Exploration economics

When considering exploration economics, the possibility of spending funds with no future returns must be taken into account. A typical world-wide success rate for rank exploration activity is one commercial discovery for every ten wells drilled. Hence a probabilistic estimation of the reserves resulting from exploration activity must take into account the main risks and uncertainties in the volume of hydrocarbons in place, the recoverable hydrocarbons, and importantly the risk of finding no hydrocarbons at all. 

Recall a typical cumulative probability curve of reserves for an exploration prospect in which the probability of success (POS) is 30%. The success part of the probability axis can be divided into three equal bands, and the average reserves for each band is calculated to provide a low, medium and high estimate of reserves, //there are hydrocarbons present. 

We define the expected monetary value (EMV) of the exploration prospect as  

The POS is estimated using the techniques discussed in Section 2, Exploration. 

Petroleum economics is used at exploration, appraisal and development stages of the field life, to help to make the following typical decisions  

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A slim hole rig weighs about one fifth of a conventional rig and its small size can open new frontiers by making exploration economic in environmentally sensitive or inaccessible areas. 

Sections 13.1 to 13.8 will deal mainly with the economics of a field development. Exploration economics is introduced in Section 13.8. The general approach to this section will be to look at an investment proposal from an operator s point of view. 

Finally, it may be added that it is the terrestrial resources which have served and will continue to serve as practically the sole suppliers of metals and materials. Among the other resources only the manganese nodules extracted from the ocean bed have drawn serious attention the world over for exploring economic methods of processing. 

ZwANZiG, FI.V., Macek, J.J., McGregor, C.R. 2007. Lithostratigraphy and geochemistry of the high-grade metasedimentary rocks in the Thompson Nickel Belt and adjacent Kisseynew Domain, Manitoba implications for nickel exploration. Economic Geology, 102, 1197-1216. 

Goldberg, I.S., Abramson, G.J., Haslam, C.O., Los, V.L. 2007. Depletion and enrichment zones in the Bendigo gold field a possible source of gold and implications for exploration. Economic Geology. 102, 745-753. 

Groves, D.I., Goldfarb, R.J., Robert, F., Hart, C.J.R. 2003. Gold deposits in metamorphic belts overview of current understanding, outstanding problems, future research, and exploration. Economic Geology, 98, 1-29. 

Exploration Economic deposits are identified and their characteristics are determined to allow recovery. 

DAVIES R w D and RANGELEY R (2010) Ranking on cod Exploring economic incentives for recovering Grand Banks and North Sea cod fisheries. Marine Policy, 34, 92-98. 

Keywords exploration, appraisal, feasibility, development planning, production profile, production, abandonment, project economics, cash flow... 

Introduction and commercial application Safety and the environment have become important elements of all parts of the field life cycle, and involve all of the technical and support functions in an oil company. The Piper Alpha disaster in the North Sea in 1988 has resulted in a major change in the approach to management of safety of world-wide oil and gas exploration and production activities. Companies recognise that good safety and environmental management make economic sense and are essential to guaranteeing long term presence in the industry. 

Keywords economic model, shareholder s profit, project cashflow, gross revenue, discounted cashflow, opex, capex, technical cost, tax, royalty, oil price, marker crude, capital allowance, discount rate, profitability indicators, net present value, rate of return, screening, ranking, expected monetary value, exploration decision making. 

Petroleum economics provides the tools with which to quantify and assess the financial risks involved in field exploration, appraisal and development, and allows a consistent approach with which alternative investments can be compared. The techniques are applied to advise management on the attractiveness of such investment opportunities, to assist in selecting the best options, and to determine how to maximise the value of existing assets. 

So far, the economics of developing discovered fields has been discussed, and the sensitivity analysis introduced was concerned with variations in parameters such as reserves, capex, opex, oil price, and project timing. In these cases the risk of there being no hydrocarbon reserves was not mentioned, since it was assumed that a discovery had been made, and that there was at least some minimum amount of recoverable reserves (called proven reserves). This section will briefly consider how exploration prospects are economically evaluated. 

The acid content of cmde petroleum varies from 0—3%, with cmdes from California, Venezuela, Russia, and Romania having the highest content. Smaller amounts are found ia U.S. Gulf Coast cmdes, whereas Httie or no naphthenic acids are found ia Pennsylvania, Iraq, or Saudi Arabia cmdes. Typical concentrations are shown ia Table 2. Minor amounts of naphthenic acids are also found ia bituminous oil sands, but these are not economically recoverable. Identification of naphthenic acids ia water from oil-beating strata is being examined as a potential method of petroleum exploration (18). 

Small amounts of PGM have been produced in AustraUa for a number of years as a by-product of nickel recovery. There has been a significant increase in speculative exploration of the widespread known deposits in Western AustraUa, but as of this writing commercialization is not regarded as economically viable. 

Hand in hand with this research on finding a suitable carboxyUc acid chemical for cross-linker has been the search for an economical catalyst system. The catalyst found to be most effective for the esterification reaction was sodium hypophosphite (NaH2P02). This material was also costiy and out of range for the textile industry. Because weak bases function as catalyst, a range of bases has been explored, including the sodium salts of acids such as malic acid. 

As of this writing (1997), researchers are exploring combinations of acids, additives, and catalysts to achieve a suitable economic finish. However, commercial appHcation of these finishes would require costs akin to that of DMDHEU as well as compliance with formaldehyde release levels by consumers, regulators, and the textile industry. Another possible impetus could be marketing considerations. Nevertheless, this work has sparked intense effort in the use of cross-linkers containing ester cross-links and has broadened the scope of cross-linker research. 

Production and Consumption. About 80% of the world s barite production is used as a weighting agent for the muds ckculated in rotary drilling of oil and gas wells (see PETROLEUM, DRILLING FLUIDS AND OTHER OIL RECOVERY CHEMICALS). Table 2 shows the U.S. production—consumption balance. The 1988 demand for barite increased nearly 40% over that recorded in 1987. However, by the end of 1988, oil prices had declined and renewed economic uncertainties depressed exploration and development activity. Barite demand fell accordingly and imports of lower cost foreign product exceeded domestic production. 

Exploration for an acceptable or optimum design of a new reaction process may need to consider reactor types, several catalysts, specifications of feed and product, operating conditions, and economic evaluations. Modifications to an existing process hkewise may need to consider many cases. These efforts can oe eased by commercial kinetics services. A typical one can handle up to 20 reactions in CSTRs or... 

Resource economics stresses that, to date, experience is that the conversion of unutilized resources to profitable ones has moved ahead of demand growth and resource commodity prices have fallen over time. Moreover, M. A. Adehiian s classic studies of petroleum supply development have shown that exploration is an ongoing effort to expand the potential for supply expansion. A backlog of developable prospects always exists. When profitable, the much more expensive development stage is undertaken. 

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