OilSim

Geology Rocks!Geology for Non-

GeologistsStavanger

31st Jan – 2nd Feb 2012

www.oilsim.com

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Learning Cycle

Three Challenges

Environmental issues Team work and negotiation Critical decision making, analytical skills,

multi-tasking Learn through experience Economically viable volumes-

reducing uncertainty Return on Investment Function appreciation

Additional Knowledge/Skills

You start with $200 millionYou can apply for more money later.

Create valueMeasured by the net value of the oil and gas fields discovered MINUS all costs involved.

Correct answers and sensible decisions are awarded with CPs

Money and Credibility

Complete Value Chain

U p s t r ea m

Oil and Gas Value Chain

Upstream Process

Decision Gates

Blocks are divided into smaller cellse g. R1C1

Columns e.g C1 and C54

Rows e.g R15 and R97

Home Page

Where and How to Find Hydrocarbons

Challenge: Find three sedimentary basins in the area. Basins are sedimentary rocks in the deep subsurface where oil and gas has been generated.

Procedure: Buy and study magnetic and gravimetric surveys; and to submit the coordinates, column and row number for each basin geographic midpoint.

Challenge 1- Find basins

Gravimetric Surveys Gravimetric surveys indicate

changes in the gravitational pull of the Earth in different areas of the sub-surface.

Lower gravitational fields indicates likelihood of low density rocks –Sedimentary rocks, porous and hopefully containing hydrocarbons

Low gravity are basins. High gravity are crystalline rocks

Gravimetric survey:South-east quadrant

Gravimetric Surveys in OilSim

Magnetic surveys show similar information as gravimetric surveys. The sedimentary rocks in the basins have a lower concentration of magnetic materials than the surrounding crystalline rocks.

Sedimentary basins are the areas with the lowest magnetic field.

Sedimentary basins have low magnetic field Non-basins have high magnetic fields.

Magnetic Surveys

Magnetic survey:North-west quadrant

Magnetic Surveys

Finding the Midpoint

Example:Top basin on both

maps Calculate the

midpoint between the gravimetric and magnetic centres found

= C55 and R105

C50

R100

C60

R110

Midpoint May Not be the Same

Enter Decision

3 basins – one midpoint for each basin

Example: C55, R105 Solve before deadline. All

submissions are evaluated after the deadline (and not before).

You may get 0-100 CPs. All three midpoints must be located to get full CPs.

Basin Midpoint Calculation

All teams have submitted their answers. Basin midpoints are located.

Message in mailbox. All teams have answers and CPs awarded.

Challenge 1- Solved

Get The Best Block

Sedimentary basins may contain oil and gas

The government has decided to put the blocks around one of the basins on offer

Challenge: Identify the 3 most promising blocks and submit a bid to the Government for these blocks

Challenge 2 - Licence Round

Process in a Licence Round

•Invitation/announcement •Qualification (Pre-qualification)•Preparation, data acquisition, evaluation •Establishment of partnerships •Priority, recommendation for bidding •Application, documentation, bid •Announcement of bidding results •License negotiation•Award , work programme, start-up

Success or failure-> discovery/ development/ production/ abandonment or relinquishment

Red areasYou will not be awarded blocks that contain any red spots

Blue areasBlocks in area may be awarded

Spawning Grounds

Basic Petroleum Geology

B a s in

P e t r o le u m s y s t e m

P la y

P r o s p e c t

B a s in S c r e e n in g

P r o s p e c t in g

R e s e r v o ir

T r a p a n d s e a l

S o r c e r o c k a n d m ig r a t io n /c h a r g e

1. SOURCE ROCKwhere organic material is put under sufficient pressure and temperature

2. MIGRATION ROCKwhere hydrocarbons are driven through

4. CAP ROCKImpermeable rock that stops migration of hydrocarbons PROSPECT

Source and Migration3. RESERVOIR ROCKRock with porosity and permeability

5.STRUCTURAL OR STRATIGRAPHIC TRAP

Play Elements Mapping

ReservoirReservoir SourceSource SealSeal

Presence

Quality

Presence

Quality

Maturation

Migration

Timing

Presence

Capasity

Play elements are

converted to risk

segment maps Highest probabilityModerate probabilityLowest probability

Risk maps for each element are combined into total Common Risk Segment map - CRS

Layer 3 Eocene1500m below the seabed

Layer 2 Paleocene2500m below the seabed

Layer 1 Cretaceous3500m below the seabed

CRS - Common Risk Segment maps tell you about the probability of a prospect in the block containing oil or gas Surface

Common Risk Segment

(c) OLFAnticline trap

Fault trap

S t r a t ig r a p h ic t r a p

S a l t d o m e t r a p

Geological “pockets”, that might contain hydrocarbons.

Traps

Traps can be found with use of seismic data

A 2D seismic survey consists of cross- sections of the geological layers along either a column or a row

2D seismic surveys are used for locating prospects

2D Seismic Surveys

Unprocessed Processed

Interpreted

Red is top of the sealing rockGreen is top of the reservoir rock

PROSPECT

2D Seismic in OilSim

Which type of data do you want?

Columns or Rows

Unprocessed or processed data

Interpreted or not

You can only buy maximumof 4 blocks of data at a timeto speed up processing

The yellow hatched area on map can be clicked on and dragged to blocks of interest

Order 2D Seismic

Red is top of the sealing rock

Green is top of the reservoir rock

PROSPECT

2D Seismic in OilSim

Acquired 2D Seismic

532 533 534

546 547 548

532532

R17

R19

R21

R23

R17

R19

R21

R23

Prospect Counting

How Rows Work

1

1

2

3 4

5 6

2

5 6

Prospect Counting

How manyprospects canyou see ineach block?

Text

Anticline and Fault Traps

Leakage

Black arrows in red circles – navigate through the 2D seismic

Line data in yellow square – Row 1 from Column 1-56

View the Seismic

Column

Row

Prospect, ReservoirBasin,Source

Cross-Sections

Activities that oil and gas companies do to serve the communities they operate in

CSR projects usually to develop the local communities in education, social welfare, and business

In OilSim teams are rewarded with CPs when choosing their CSR projects

CPs a company has is considered by the Government when deciding upon licence awards

Corporate Social Responsibility

CSR Tab

Some are greyed out, because the team does not have enough CP, enough CSR budget, or enough cash to do them

Each has a cost, and a number of possible outcomes Each outcome has a probability and either negative

or positive CP In the CSR tab you can see the minimum and

maximum CP you can get, as well as the probability for getting the maximum CP

CSR Projects

This project costs $8M If it goes well, the team gets 40 CP

The likelihood of this is 60% If it goes badly, the team gets zero CP Minimum required CP is zero

Project Example

Confirmation Box

CSR Project Result

Completed projects

Credibility Point page

Review Credibility Points

Lots of different types of Projects to choose from You only have $30M budget for CSR in each

licensing round CSR funds that you don’t spend in one round are

transferred to the next You cannot initiate a project if it has the potential to

make your CP’s go into negative You cannot initiate a project if you don’t have the

cash for it Each project can only be run once per team

Limitations

CSR is about caring for the local society – and making a difference for the people living where you operate

Not all projects are sound Bribery does not pay

Some projects cost a lot, but do not give so much return

Some projects are riskier than others

Learning Points

Environmentally sensitive areas – blocks to avoid

Common Risk Segment surveys – areas of higher probability of prospects

2D seismic – blocks with most structures

Bid for 3 blocks - you will only be awarded 1

Recap on Challenge 2

Final Tip – Check water depth and go for shallow water blocks if possible

• Choose which blocks you want to bid for• For each block, say how

many exploration wells you are committing to drill• Do NOT promise to drill

more wells than there are prospects• An estimated cost is shown• You will initially only be

awarded one block

Bidding Form

Message sent to all teams with the results- see mailbox

Credibility Points are given for prosperity of the blocks you bid for

Every team has got one exploration license

Challenge 2 Solved

Reduce Risk and Start Drilling

HQ is happy with the license awarded. Challenge: Farm-out minimum 20% from

your license – and farm-in as much as you can, in other good licenses.

Acquire 3D Seismic interpretations for the block you operate, and study the results from the licensing round

Get others to invest 20% or more in your license – you can show/send 3D seismic

Challenge 3 - Exploration Drilling

Shows the subsurface structure in a cube.

Real 3D Seismic

3D Seismic in OilSim

Layer 1 Cretaceous

Layer 2 Paleocene

Layer 3 Eocene

Prospects are no guarantee of oil or gas

Spread the risk: e.g Investing in other blocks divides the risks amongst all partners, much more preferable than keeping 100% of one field and all the risk.

Increase probability of profit: investment in only one prospect which could be a dry is possible, whereas the likelihood of investing in 5 prospects which are all dry, is less likely.

Partnerships

Licences

Enter the percentage and total amount for have agreed to offerMinimum $100,000 per %Add a message to the sellerPress “Send offer”

Farm-In

When a team receives a Farm-In offer to appears under Financing. This is where a team can receive finance or money for a % of their own blocks

Farm-In

licence OWNER decides whether to ACCEPT or REJECT the offer

Partnerships established every time a licence owner accepts an offer.

Overview: On the main page, you can see all licences. 1) licences you operate, 2) licences you have invested in, and other licences.

Farm-In

All your farm-in offers to other teams are shown under “Investing” on the right-hand side of the homepage . This is where a team offers investments to other teams for a % of their blocks

Farm-In

Partners pay a proportional share of all future costs

Partners receive a proportional share of the net proceeds from oil and gas

The operator team makes all decisions regarding drilling

Teams can farm-out up to 70% of licence Operators must keep 30% of licence

Parnerships

Before choosing a rig, you need to check your water depth .

Find this at the bottom of the BLOCK page

Water Depth

Choose Rig Choose the right rigs for your water depths

Jack-up rigs for shallow waters Up to 100m

Semi-submersible rigs for middle waters Up to 600m

Drill ships for the deepest waters Over 600m

Rig cost = drilling days * day rate

Drilling Days

Rigs

Limited number of rigs 20 minutes to use Queues Prices can change

Up to 9 Star quality- Good: normally

costs more Bad: cheaper, but reliability is low,

so you risk extra drilling time and extra costs

Service Providers

Drill Position

EIA: Enviromental Impact Assessmentshows where not to drill.

Place your mouse where to drill

Penalties & Fines

Certain problems can occur if Service Provider Selection is poor quality

Other penalties can occur if you drill in areas indicated as problematic in the Environmental Impact Assessment

As in real life, problems can occur randomly and these are also applied with fines levied accordingly.

Layer 1 Cretaceous

Layer 2 Paleocene

Layer 3 Eocene

Drilling Position

Oil spill or Gas Blowout control

Estimated cost

Estimated Cost

Drilling Results

Proven volume (MBOE) counts Test may increase proven volume Remember to tick the boxes!

After Testing

Proven Upside potential

Reinterpretation of Seismic

Value

Discovered Prospects

A s s u m p t io n s

Value Calculation25% of 8 MBOE @ $50

12% $39.9M

Expected costs ifyou developed thefield (capex) andproducedthe oil (opex)

If total expenses arehigher than the salesvalue, the value of thelicence is zero

Appraisal

From Probable volume to proven reserves

Narrowing Ranges-Example

Exploration well: 0 to 1572 MBOE (after drilling) 11 to 1266 MBOE (after testing)

First appraisal well: 25 to 1033 MBOE (after drilling) 34 to 910 MBOE (after testing)

Second appraisal well: 65 to 850 MBOE (after drilling) 101 to 752 MBOE (after testing)

Only proven MBOE counts

Increasing Proven Volumes

Appraisal wells - proven reserves increase Range between proven and possible is decreased

Effect on Calculation of Licence

397 MBOE @ $50 including 25% recovery factor, 0.8 production factor, 10% discount factor)

12% $39.9M$6 of $50 = 12% tax)

Expected costs ifyou developed thefield (CAPEX) andproducedthe oil (OPEX)

Now total expenses are lower than the sales value and so we have a positive licence value

After your first drill in each well, test and reinterpret seismic

Decide which discoveries to drill, how many appraisal wells into

Ultimately, you should either: Get a positive net present value, Or a conclusion that additional appraisal

wells will not result in a net present value

Drilling Summary

Click on Apply for More Funds Tab. 1 CP for each $100,000 applied for. Answer three questions:

Expensive money if less than 10 credibility points: Apply for cash and be fined $5million for each $20million requested.

Apply for More Funds