct a
few thoughts and arrangement. For our gathering, fundamentally we figured out how to
assess two distinctive methods for working arranging. Firstly, the organization
developed their own particular pipeline from the field important to Oil Terminal for
125.15km for length. In conclusion, we were arranging of leasing a Floating Production
Storage Offloading (FPSO) which is truly costly.
Keeping in mind the end goal to recognize the most productive strategy for the field
improvement venture, we need to assess the fundamental information given and look at
the estimation of Internal Rate of Return of every thought.
OPEX Schedule
For OPEX schedule, both plans are the same for fixed opex, the difference is that
only pipeline installation and use of FPSO. For plan A is using the pipeline while for plan
B is using the FPSO.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
7.1 RESERVES
Reserves estimation at the early stage is important to determine either the field is
profitable to be developed or not. Based on the reserves, type of development plan that
suitable will be considered.
7.5 OPEX
The operating cost should be lower than the income so there will no negative cash flow.
The negative cash flow means that the production from the field cannot cover the
operating cost for that period.
Offshore platforms. These cost depend on field size, water depth and number of slots
(wells)
Development drilling costs include the drilling cost and well completion cost. This cost
depends on numbers of wells and type of completion.
Production system will include the pipeline system. This cost depends on throughout
volume, length of pipe and etc.
9.1 ITEM
Capital allowance
Summary data input
Gas price profile
Profit split computations
Gross gas revenue split
Contractors cash flow
Petronass cash flow
Projects cash flow
35,000.00
30,000.00
25,000.00
Production rate, BPD
20,000.00
15,000.00
10,000.00
5,000.00
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
0.00
Plan A
NPV (Billion)
IRR
Payback Period
RM 6.893
32%
3 years
Table 2: Plan A
10,000,000,000.00
8,000,000,000.00
6,000,000,000.00
payback period
economic limit year
4,000,000,000.00
2,000,000,000.00
(2,000,000,000.00)
(4,000,000,000.00)
economic life
3,000,000,000.00
2,000,000,000.00
payback period
economic limit year
1,000,000,000.00
(1,000,000,000.00)
(2,000,000,000.00)
RM1,500,000,000.00
NPV Plan A
RM1,000,000,000.00
RM500,000,000.00
RM0.00
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
(RM500,000,000.00)
Figure 10: NPV Project Cash Flow for Plan A
NPV Plan A
RM0.00
10%
20%
30%
40%
50%
60%
70%
80%
(RM200,000,000.00)
(RM400,000,000.00)
Figure 11: NPV Contractor cash flow for Plan A
90% 100%
RM2,000,000,000.00
RM1,500,000,000.00
NPV Plan A
RM1,000,000,000.00
RM500,000,000.00
RM0.00
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Plan B
NPV (Billion)
IRR
Payback Period
RM 5.671
17%
4 years
Table 3: Plan B
economic life
5,000,000,000.00
4,000,000,000.00
payback period
3,000,000,000.00
2,000,000,000.00
1,000,000,000.00
(1,000,000,000.00)
(2,000,000,000.00)
(3,000,000,000.00)
(4,000,000,000.00)
4,000,000,000.00
payback period
2,000,000,000.00
(2,000,000,000.00)
2,000,000,000.00
1,000,000,000.00
-
NPV Plan B
RM0.00
(RM200,000,000.00)
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
(RM400,000,000.00)
(RM600,000,000.00)
(RM800,000,000.00)
Figure 16: NPV Project cash flow for plan B
20%
30%
40%
50%
60%
70%
80%
90% 100%
NPV Plan B
(RM200,000,000.00)
(RM400,000,000.00)
(RM600,000,000.00)
(RM800,000,000.00)
Figure 17: NPV Contractor cash flow for Plan B
RM2,000,000,000.00
RM1,500,000,000.00
NPV Plan B
RM1,000,000,000.00
RM500,000,000.00
RM0.00
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Figure 18: NPV Petronas cash flow for Plan B
Plan A
Items
Risk Rate
-50%
-20%
Oil Price Plan A
0%
20%
50%
-50%
-20%
Production Rate Plan A
0%
20%
50%
-50%
-20%
CAPEX Plan A
0%
20%
50%
-50%
-20%
OPEX Plan A
0%
20%
50%
NPV
2,306,868,901.96
5,058,813,037.56
6,893,442,461.30
8,728,071,885.03
11,480,016,020.64
2,306,868,901.96
5,058,813,037.56
6,893,442,461.30
8,728,071,885.03
11,480,016,020.64
7,617,380,926.06
7,183,017,847.20
6,893,442,461.30
6,603,867,075.39
6,169,503,996.53
7,309,356,325.23
7,059,808,006.87
6,893,442,461.30
6,727,076,915.73
6,477,528,597.37
6,000,000,000.00
4,000,000,000.00
CAPEX Plan A
2,000,000,000.00
OPEX Plan A
0.00
-60%
-40%
-20%
0%
20%
40%
60%
Percentage
Plan B
Items
Risk Rate
-50%
-20%
Oil Price Plan B
0%
20%
50%
-50%
-20%
Production Rate Plan B
0%
20%
50%
-50%
-20%
CAPEX Plan B
0%
20%
50%
-50%
-20%
OPEX Plan B
0%
20%
50%
NPV
1,084,644,774.95
3,836,588,910.56
5,671,218,334.30
7,505,847,758.03
10,257,791,893.64
1,084,644,774.95
3,836,588,910.56
5,671,218,334.30
7,505,847,758.03
10,257,791,893.64
6,585,620,812.15
6,036,979,325.44
5,671,218,334.30
5,305,457,343.16
4,756,815,856.44
6,507,780,248.64
6,005,843,100.03
5,671,218,334.30
5,336,593,568.56
4,834,656,419.95
8,000,000,000.00
Oil Price Plan B
6,000,000,000.00
4,000,000,000.00
CAPEX Plan B
2,000,000,000.00
OPEX Plan B
0.00
-60%
-40%
-20%
0%
20%
40%
60%
Percentage
From the sensitivity analysis result it clearly shows that when the CAPEX and
OPEX decrease, the NPV and IRR will increase however when the gas price decrease
the NPV and IRR will also decrease.
Oil price is the most sensitive parameters followed by CAPEX and OPEX. Since
our revenue depends on oil sales, large decrease in oil price or in production rate up to
50% would not have a high impact (negative) to the NPV.
Nevertheless, if we over estimated up CAPEX or OPEX up to 50% the NPV will
not be negative.
When choosing among mutually exclusive projects or features of the same
project, NPV, IRR and payback period should be compared for each options in order to
arrive at the best economic alternative.
From the result obtained, the most profitable method to operate the field of
interest is Plan A because it gives the highest percentage of Internal Rate of Return
(IRR) compared to other projects.
RM2,000,000,000.00
NPV Plan B
RM1,500,000,000.00
NPV Plan A
RM1,000,000,000.00
RM500,000,000.00
RM0.00
(RM500,000,000.00)
10%
20%
30%
40%
50%
60%
70%
80%
(RM1,000,000,000.00)
Figure 24: NPV Project cash flow for both plan
32%
17%
90% 100%
NPV Plan B
NPV Plan A
RM0.00
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
(RM500,000,000.00)
(RM1,000,000,000.00)
Figure 25: NPV Contractor cash flow for both plan
19%
14%
NPV Plan B
RM2,000,000,000.00
NPV Plan A
RM1,500,000,000.00
RM1,000,000,000.00
RM500,000,000.00
RM0.00
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Since Petronas did not invest in project, therefore NPV of Petronas Cash Flow will
always be positive. The rate of return for both plan is infinity.
10,000,000,000.00
8,000,000,000.00
CAPEX Plan A
6,000,000,000.00
OPEX Plan A
4,000,000,000.00
2,000,000,000.00
0.00
-60%
-40%
-20%
0%
20%
40%
60%
Percentage
OPEX Plan B
From the result obtained, the most profitable method for operated the field of
interest is the plan A. It means that, the company is suggested to operate or built up
their own pipeline the offshore of Sarawak. Plan A gives the highest percentages of
Internal rate of Return (IRR) compared the other projects.
14.0 CONCLUSION
Based on the result, the most feasible plan is Plan A based on this evaluation,
we assume that based on the PSC, PETRONAS want the optimum production for 14
Years which mean here only Plan A is suitable. Furthermore, plan A gives very high
NPV and high IRR as compared with plan B.
NPV (Billion)
RM 6.893
IRR
32%
Payback period
4 years
At the conclusion of our evaluation of the Field Development Project planning for
the oil operation of transportation methods to onshore we were agreed with the Plan A.
The plan A is suggested about the constructing their own oil pipeline from the offshore
platform operation to the terminal which operated by company properties. While for the
Plan B, the renting cost of FPSO for operation is about RM 15,000 per day for 14 years
operation will cost a lot and is shown that it is has the lowest percentage of profit
income.
As the platform is located in the offshore of Sarawak with the specific latitude and
longitudes, the nearest terminal is located located in Miri which is known as Bintulu
Crude Oil Terminal. The distance between the platform and the terminal is about 125.12
km.
Next, the economic evaluation parameters involved in this projects are acting as
the control variable for decision making for choosing the right and the most preferable
methods that will result in high profitable income for both contractor and company itself.
The most important parameters are Net cash flow diagram, payback period, net present
value (NPV) and also the Internal Rate of Return which are known as the time function
for predicting the future profitable income and also important for investment process for
the future project operation.
14.0 REFERENCES
1.
Frank Jahn, Mark Cook and Mark Graham Development In Petroleum Science (
Vol 46 ), Hydrocarbon Exploration and Production, TRACS International Ltd,
Falcon House, Union Grove Lane, Aberdeen, AB10 6XU, United Kingdom
2.
3.
Ahmad Hussain et.al. Reservoir Management of the Dulang Oil Field, Offshore
Peninsular Malaysia: The Heuristic Approch, SPE paper
4.
5.
6.
15.0 APPENDICES
PSC 1985
Gov Profit
Cont. Profit
Duty
Tax
Royalty
Cost Oil Ceiling
Research Cess
10kBPD
50%
50%
25%
45%
10%
50%
0.50%
10kBPD
>20kBPD
60%
70%
40%
30%
of profit oil
$1=
RM4.00
Depreciation= 0.38 , b=0.6