Jens Petur Bærentsen Simprentis Marcos Monteferrante OILSIM EXPLORATION Svalex 2007 Longyearbyen, Svalbard, Norway August 2007

Jens Petur Bærentsen Simprentis Marcos Monteferrante Schedule - Example Monday 20 August Introduction to OILSIM Exploration Simulation Phase 1 starts (Find Basins) Phase 1 Deadline. Phase 2 (First Licensing Round opens) End Day 1 Tuesday 21 August Oilsim Exploration continues First Licensing Round deadline Phase 3 starts: Farm-In, Order Rig, Providers, Drilling Location, Testing (continues the rest of the day) nd Licensing Round opens 18:15 2nd Licensing Round deadline 18:55 Simulation ends Debriefing End Day 2

Jens Petur Bærentsen Simprentis Marcos Monteferrante Schedule - Example OilSim Field Development Wednesday 22 August Introduction to OilSim Field Dev Challenge 1 Reservoir characterization Challenge 2 – Design Basis Challenge 3 – Concept Solutions End first part Challenge 4 – Planning End of the 1 Cycle (Results) nd Cycle starts - Challenge 1 Reservoir characterization Challenge 2 – Design Basis Challenge 3 – Concept Solutions Challenge 4 – Planning End of simulation Debriefing Course ends

Jens Petur Bærentsen Simprentis Marcos Monteferrante Schedule - Example OilSim Exploration Competition Thursday 23 August Simulation Phase 1 starts (Find Basins) Phase 1 Deadline. Phase 2 (First Licensing Round opens) First Licensing Round deadline Phase 3 starts: Farm-In, Order Rig, Providers, Drilling Location, Testing (continues the rest of the day) nd Licensing Round opens nd Licensing Round deadline Simulation ends Debriefing End

Jens Petur Bærentsen Simprentis Marcos Monteferrante Overview Enhance your overall understanding of petroleum exploration Common platform to work on Multidisciplinary challenge You are an exploration team in charge of a new petroleum province Your task is to get maximum return on investment (ROI)

Jens Petur Bærentsen Simprentis Marcos Monteferrante Money You start with $200M –You can apply for more money later Earnings: –Net value of the oil fields discovered –MINUS costs (surveys, wells, etc.) Winning team: –highest return on investment (ROI) –ROI = Earnings / Funds received

Jens Petur Bærentsen Simprentis Marcos Monteferrante Learning Points Where and how to find oil Surveys used in exploration Licensing rounds Farm-in and Partnerships Rigs and Sub-contractors Reducing uncertainty Economically viable volumes

Jens Petur Bærentsen Simprentis Marcos Monteferrante Oil & Gas Industry Upstream –Exploration –Production Downstream –Refining –Distribution

Jens Petur Bærentsen Simprentis Marcos Monteferrante Structure 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Map Columns (1 to 112) Rows (1 to 152) 1000 m deep Cell (112,89) Block 168

Jens Petur Bærentsen Simprentis Marcos Monteferrante Login

Jens Petur Bærentsen Simprentis Marcos Monteferrante Main screen

Jens Petur Bærentsen Simprentis Marcos Monteferrante First task 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 3 block numbers; one for each basin centre

Jens Petur Bærentsen Simprentis Marcos Monteferrante Surveys

Jens Petur Bærentsen Simprentis Marcos Monteferrante Gravimetric surveys 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Gravimetric surveys

Jens Petur Bærentsen Simprentis Marcos Monteferrante Magnetic surveys

Jens Petur Bærentsen Simprentis Marcos Monteferrante More detail North East

Jens Petur Bærentsen Simprentis Marcos Monteferrante Quarter map survey

Jens Petur Bærentsen Simprentis Marcos Monteferrante Enter decision

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 1 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 1 solved 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Second task Bid to get an exploration licence Exploration licence: A permission from the Government to explore a block Procedure 1.Buy and study Common Risk Segment Maps and 2D Seismic surveys 2.Submit 3 bids –Block number –Amount offered to Government (“bonus”)

Jens Petur Bærentsen Simprentis Marcos Monteferrante Migration Basin Prospect Play Migration

Jens Petur Bærentsen Simprentis Marcos Monteferrante Prospect Migration Reservoir Seal

Jens Petur Bærentsen Simprentis Marcos Monteferrante Real Seismic

Jens Petur Bærentsen Simprentis Marcos Monteferrante 2D Seismic surveys 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante 2D Seismic example

Jens Petur Bærentsen Simprentis Marcos Monteferrante Prospects Top of sealing rock Top of reservoir rock

Jens Petur Bærentsen Simprentis Marcos Monteferrante Cross-sections Column Row Prospect, Reservoir Basin, Source

Jens Petur Bærentsen Simprentis Marcos Monteferrante Wells 179

Jens Petur Bærentsen Simprentis Marcos Monteferrante Remarks 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 -)

Jens Petur Bærentsen Simprentis Marcos Monteferrante Common Risk Segment Prospect probability –Red: low –Orange: medium –Green: high

Jens Petur Bærentsen Simprentis Marcos Monteferrante Tips 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Enter bid

Jens Petur Bærentsen Simprentis Marcos Monteferrante Remarks Minimum bonus: 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 2 Submit your bid before the deadline After the deadline, all bids are evaluated, and each team gets one and only one licence

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 2 solved 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Farm-in & -out The headquarters of you company has evaluated the licence that you got 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)

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.1 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 2D Seismic surveys 2.Submit one offer for each viable licence –Amount offered –Share wanted (in whole %)

Jens Petur Bærentsen Simprentis Marcos Monteferrante Farm-in

Jens Petur Bærentsen Simprentis Marcos Monteferrante Send an offer

Jens Petur Bærentsen Simprentis Marcos Monteferrante Partnerships 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.1 Study 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 prospects

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.1 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.2 Rig 3 rig types –Drillships –Semi-submersibles –Jack-up rigs Different water depths, Different day rates –Rig cost = drilling days * day rate

Jens Petur Bærentsen Simprentis Marcos Monteferrante Available Rigs

Jens Petur Bærentsen Simprentis Marcos Monteferrante Drilling days

Jens Petur Bærentsen Simprentis Marcos Monteferrante Drilling Depths Seabed 3500 m below seabed Layer 3 Layer 2 Layer m below seabed 2500 m below seabed “water depth”

Jens Petur Bærentsen Simprentis Marcos Monteferrante Seabed Depth

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.2 Rigs

Jens Petur Bærentsen Simprentis Marcos Monteferrante Rigs Limited number of rigs available You can order a rig –use it within 20 minutes Not enough for all –Wait in a queue, if another team is using the rig Rig day rates are dynamic

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.3 Providers

Jens Petur Bærentsen Simprentis Marcos Monteferrante Track Record

Jens Petur Bærentsen Simprentis Marcos Monteferrante Select Providers

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.4 Position 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante 3D Seismic Shows the structure: –in one (of the three) horizons –in one block Look out for “tops” –a top = a trap = a prospect

Jens Petur Bærentsen Simprentis Marcos Monteferrante 3D Seismic

Jens Petur Bærentsen Simprentis Marcos Monteferrante Three targets Layer 1 Layer 2 Layer 3 Column 60, Row 79 Column 60, Row 78

Jens Petur Bærentsen Simprentis Marcos Monteferrante Select Positions

Jens Petur Bærentsen Simprentis Marcos Monteferrante Summary

Jens Petur Bærentsen Simprentis Marcos Monteferrante Drilling position 3

Jens Petur Bærentsen Simprentis Marcos Monteferrante Drilling position 2

Jens Petur Bærentsen Simprentis Marcos Monteferrante Conf. & Budget

Jens Petur Bærentsen Simprentis Marcos Monteferrante Drilling results

Jens Petur Bærentsen Simprentis Marcos Monteferrante Drilling result

Jens Petur Bærentsen Simprentis Marcos Monteferrante Task 3.5 Testing 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)

Jens Petur Bærentsen Simprentis Marcos Monteferrante Test decision

Jens Petur Bærentsen Simprentis Marcos Monteferrante Field value

Jens Petur Bærentsen Simprentis Marcos Monteferrante Prospects

Jens Petur Bærentsen Simprentis Marcos Monteferrante Licence Value

Jens Petur Bærentsen Simprentis Marcos Monteferrante Appraisal

Jens Petur Bærentsen Simprentis Marcos Monteferrante Narrowing ranges 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

Jens Petur Bærentsen Simprentis Marcos Monteferrante Continue... 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