Field Appraisal: role, uncertainty,

tools, cost benefit and practical aspect

Yales Vivadinar

2014

Field Appraisal Objectives and Tools

Reduce uncertainty
Cost effective information
Other

Interference test
Drill additional well
Drill the well in the flank
Drill horizontal well

Coring
Production test
Deepening

Appraisal Tools
Interference test
Drill additional well
Drill the well in the flank
Drill horizontal well

Coring
Production test
Deepening

Typical E&P cash flow project is getting

higher along with the progress of the project

Exploration cost is much lower compare to further cost but having the
highest risk
Cost will get higher along with the progress of the project
Evaluation and appraisal are required prior to take further high investment

Source of uncertainty

Field Appraisal

Not
Apprais
e
Exploratio
n well

Develop

$A

Not
develop

$B

Develop

$C

Not
develop

$D

Apprais
e

Appraisal is a major part of the exploration life cycle

Appraisal activity is worthwhile if the outcome value is greater than the value
without appraisal information (($C & $D are greater than $A & $B )

Supporting Evaluations to help the business

decision making
Business
decision

Supporting
evaluation

Comprehensive evaluation should involve the subsurface data, surface

assessment and commercial perspective.
Business decision making

Seismic Data and Subsurface Modeling

Raw information of Seismic and well data are among the key initial information

Reservoir Model

Key

Parameter:
Gross Rock Volume
Porosity
Hydrocarbon saturation
Recovery Factor
Formation volume factor

Petroleum Resource Classification Scheme

modified from Ross, 2004 and SPE/WPC/AAPG,

2000

Reserve Classification to weight the risk of the reserves along understanding of the geology
and reservoir
Reserve Classification will help the risk mitigation on the decision of next investment
Reserves certificate will be based on the above classification and issued by independent party

Factor Controlling Reserves

Ferruh Demirmen, 2007

reserves estimates are affected by many factors, not necessarily technical, and not all
transparent.
The major factors are reservoir-specific, which relate to the geological/rock/fluid system
and form the basis for reservoir modeling.
Development scheme, operations, and technology also play a role (Horizontal drilling
and multilateral-completion technology) have boosted reserves significantly in many
fields

Development Scenario
Possible future
flow lines

Possible future
gas export line

FPSO
Calm buoy
off-loading

Primary depletion
5 production horizontal
wells
2 injection wells

WH Platform
Dynamic risers
Liquid & gas
infield lines

Gas reinjection

4500 ft

Zone C
Zone A
Zone D
Zone C
Zone E
6500 ft

Offshore Transportation to East Java

Gas can be delivered to Gresik at

60-70 MMscfd.

100 km gas pipeline need to be

installed that requires additional
compression to give 100% back up
as well as facility modifications.

requires an onshore receiving

facility (ORF). The facility is
expected to be minimal that
comprise of slug catcher, metering,
flare and office support.

The location of this facility is

envisaged to be in the vicinity of
industrial area.

The gas reserve could potentially

support 7-10 years of gas sales.

Offshore Transportation to Madura

The potential gas demand in Madura

would be from power generation segment
of around 20 MMscfd to fuel +100 MW
power plant capacity.

The capacity of gas handling would be 20

MMscfd for sales to Madura and the rest
up to 50 MMscfd would still be reinjected.

The additional facility to be installed are:

sales gas compressor with 100% back up,
35 km pipeline to Madura and onshore
receiving facility in Madura Island, and
probably around Ketapang village. With
the size of the market, the gas reserve
could support 15-20 years of gas sales.

Any disruption to the gas sales would

require undelivered gas to be flared as
the re-injection capacity is designed to
only 50 MMscfd.

The disruption to the gas sale could be

caused by buyer facilities, ORF shutdown,
pipeline leak or rupture.

On-Site Gas Sales Buyer Transports

The Buyer will build their facility

adjacent to the gas facility.

There will be a sub-sea gas manifold

provided by CPKL and the buyer
would need to make connection to
the manifold.

The gas will be on sales

specification, i.e. dew pointed to
avoid potential liquid drop out along
the line.

The compression installed is up to

the operating condition of the DPCU
(around 600-800 psig) and there will
be 100% back up.

The buyer has to take all gas

produced (after fuel gas and utility
usage) as there is no re-injection
facility.

If the buyer fail to take the gas for

any reason, the gas has to be flared
otherwise oil production has to stop.

Regional Seismic Overview

A

NNE

B
RONO-2

W LIRIK-1

AGHA - 1

SSW

TOP COAL ZONE A

TOP COAL ZONE B
TOP COAL ZONE C
TOP BINIO FM.

TOP LAKAT FM.

TOP COAL ZONE D

TOP KELESA FM.
C

www.nuenergygas.com

Three Layers Zones Have Been Identified

High Case

Low Case

Zone A
107 Km2

272 Km2

Zone B

Zone C

303 Km2

127 Km2

654 Km2

645 Km2

Proposed wells location

The preliminary study shows some sweet spots distribution in the western part of the PSC

Total sweet spot area is between 537 Km 2 (low case) and 1571 Km 2 (High case)

The potential area is located at the Western area of the PSC

Very limited data (seismic data and well controls) to support the evaluation of eastern area
Two coring and exploration wells at both prospect (Northwest and Southwest) to confirm
the model and assumptions

Resources Estimation and Potential Development Area

Zone

Area
(Km
2)

Thickness (m)

Gas In Place
(TCF)

Min

Mod

Max

Min

Mo
d

Max

Zone
A

107

4.8
7

7.12

8.5
8

0.0
8

0.1
1

0.14

Zone
B

304

5.6
6

7.72

7.7
4

0.2
6

0.3
5

0.35

Zone
C

126

1.8
0

5.69

5.7
6

0.0
4

0.1
2

0.12

0.3
7

0.5
8

0.61

Total development area is circa 500 Km2

Required land to drill +100 well (50 pairs of SIS well)
Well site is circa 100 wells x 2500 m2 = 0.25 Km2

Maximum distance to the gas transmission line is 15 Kms

Pipeline RoW for 50 locations x (2 m x 15 Km) = 2.5 Km2

18

Drilling Program and Production Profile

No of wells
Potential Reserves
Maximum Daily Rate

48
580.0 BCF
MMSCFD/we
1.94 ll

Max Total Daily Production

2.32 MMSCFD

Max Total Daily Production

49.36 MMSCFD

Total Acumulative Production

216.2 BCF

Recovery factor

37%

19

Key Parameter and assumption

Development period
Production period
PSC Split
GoI
Contratctor
FTP
Tax
Annual Cost recovery cap
Depreciation rate

2018-2028
2018-2039

21.875%
78.125%
10%
44%
90%
25%

Depreciation period
Inflation rate
Investment credit

10

Drilling cost ($000)

Facilities & pipeline cost ($000)
Total ($000)
Exploration Sunk Cost ($000)
Development Cost ($000)
Total Investment ($000)
Gas price
Variable cost ($/MSCF)
Fixed cost ($000/well-year)

year
2.5% p.a.
0% p.a.
$4,500

$2,150
$6,650
$17,320
$319,200
$336,520
7.5

$/MSC
F
0.5
150

20

Time Value of Money

Net Present Value

Project Cash Flow

23

Revenue Split and NGYs Net Cash flow

Cap on Cost Investment

IRR
Recovery
Credit
(@NPV=0)
90%

90%

3%

100%

12.13%

100%

3%

13.18%

11.92%
12.92%

24

Sensitivity Analysis

Given current cost and schedule premises, Buyer break-even NPV13 ($0MM) could be achieved by (Either OR):
1. reducing ~40% of total Capex (drilling and facilities ) from $959MM to $550MM (gross); OR
2. selling gas at $20.7/mmbtu (flat) or at $19.2/mmbtu (esc. 2.5% per annum starts in 2019 forward): OR
3. having contractor 65% after-tax gas split.