Faroe Islands 3-4 November 2008

Purpose: Enhance your overall understanding of petroleum exploration

Multidisciplinary challenge

You are an exploration team in charge of a new petroleum province

Your task is to get maximum return on investment (ROI)

You start with $200 Million− You can apply for more money later

Value:− Net value of the oil fields discovered− MINUS costs (surveys, wells, etc.)

Winning team: − highest return on investment (ROI)− ROI = Earnings / Funds received

Where and how to find oil Surveys used in exploration Licensing rounds Farm-in and Partnerships Rigs and Sub-contractors Addressing environmental issues Reducing uncertainty Economically viable volumes

Upstream

−Exploration

−Field Development

−Production Downstream

−Refining

−Distribution

Phase 1: Find Basins Phase 2: Bid for Licences Phase 3: Drilling

− 3.1 Farm-in− 3.2 Order Rig− 3.3 Select Providers− 3.4 Select Position− 3.5 Testing

Columns (A to DL)

Row

s (1

to 1

52) 600 sea bed depth

Cell (BO,49)

Block 619

619

www.oilsim.com

Find the 3 basins in the area Basin: Sedimentary rocks in the deep

subsurface where oil and gas was generated Procedure

1.Buy and study magnetic and gravimetric surveys

2.Submit the coordinates, column (letter) and row (number)for each basin centre

Gravimetric surveys show the gravity in the sub-surface

Sedimentary rocks (“basins”) have lower densities than the surrounding crystalline rocks

Low gravity (green) -> Basins High gravity (red) -> Crystalline rocks

NorthEast

Find the cell that contains the center of the basin

You have to locate all 3 cells to get 100 kp

• Possible to get between 0 and 100 knowledge points (KP)– KP’s can be used e.g. when you apply for

money• Must be solved before deadline• After the deadline, all submissions are

evaluated

• All basins are located• Message sent to all teams with the results• Oil and gas is close to the basins• Next step: First licensing round

– The blocks around one of the basins are on offer

Bid to get a exploration licence Exploration licence: A permission from the

Government to explore a block Procedure

1. Buy and study Common Risk Segment Maps, 2D Seismic surveys, and Spawning Ground Maps

2. Submit 3 bids– Block number– Amount offered to Government (“bonus”)

Basin

Prospect Play

Migration

MigrationReservoir

Seal

SealReservoir

A 2D Seismic survey is a cross section of the geological layers− along either a column or a row

Is used for locating prospects Look out for traps Three separate geological layers

Top of sealing rock

Top of reservoir rock

Column

Row

Prospect, ReservoirBasin,Source

659

In OilSim, there is only one type of trap: the four-way closure structural trap– in reality, there are several other types

Three prospecting systems– 3. Eocene (1.500 m below seabed)– 2. Paleocene (2.500 m -)– 1. Cretaceous (3.500 m -)

Prospect probability– Red: low– Orange: medium– Green: high

There is one CRS for each geological layer

Band 3 Eocene

Band 2 Paleocene

Band 1 Creataceous

There are spawning ground areas in the map – these are environmentally sensitive areas where fish breedSome spawning grounds might be in the blocks that have been offeredHowever, no licences will be awarded in blocks that are spawning groundsTo find out which blocks are spawning grounds, you can buy a Spawning Ground Survey

Red Area:Spawning GroundsYou will not be awarded blocks that contain any red area

Blue Area:Not Spawning Grounds

The survey covers the whole area

Study spawning ground maps to see which blocks to avoid

Use CRS to see which blocks to study Buy and study many 2D surveys Focus on shallow water blocks

– It is cheaper to drill exploration wells in shallow water

– It is more economically viable to produce oil and gas in shallow water

Remember to update the site

Minimum bonus: 1000000 Maximum bonus: 30000000 You will only get one licence Highest bid gets the licence If you lose on all three blocks, you will

get a random licence (of the ones that are left)

Do submit 3 bids -> more KP’s and higher probability for success

• Submit your bid before the deadline• After the deadline, all bids are evaluated,

and each team gets one and only one licence

Every team has got one exploration licence Message sent to all teams with the results Knowledge Points: a measure of how

prosperous the blocks the team bid for were Next step: Farm-in

The headquarters of your company has evaluated the licence that you were awarded

Although the possibility of finding oil is fair, the costs involved are large, and the headquarters wants you to spread the risk.

This is accomplished by:– investing in other licences (farm-in), and– letting other invest in your licence (farm-out)

• Get other’s to invest 20% or more in your licence (“farm-out”)

• You can only send farm-in offers (!)– Offers to buy parts of other licences

• Procedure for farming in:1.Study CRS and 2D Seismic surveys2.Submit one offer for each viable licence

– Amount offered– Share wanted (in whole %)

Partners pay their share of all future costs incurred by the partnership.

Partners receive their share of the net proceedings from any oil found on the licence

The operator team takes all decisions regarding acquirement of 3D seismic, drilling of wells and testing of wells

Study CRS and 2D seismic surveys of the other licences

Submit your bids Minimum amount 100,000 for 1%

You are not allowed to drill before at least 20% of your licence has been farmed out

You can farm-in & -out at any time Partners in a block get all info about drilled

wells and discovered oil and gas fields

Partnerships will be established every time a seller accepts an offer

On the main page, you can see all the licences– The licences you operate– The licences you have invested in– Other licences

Next task: order rig

• 3 rig types– Drillships– Semi-submersibles– Jack-up rigs

• Different water depths, Different day rates– Rig cost = drilling days * day rate

Seabed

3500 m below seabed

Layer 3 Eocene

Layer 2 Paleocene

Layer 1 Cretaceous

1500 m below seabed

2500 m below seabed

“water depth”

Limited number of rigs available You can order a rig

− Start using it within 20 minutes Not enough for all

− Wait in a queue, if another team is using the rig

Rig day rates are dynamic

You have to choose where to drill– Which cells?

..and how deep to drill– Either to the Eocene horizon– Through the Eocene to the Paleocene

horizon, – or through the Eocene, the Paleocene,

and to the Cretaceous horizon

Buy an EIA survey to get more knowledge about the area

EIA equals−Less probability for drilling problems−Less severe consequences if you run into

problemsIn the EIA you can also see which

drilling locations to avoid

Shows the structure:– in one (of the three) horizons– in one block

Look out for “tops”– a top = a trap = a prospect

Layer 1 Creataceous

Layer 2 Paleocene

Layer 3 Eocene

Column 60, Row 79

Column 60, Row 78

If you discover a field-> decide whether you want more information about that field

You get more information by doing a production test (and other tests)

Tests take 10 days per field Tests have the same day-rate as the drilling

(you use the same providers)

– From Probable volume to proven reserves

First well:– 0 to 572 MBO (after drilling)– 11 to 266 MBO (after testing)– Proven volume: 11 MBO

Second well:– 11 to 233 MBO (after drilling)– 35 to 210 MBO– Proven volume: 35 MBO

Drill appraisal wells to narrow the uncertainty (get proven volumes)

Drill into other prospects Farm-in and -out Two additional licensing rounds Apply for more money, if you run out of

cash− Winner: highest ROI