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Section 1 The Oil & Gas Value Chain

Oil & Gas Industry has the following chain of value for its upstream activity (simplified, see Figure 1).

Exploration Production Sales Figure 1. Simplified Oil & Gas Value Chain
Exploration
Production
Sales
Figure 1. Simplified Oil & Gas Value Chain

The process starts with exploration activity which basically an activity to ‘search’ and discover source of hydrocarbons to be extracted. Exploration process is a high risk activity with high amount investment. The probability of exploration activity to discover hydrocarbons is app. 20% that is 4 out of 20 wells drilled by a company are productive. The process starts from seismic activity and ended with reservoir modeling to estimate & determine the best production method (see Figure 2). A compact narration on exploration process and reserve estimation can be seen in Section 2 Petroleum System.

Exploration Production Sales The process of discovering hydrocarbons Reservoir Geophysics Geology Drilling
Exploration
Production
Sales
The process of discovering
hydrocarbons
Reservoir
Geophysics
Geology
Drilling
Engineering
Do seismic to
determine if
any anticline
and/or fault
are found
Determine well
location to be
drilled
Drill well to
prove
existence of oil
& gas
Determine
total reserves
and reservoir
model

Figure 2. Exploration Process

Once the reservoir model is built, the process continues in designing the proper production facilities to extract hydrocarbons. Project management and procurement process are critical in this phase. After the facilities are completely built, operations of the facilities are started. Production control system and monitoring system play important role in this phase. Be noted that since the process of extracting the hydrocarbons are based on hydrostatic pressure, throughout the years production rate will be declined since pressure in reservoir will be depleted (See Section 4 Typical Production Profile). To maintain and improve the declined production rate, developmental projects are mandatory (See Section 4 Typical Production Profile). See Figure 3 for detail description of Production Activities. Maintenance also plays important role in assuring the operability of production facilities. It relates commonly with inventory management in term of spare part management.

Exploration Production Sales The process of extracting hydrocarbons Developmental Storage & Facilities Design
Exploration
Production
Sales
The process of extracting
hydrocarbons
Developmental
Storage &
Facilities Design
Operating
Projects
Transportation
Engineers and
Projects to
constructs the
increase the
proper
always‐
facilities to
declined
extract and
production
process
Process the
‘raw’
hydrocarbons
to be able to
meet sales
requirement
rate
hydrocarbon
The storing of
oil/condensate
/LPG/LNG and
the
transportation
of gas to
buyers
Maintenance

Figure 3. Production Process

Sales of hydrocarbons can be in form of agreement. See Figure 4 for description.

Exploration Production Sales • Gas sales need agreement; since gas can’t be stored (economically), prior
Exploration
Production
Sales
• Gas sales need agreement; since
gas can’t be stored (economically),
prior to producing gas, company
needs to have agreement with
buyer
• Oil is more flexible, it can be stored
and handled with easier care to the
buyer

Figure 4. Sales of Hydrocarbon

Section 2 Petroleum System

Generally, Petroleum System is consisted of Source Rock, Reservoir, and Trap/Seal (see Figure 5). Source Rock is kind of sedimentary depositional rock (formation) that consisted of organic material to produce hydrocarbon (as a place to produce hydrocarbon). The Reservoir is a kind of place (formation) that stores and makes an avenue of hydrocarbon (as a place to store the hydrocarbon). Trap/Seal is a kind of structure/layer that seals the hydrocarbon.

is a kind of structure/layer that seals the hydrocarbon. Figure 5. Petroleum System Source: oceanexplorer.noaa.gov

Figure 5. Petroleum System Source: oceanexplorer.noaa.gov

Crude oil is found in oil reservoirs formed in the Earth's layer/ formation from the remains of living things. Crude oil is properly known as petroleum, and is used as fossil fuel. Evidence indicates that millions of years of heat and pressure changed the remains of microscopic plant and animal remains into oil and natural gas. Although the process is generally the same, various environmental factors lead to the creation of a wide variety of reservoirs. Reservoirs exist anywhere from the land surface to 30,000 ft (9,000 m) below the surface and are a variety of shapes, sizes and ages.

Estimating reserves

After the discovery of a reservoir, engineer will seek to build a better picture of the accumulation. In a simple text book example of a uniform reservoir, the first stage is to conduct a seismic survey to determine the possible size of the trap. Appraisal wells can be used to determine the location of oilwater contact and with it, the height of the oil bearing sands. Often coupled with seismic data, it is possible to estimate the volume of oil bearing reservoir.

The next step is to use information from appraisal wells to estimate the porosity of the rock. The porosity, or the percentage of the total volume that contains fluids rather than solid rock, is 2035% or less. It can give information on the actual capacity. Laboratory testing can determine the characteristics of the reservoir fluids, particularly the expansion factor of the oil, or how much the oil expands when brought from high pressure, high temperature of the reservoir to "stock tank" at the surface.

With such information, it is possible to estimate how many "stock tank" barrels of oil are located in the reservoir. Such oil is called the Original Oil in Place (OOIP). As a result of studying things such as the permeability of the rock (how easily fluids can flow through the rock) and possible drive mechanisms, it is possible to estimate the recovery factor, or what proportion of oil in place can be reasonably expected to be produced. The recovery factor is approximately 30%35% in common, giving a value for the recoverable reserves.

The difficulty is that reservoirs are not uniform. They have variable porosity and permeability and may be compartmentalized, with fractures and faults breaking them up and complicating fluid flow. For this reason, computer modeling of economically viable reservoirs is often carried out. Geologist, geophysicist and reservoir engineer work together to build a model which allows simulation of the flow of fluids in the reservoir, leading to an improved estimate of reserves.

Section 3 Original Oil in Place

Original Oil in place is the total hydrocarbon content of an oil reservoir and is often abbreviated OOIP, referring to the oil in place before the commencement of production.

Oil in place must not be confused with oil reserves that are the technically and economically recoverable portion of oil volume in the reservoir. Current recovery factors for oil fields around the world typically range between 10 and 60 percent; some are over 80 percent. The wide variance is due largely to the diversity of fluid and reservoir characteristics for different deposits.

Accurate calculation of the value of OOIP requires knowledge of:

volume of rock containing oil (Bulk Rock Volume, in the USA this is usually in acrefeet)

percentage porosity of the rock in the reservoir

percentage water content of that porosity

amount of shrinkage that the oil undergoes when brought to the Earth's surface

OOIP is calculated using the formula:

Earth's surface OOIP is calculated using the formula: [stb/ standard barrel] where • • • •

[stb/ standard barrel]

where

Or

[m 3 ]
[m
3 ]

= OOIIP (barrels)

= Bulk (rock) volume (acrefeet or cubic metres)

= Fluid filled porosity of the rock (fraction)

= Water saturation waterfilled portion of this porosity (fraction)

= Formation Volume Factor (dimensionless factor for the change in volume between reservoir and standard conditions at surface)

Formation Volume Factor

When oil is produced, the high reservoir temperature and pressure decreases to surface conditions and gas bubbles out of the oil. As the gas bubbles out of the oil, the volume of the oil decreases. Stabilized oil under surface conditions (either 60 F and 14.7 psi or 15 C and 101.325 kPa) is called stock tank oil. Oil reserves are calculated in terms of stock tank oil volumes rather than reservoir oil volumes. The ratio of stock tank volume to oil volume under reservoir conditions is called the formation volume factor (FVF). It usually varies from 1.0 to 1.7. A formation volume factor of 1.4 is characteristic of high shrinkage oil and 1.2 of low shrinkage oil.

Section 4 Typical Production Profile

Hydrocarbon production rate is always declining over the years. Company needs to have improvement in increasing production with (but not limited to) these ways:

Enhanced Oil/Gas Recovery

• Installation of Compressor

• Acquiring assets

Development Drilling (new wells)

• New Venture (look for new reserve)

Estimated Production (model base) Gap on Design Production increases as developmental project is finished; the
Estimated Production (model base)
Gap on
Design
Production increases as developmental
project is finished; the time when the
project’s done is named Place In Service
(PIS)
Production rate on
plant capacity
Project lead time
(4 years)
//
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Plant capacity
Production rate

Figure 6. Typical Production Profile

Project lead time is consists of these activities:

Engineering phase of facilities and flow lines

Procurement of required material and services

Fabrication of certain customized parts

Construction of facilities at site

Installation and Commissioning of the facilities (go online/PIS)

Which commonly known as EPCI Activity.