Welcome to Oilsim

2

Three Part Learning System

Introduction to the Industry Overview of the Oil & Gas

Industry Value Chain

Oilpatch EXClassroom

Exploration 101 Drilling and Completions 101

e-LearningModules

OilSim OilSim Team Learning Simulation

Your Challenge Today

You are an exploration team in charge of a new petroleum exploration area.

Your task is to find and drill for new reserves and to maximize return on investment (ROI).

You will need to work as a company as well as in partnership with others.

You will show your new understanding of exploration and be rewarded through Credibility Points.

Finances

You will start with $50 millionYou can apply for more later.

Creating ValueProfit is measured by the net value of the oil and gas fields discovered MINUS all costs involved.

Winning team has highest ROIROI is calculated as Value created DIVIDED by Funds received.

Credibility Points

You get CPs for doing wellduring the simulationCorrect answers and sensibledecisions are awarded with CPs

CPs are a measure of ability and credibilityA team’s CPs are considered when bidding for blocks and applying for funds from the HQ

You will learn

Where and how to find hydrocarbons. Various surveys during exploration.

Licensing rounds. Farm-in and Partnerships.

Drilling rigs and Sub-contractors.

Environmental issues.

Economically viable volumes. Reducing uncertainty.

Team work and negotiation. Critical decision making, analytical skills. Multi-tasking.

88

Today’s Agenda – OilSim

AM

Team Challenge 1 – Finding Basins

Team Challenge 2 – Finding Prospects

Team Challenge 3a – Partnerships

PM

Team Challenge 3b – Drilling

Team Challenge 4 – License Round 2

Close and Feedback

Login

www.oilsim.com

Main screen

MapColumns e.g C1, and C54

Row

s e

.g. R

35 a

nd R

163

Block

Blocks are divided into smaller cellse g. C57,R73

First challenge

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 centre.

Gravimetric surveys

Gravimetric surveys show the gravity in the sub-surface. Measured by airborne sensors.

Sedimentary rocks have lower densities than the surrounding crystalline rocks. Low gravity means high probability of a basin below.

Low gravity are basins.

High gravity are crystalline rocks

Surveys in OilSim

Real gravimetric survey

Survey in Oilsim

Gravimetric survey:South-east quadrant Gravimetric

survey:South-east quadrant

Survey in OilSim

All four quadrant surveys in map context.

Magnetic surveys

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.

Basins have low magnetic field

Non-basins have high magnetic fields.

Real magnetic survey

Survey in OilSim

Magnetic survey:North-west quadrant

Survey in OilSim

All four quadrant surveys in map context.

Gravimetric survey analysis

Locate edges of the continous basin structure (yellow area)

Locate the diagonals and thus basin centre

Magnetic survey analysis

Locate edges of the continous basin structure (purple area)

Locate the diagonals and thus basin centre

Finding the Midpoint

Centre may not be the same

Example:

Top basin on both maps

Calculate the midpoint between the gravimetric and magnetic centres found

= C55 and R105

C50

R100

C60

R110

Enter decision

Centre Midpoint calculation

3 centres – one Centre 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 centres must be located to get full Credibility points.

Solve task 1

Task 1 solved

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

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

Challenge 2 : license round

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 offer an amount for each of them.

Challenge 2 : license round

Any restrictions involved? Yes, you need to watch for Endangered Species Rangeland.

What are we looking for? Hydrocarbon Prospects.

Where do we find prospects? In sedimentary basins

How do I find them? Interpreting 2D seismic and Common Risk Segment maps.

Prospect

Prospect: An area of interest in the subsurface identified to be likely to contain hydrocarbons

What makes a prospect?

Source rock

Migration path

Reservoir rock

Seal or cap rock

Trap

Traps

Geological “pockets”, that might contain hydrocarbons.

(c) OLFAnticline trap

Fault trap

Stratigraphic trap

Salt dome trap

Environmentally Sensitive Areas

Red areasYou will not be allowed to bid, drill or operate in any of the red areas. Green areasBlocks in area may be awarded.

Sensitive Range-Lands Survey

Common Risk Segments

Is there a sedimentary basin and a migration route into the prospects in the area?

Is there porous reservoir rock in the area, so that the oil or gas can be stored?

Is there a sealing rock in the area, so that the oil and gas can be trapped?

If all are positive, then green

If some negative, then orange

If mostly negative, then red

Common Risk Segment

Layer 3 Eocene1500m below the surface

Layer 2 Paleocene2500m below the surface

Layer 1 Cretaceous3500m below the surface

CRS. Common Risk Segment surveys tell you about the probability of a structure in the block/cell containing

oil or gas

Surface

2D Seismic surveys

Traps can be found with seismic surveys

2D seismic survey is a cross section of the geological layers along either a column or a row.

2D seismic surveys are used for locating prospects.

Real Seismic

                                                                                                                                                                       

Real Seismic

OilSim of 2DSeismic

Unprocessed Processed

Interpreted Red is top of the sealing rock

Green is top of the reservoir rock

Anticlinal traps

Fault traps

Leakage

Leakage?

44

Order Seismic

45

Buy 2D Seismic from the Survey Shop

Order Seismic

What type of data do you want?

Columns or Rows

Unprocessed or processed data

Interpreted or not

Order Seismic

It takes time to process your request

Created to order

View the Seismic

Red circles – navigate through the 2D seismic

Yellow square – Row 1 from Column 1-56

Cross-sections

Column

Row

Prospect, ReservoirBasin,Source

License Round in OilSim

Minimum bid is $250K

Maximum bid is $7.5M

Enter numbers without commas (ex: 250000)

You will bid for 3 licenses but each team will only be awarded one license

Highest bid wins the license

If two teams bid the same, the team with the most CP’s gets it

Random license awarded if none of your bids are high enough

Submit your bid before the deadline!

Enter bids

Three different blocks

Three bids

Example-Block 1123

Bid 250000

Recap on Challenge 2

Study Sensitive Rangelands Survey to see which blocks to avoid

Use Common Risk Segment surveys to see which blocks to examine closer (look for green)

Buy and study many 2D surveys to identify which ones have the most potential traps, as well as the biggest traps.

Solve task 2

Task 2 solved

Message sent to all teams with the results

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

Every team has got one exploration license

Challenge 3 : Exploration Drilling

Company management has reviewed the licence that you were awarded and the potential cost to drill a well.

Although the possibility of finding oil is fair, the costs involved are large. They have asked you to spread the risk.

Challenge: Farm-out a minimum of 20% on your license and farm-in as much as you can on other good licences.

Partnerships

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 1 field which could be a dry prospect is possible, whereas the likelihood of investing in 5 fields which are all dry is unlikely.

Challenge 3.1 Partnering

Acquire 3D Seismic interpretations for the block you operate, and study the results from the licensing round-can send under “surveys” to possible partners

Farm-out: Get others to invest 20% or more in your license

Farm-in: Send offers to other teams to buy shares in their viable licences. Submit an offer for each viable licence, with amount offered and share wanted in whole %.

Real 3D Seismic

Shows the subsurface structure in a cube.

3D Seismic in OilSim

Structures are prospects, where hydrocarbons may be.

Prospects are no guarantee for oil

or gas

3D Seismic in OilSim

Layer 1 Cretaceous

Layer 2 Paleocene

Layer 3 Eocene

Licences

61

Farm-in

Input your amount and %

Min bid is $25000 and max is $1250000 per %

Add a message to the seller

Press “Send offer”

Financing

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

Farm-in

license OWNER decides whether to ACCEPT or REJECT the offer Partnerships established every time a license owner accepts an offer.

Investing

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

Partnerships

Partners pay a proportional share of all future costs incurred by the partnership

Partners receive a proportional share of the net proceedings from any oil or gas found on the license.

The operator team makes all decisions regarding acquiring 3D seismic, drilling of wells and testing of wells.

Information: partners in a block can access info about drilled wells and discovered oil and gas fields.

Ready to drill

Click on drill

Choose rig

Truck mounted Rigs

Medium Duty Rigs

Heavy Duty Rigs

Choose Rig

Max drilling depth is important

Rig cost = drilling days * day rate

Rigs

Few: limited number of rigs available.

If you get one: start using it within 20 minutes.

If you don’t: wait in a queue, if another team is using the rig.

Price can change: rig day rates are dynamic.

Drilling Depths

Ground level

3500 m below surface

Layer 3 Eocene

Layer 2 Paleocene

Layer 1 Cretaceous

19 days

1500 m below surface

2500 m below surface 45 days

35 days

Service providers

9 Star quality:

Good- costs more

Bad: - cheaper, but reliability is low

5 types of providers- Construction and Maintenance , Logistics, Well Services, Camp Services and Analysis

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.

Oil spill control – 5% of overall drilling costs

Environmental Impact Assessment

EIA survey: more knowledge about the area.

Less probability for drilling problems.

Less severe consequences if you run into problems.

Drill Position

EIA: enviromental impact analysis shows where not to drill.

Place your mouse where to drill

Drilling Position

Layer 1 Cretaceous

Layer 2 Paleocene

Layer 3 Eocene

Drill Position

Too deep for the chosen rig.

Estimated cost

Drilling Days

Drilling Result

Proven Volume (MBOE) counts

Test may increase Proven volume

Remember to tick the boxes!

Testing

Only if you discover a field – find Oil or Gas

You decide whether you want more information about that field

More information by doing a production test (and other tests)

Tests costs. Tests take 10 days per field. Tests have the same day-rate as the drilling if you use the same providers.

Value and ROI

Volume Range, e.g. 1-897Proven Reserves e.g. 1

Value Calculation

The total proven oil and gas = 18MBOE

Allowing for 25% recovery factor0.8 Production profile factor and 10% discount factor per year

84

BEHIND THE SCENE CALCULATION

18MBOE x 25% recovery factor = 4.5MBOE

Sales price without discount factor -> 4.5MBOE x $50 = $225,000,000 Sales price allowing for production profile -> $225,000,000 x 0.8 (production factor)

= $180,000,000

Reduced sales price with 10% discount factor per year

= $ 67,397,022

85

VALUE CALCULATION

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

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

If total expenses arehigher than the salesvalue, the licence value is zero

Appraisal

From Probable volume to proven reserves

Narrowing ranges

Aero drilling - Only proven MBOE counts

Exploration well:

1 to 897 MBOE (after drilling)

11 to 566 MBOE (after testing)

First appraisal well:

25 to 333 MBOE (after drilling)

34 to 310 MBOE (after testing)

Second appraisal well:

65 to 250 MBOE (after drilling)

101 to 152 MBOE (after testing)

Only proven MBOE counts.

Increasing Proven Volumes

88

Appraisal wells - proven reserves increase

Range between proven and possible is decreased

Effect on calculation of licence

•

89

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

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

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

Challenge 3B Drilling

Continue...

Narrow uncertainty: Drill appraisal wells to get proven volumes

Drill into other prospects to find more proven volumes.

Farm-in and -out: Get into other good blocks.

Two additional licensing rounds: Repeat the processes.

Money: Apply for more money, if you run out of cash.

Apply For More Funds

Click on Apply for More Funds Tab.

1 CP for each $100,000 applied for.

Answer the questions: All correct gives cash and you can keep CPs. One wrong gives cash and you keep ½ of your CPs. Two wrong gives ½ cash and you lose all CPs. All wrong, you get no cash and lose all CPs.

<10 Credibility points: Apply for cash and be fined $5million for each $20million requested.

Company strategy

Access to new exploration

areas

Make new discoveries

World class project

performance

Increased recovery through

systematic plans and actions

Exploration acreage: Resources Reserves Production

94949494

Oilpatch EX Learning Objectives

Describe Industry

Articulate Value Chain

Practice Skills

Appreciate Complexity

95

Industry Overview Summary

Industry

Public

Regulator

Government

Investor

Consumer

969696Source: Photos.com 9696Source: Photos.com

The Lenses We Looked Through

Thank you