Expenditures

As stated previously, the source of capital is often not known, and hence it is not known whether or not Eq. (A. 10) is appropiiate to represent the cost of capital. Equation (A. 10) is, strictly speaking, only appropriate if the money for capital expenditure is to be borrowed over a fixed period at a fixed rate of interest. Moreover, if Eq. (A. 10) is accepted, then the number of years over which the capital is to be annualized is unknown, as is the rate of interest. However, the most important thing is that even if the source of capital is not known, etc., and uncertain assumptions are necessary, Eq. (A. 10) provides a common basis for the comparison of competing projects. 

Figure 1.2 Phasing and expenditure of a typioal exploration programme...

Maintenance and operating costs represent the major expenditure late in field life. These costs will be closely related to the number of staff required to run a facility and the amount of hardware they operate to keep production going. The specifications for product quality and plant up-time can also have a significant impact on running costs. 

Careful planning of drilling activities will avoid unnecessary expenditure or risks. The planning process is vital for achieving the objectives of a well. Usually, wells are drilled with one, or a combination, of the following objectives ... 

Another method of maintaining production potential from the field is to drill more wells, and it is common for wells to be drilled in batches, just as the compression is added in stages, to reduce early expenditure. 

The type and number of wells required for development will influence the surface facilities design and have a significant impact on the cost of development. Typically the drilling expenditure for a project is between 20 and 40% of the total capex. A reasonable estimate of the number of wells required is therefore important. 

Over the lifetime of the field, the total undiscounted operating expenditure (opex) is likely to exceed the capital expenditure (capex). It is therefore important to control and reduce opex at the project design stage as well as during the production period. 

The cost of implementing CAO depends of course on the system installed, but for a new field development is likely to be in the order of 1 -5% of the project capital expenditure, plus 1-5% of the annual operating expenditure. 

Standardisation of equipment items is an area for potential cost savings, both in terms of capital expenditure (capex) and operating expenditure (opex), and is a decision which should be taken In consultation with the production operations department at the FDP stage. Standardisation can be applied to equipment items ranging from drilling platforms to valves. The benefits of standardisation are ... 

As discussed in Sections 13.0 and 14.0, the management of operating expenditure (opex) is a major issue, since initial estimates of opex are often far exceeded in reality, and may threaten the profitability of a project. Within the FDP, it is therefore useful to specify the system which will be used to measure the opex. Without measuring opex, there is no chance of managing it. This will involve the joint effort of production operations, finance and accounting, and the development managers. 

Maintenance costs account for a large fraction of the total operating expenditure (opex) of a project. Because of the bath tub curve mentioned above, maintenance costs typically increase as the facilities age just when the production and hence revenues enter into decline. The measurement and control of opex often becomes a key issue during the producing lifetime of the field as discussed in Section 14.0. However, the problem should be anticipated when writing the FDP. 

Within the project box, the cashflow oi the project (or other investment opportunity) is the forecast of the funds absorbed and the money generated during the project lifetime. Take, for example, the development of an oil field as the investment opportunity. Initially the cashflow will be dominated by the capital expenditure (capex) required to design, construct and commission the hardware for the project (e.g. platform, pipeline, wells, compression facilities). 

Once production commences (possibly 3-8 years after the first capex) gross revenues are received from the sale of the hydrocarbons. These revenues are used to recover the capital expenditure (capex) of the project, to pay for the operating expenditure (opex) of the project (e.g. manpower, maintenance, equipment running costs, support costs), and to provide the host government take which may in the simplest case be in the form of taxes and royalty. 

For any one case, say the base case, the project cashflow is constructed by calculating on an annual basis the revenue items (the payments received by the project) and then subtracting the expenditure items (the payments made by the project capex, opex and host government take). For each year the balance is the annual cash surplus (or cash deficit). Flence, on an annual basis... 

Typical revenue and expenditure items are summarised in the following table ... 

The treatment of expenditures will be specified by the fiscal system set by the host government. A typical case would be to define expenditure on items whose useful life exceeds one year as capital expenditure (capex), such as costs of platforms, pipelines, wells. Items whose useful life is less than one year (e.g. chemicals, services, maintenance, overheads, insurance costs) would then be classed as operating expenditure (opex). 

The capital cost estimates are generated by the Engineering function, often based on 50/50 estimates (equal probability of cost overrun and underrun). It is recommended that the operating expenditure is estimated based on the specific activities estimated during the field lifetime (e.g. number of workovers, number of replacement items, cost of forecast manpower requirements). In the absence of this detail it is common, though often inaccurate, to assume that the opex will be composed of two elements fixed opex and variable opex. 

The project cashflow discussed so far follows a pattern typical of E P projects a number of years of expenditure (giving rise to cash deficits) at the beginning of the project, followed by a series of cash surpluses. The annual cashflows need to be evaluated to incorporate the timing of the cash flows, to account for the effect of the time value of monef. The technique which allows the values of sums of money spent at different times to be consistently compared is called discounting. 

During the producing life, most of the money spent on the field will be on operating expenditure. This includes costs such as... 

Maxwell s equation are the basis for the calculation of electromagnetic fields. An exact solution of these equations can be given only in special cases, so that numerical approximations are used. If the problem is two-dimensional, a considerable reduction of the computation expenditure can be obtained by the introduction of the magnetic vector potential A =VxB. With the assumption that all field variables are sinusoidal, the time dependence... 

To determine time dependent behaviours of the specimen up to 25 measurements in series with different time delays are possible. To prevent mistakes in application many help comments appear when inputs are necessary or differences between the calibration and the measurement are detected. All calibration conditions, a description for the specimen and results can be printed or saved by the hard disk. To reduce the input expenditure, the last configuration is made to current values when the program is stopped ore leave. 

Companies have to face the problem of how to be maximize visible, that means how to get many visitors to a Website. Website marketing is a new field that needs to be understood before you invest in an Internet presence - to avoid ineffective and unnecessary expenditure. 

In the original planning of this book we were at pains to ensure that the preparations in particular were designed to afford a minimum expenditure of time, materials and heating. We hope that the economy thus introduced will be especially appreciated in view of the recent heavily increased cost of chemicals, fuel and laboratory service. This increased cost, incidentally, must necessarily increase the attraction of the small-scale preparations referred to above. 

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