Basic Oil 2007

Exploration Management
Eni Exploration & Production

Division
Exploration Management
• WHAT is EXPLORATION?
Deliberate, business oriented search for hydrocarbons
Upstream activity targeting the replacement of produced reserves
• WHY WE –still- DO EXPLORATION?

To open new frontiers for ultimate potential
To create opportunities & value for the shareholders
To keep core industry competence

Division
Upstream (Exploration & Production) activities
UPSTREAM
Exploration
Exploration Development
Development Production
Production
Exploration is the first of the main activities constituting the upstream

workflow.
Its purpose is to identify new areas prone to reservoir producible

hydrocarbons, in order to replace ongoing production and, if possible,
to increase the Company’s production capabilities

Division
Exploration Project definition and objectives
EXPLORATION PROJECT:
Within the frame of a general strategy, the exploration project consists of a
series of studies and operations aiming at the replacement of the produced
reserves. This is achieved through:
1. identification of new targets in a defined area
2. definition of their technical value: reserves and associated geological risk
(POS = probability of success)
3. definition of their economic value (EMV = expected monetary value).
4. drilling of an exploratory well and ensuing possible appraisals

Division
What we are looking for is a peculiar situation, within the basin, where
all the necessary conditions for generation, expulsion, migration and entrapment
of hydrocarbon have materialized in the right chronological
order. This type of geological feature is called “prospect”.
Once the prospect has been firmed up to a sufficent degree of confidence

and its economic value has been estimated to be beyond the minimum threshold
set by the Corporate, it becomes “drillable”.

Division
However, this is the last stage of the pre-drilling exploration work. Before
reaching this point, a great deal of work is devoted to basin regional studies,
in order to identify specific areas of interest.
Usually, the objects which are subsequently taken into account during this
quest for new exploration targets are:
PLAY LEAD PROSPECT

…in decreasing order of size and, conversely, in increasing order of data
availability, prediction accuracy and confidence. But let’s give some
definitions…
6

Division
PLAY
“a project associated with a prospective trend of

potential prospects, but which requires more
data acquisition and/or evaluation in order to
define specific leads or prospects.”
Project activities are focused on acquiring additional data and/or

undertaking further evaluation designed to define specific leads or
prospects for more detailed analysis of their chance of discovery and,
assuming discovery, the range of potential recovery under hypothetical
development scenarios.
From: Petroleum Resources Management System – SPE, 2007 7

Division
LEAD
“a project associated with a potential accumulation

that is currently poorly defined and requires more
data acquisition and/or evaluation in order to be
classified as a prospect.”
Project activities are focused on acquiring additional data and/or

undertaking further evaluation designed to confirm whether or not the
lead can be matured into a prospect. Such evaluation includes the
assessment of the chance of discovery and, assuming discovery, the
range of potential recovery under feasible development scenarios.

Division
PROSPECT
“a project associated with a potential accumulation

that is sufficiently well defined to represent a
viable drilling target.”
Project activities are focused on assessing the chance of discovery and,

assuming discovery, the range of potential recoverable quantities under
a commercial development program.

Division
Drillable prospect generation
Before a well is drilled we can only achieve an understanding of the

petroleum system and, afterwards, of the trap geometry and reservoir
characteristics, on the basis of indirect methods of investigation .
Several options are available, depending on the stage of the analysis

where we are and, hence, on the required degree of resolution.
In the preliminary regional basin analyses surface geology, magnetic

and gravimetric methods are sometimes used (of course on top of older
data and information belonging to previous exploration campaigns,
if any).
Subsequently, interpretation is based primarily on seismic data.
10

Division
The seismic methods
Of all the indirect methods of investigation, which include gravimetric,

magnetic, electric and sonic, the latter, also called seismic, is by far the
preferred for the hydrocarbons exploration. The reason is that it
compounds a good resolution capability with the easiness of acquisition
and with a reasonably low cost, compared with the amount of information
it can generate.
Virtually all the pre-drill exploration analyses and interpretations are

carried out on the basis of seismic data.
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Division
Seismic for E&P Activities
• seismic is largely the most used investigation method in oil and gas
E&P
• seismic is less expensive than drilling
• seismic data provide information on:

– geometry and size of the trap
– HC migration paths
– timing of trap formation
– direct presence of hydrocarbon (DHI)
– information regarding velocity, density, fluid content
12

Division
Reflection Seismic
• a source sends acoustic energy into the ground
• the resulting echoes from underground rocks are detected by seismic

sensors (geophones) at the surface
• the sensors transform the echoes into electrical signals proportional to

the intensity of the echoes
• the signals are recorded on magnetic tapes for computer processing
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Division
Indirect investigation: reflection Seismic
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Division
Direct investigation: drilling
Mechanical drilling through the

subsurface rocks is the only
direct method to explore for
hydrocarbons…
15

Division
Exploration Project main phases
Acreage Prospect Drilling &

Basin / Play
identification / generation & well results
analysis
acquisition evaluation evaluation
Commonly, the exploration activity is subdivided into four different

phases
At first, regional studies and analyses are carried out in order to identify
areas of potential interest. Then, on specific parts of these hydrocarbon
prone area, more in-depth investigations are performed to point out
specific blocks to be targeted for acquisition.
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Division
Prospect Drilling &

Basin / Play Acreage
generation & well results
analysis acquisition
evaluation evaluation
When the exploration licence is acquired, data and information from

the past exploration activity (if any) become available. Usually, a
new seismic survey covering the area of possible interest is also
recorded.
These data are used for “prospect generation” work.
Throughout all this process, and until the first exploratory well is
drilled, the technical work is aiming at firming up the play / lead /
prospect potential with an continuously increasing confidence in
the geological model and a constantly reduced degree of uncertainty
about reserves and their economic value, in order to justify further
investments. 17

Division
Prospect Drilling &

The ultimate result of the studies carried out during each phase is a
technical and economic evaluation of the hydrocarbons contained in
the area.
The same type of evaluation is performed each time an investment

authorization is required, each time making use of more data and
information acquired during the life of the Project.
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Division
Prospect Drilling &

All methods and techniques (seismic, geochemistry, basin modelling

etc.) are often used more than one time, in subsequent phases of the
project, to analize and integrate new data.
In any case, the rule is to make full use of all the data and information
available at any moment, in order the achieve the best possible result.
19

Division
Exploration activity as a process: the OPES
To guarantee the highest level of quality in its activities, Eni E&P

Division has adopted a standard working procedure based on a
detailed description of the exploration process.
Each activity is described in a set of Handbooks, Best Practices and

Workflow maps. This complex system is called OPES, an acronym
standing for Opportunity and Project Exploration System.
A similar tool is available also for the Development (OPDS) and the
production (OPOS) phases. The three systems are linked one to the
other, so that there is no break between activities
20

Division
Exploration, Development & Operations Management Systems
OPES
OPES OPDS
OPDS OPOS
OPOS
Running
Running
Drill
Drill &
& Handover First Running Production
Opportunities G Handover First Running Production and
and
Opportunities
OpportunitiesGGEE11 Opportunities
GEE22 Pre-drill G
Pre-drill
GE33 Post-drill
Post-drill G
GEE44 Evaluation
Evaluation G1
G1
Concept
Concept
G2
G2
Concept
Concept
G3
G3 Execution
Execution
Handover to
to Acceptance Period
Period G
Gpp11 Production
Production &
& G
Gpp22 Preparation
Preparation to
to
Generation
Generation Evaluation
Evaluation Exploration E
Exploration Selection
Selection Definition
Definition Package
Operations Production Improvement Decommissionin
Evaluation
Evaluation Operations Production Improvement Decommissionin
gg
HC HC
in free
Project
Project Management
Management System
System Value
Value Management
Management System
System Technology
Technology Management
Management System
System
PMS VMS TMS
Technical Scientific and Know-how Portals

21

Division
The EMS/OPES covers the exploration process according
to the set of guiding principles
EMS/OPES guiding principles
Value driven
Knowledge Exploration risk

sharing reducing
OPES
guiding Aligned with best
Flexibility
principles practice
Standardisation of
Team based
terminology
Decision driven
22

Division
Opportunity & Project Exploration System - OPES
New ventures Activities in existing Eni blocks

Drill &
Phase
Opportunities G 1 Opportunities G 2 Pre-drill G

GEE 1 GEE 2 G
GEE33 Post-drill GEE44 Evaluation
Generation Evaluation Exploration Evaluation
To
To evaluate
evaluate specific
specific To
To implement
implement the the To
To confirm the
the presence
presence
To identify
identify generic
generic opportunities
opportunities from
from aa operational
operational programme
programme of
of hydrocarbons
hydrocarbons andand
Objective
exploration
exploration opportunities
opportunities technical/economic
technical/economic aimed
aimed atat detailing
detailing the
the update
update the technical
technical
within
within strategic perspective
perspective and
and decide
decide prospect
prospect and
and evaluating
evaluating evaluation
evaluation according
according to
to
guidelines
guidelines whether
whether to
to proceed
proceed how
how to
to proceed
proceed toto the
the well
well results
results
securing
securing the
the legal
legal right
right drilling
drilling phase
phase
Main Gate
Is
Is the
the acreage
acreage Is
Is the
the prospect
prospect Does
Does the
the
question
Does
Does the
the valuable
valuable enough
enough toto technically
technically and
and discovery
discovery deserve
deserve
opportunity
opportunity deserve
deserve proceed
proceed to to the
the economically
economically mature
mature to
to to
to move
move to
to the
the
further
further license
license proceed
proceed toto the
the Evaluation
Evaluation
investigation?
investigation? acquisition?
acquisition? drilling
drilling phase?
phase? phase?
phase?
23

Division
Phase 1: Opportunities Generation
Monitoring
Opportunities Opportunities Additional data Regional

Strategic generation & information geological EB
selection/
guidelines set-up acquisition study
updating
Data, Opportunities
information and Basin & play Preliminary generation
studies analysis screening DSP
collection submission
Scouting
GE1
Legend
Preparation Gate Strategic Internal/

Key Activity Decision External
Activity Assurance Guidelines
Decision
Each phase’s activities are traced in detail…

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Division
Opportunity Generation
Activity Denomination
Regional geological study
Activity Description
• Interpret data in order to define

Inputs number, type and location of Output/Deliverables
• Data for regional study plays in the region • Play inventory and play
chance
HEM EM E G
Head office
Exploration Drilling &
HEM Exploration EM E Explorationist G G&G R Reservoir W F Facilities H HSEQ
Management Manager Completion
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Division
For each phase Workflow Specifications are also available, tracing
steps…
Code N. Ste
EA.1 EA.1
Management of
EA.2
Management EA.3
MA
&P
Monitoring Process
of Opportunity Submission
& Preliminary
Opportunity Generation
to Gate 1
Screening Project
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Division
… and, within each step, the relevant tasks.
N. Task name Task Description Professional I Software Output
applications
EA.1.1 Acknowledgement of - Receive and share with Exploration Team EM M

Strategic Guidelines Company Overall Strategy.
indications
EA.1.2 Co-ordination of the - Co-ordinate the monitoring of other EM M Internet

monitoring cycle operators/competitors exploration activities. Robertson
- Co-ordinate the monitoring of local authorities to IHS
follow the political/economic evolution. WoodMcKenzie
- Co-ordinate the research of technical
information.
- Develop network and contacts with competitors
and third parties.
EA.1.3 Activate the preliminary - Identify, during the monitoring process, EM M PSOS
screening of generic possibilities to develop exploration opportunities. HEM M
exploration opportunities - Define a preliminary “opportunity screening” Responsible
project, identifying structure and breakdown of the Functional
technical activities. Competencies
- Plan the employment of resources assigned to
the project.
- Define the amount of work required, the project
timeline and milestones, reporting schedule and
deliverables.
- Co-ordinate/Manage the process of project
financing (budgeting).
- Issue a Request of cost estimate;
- Issue a Job Order upon approval of the Cost
estimate provided;
- Activate the process of releasing “cost charging
unit(s)” (“commessa”), to fund and to control
specific project activities.
27

Division
Finally, geoscientist can also rely on check lists to make sure
their work is complete
OPES Phase I:
- Exploratio
28

Division
All this work, as we saw, is meant to produce a raccomandation to

the Management, with a proposal for investment to be presented
at the Gate.
Before doing so, the opportunity/project must be validated by an

independent entity.
The opinion of experts outside the project group is sought, in order

to gain different perspectives and to maximize project’s definition.
A mechanism of Assurance Checks has been put in place to this

effect.
29

Division
Assurance Checks (AC)
Assurance Checks (ACs) are aimed at introducing

additional outside perspectives in order to increase
potential project value
Three types of Assurance Checks are envisaged by OPES:
Peer Reviews Assurance Review Peer Assists

(PR) (AR) (PA)
Recommended Mandatory formal Advice of an expert on
knowledge reviews aimed at technical aspects
capture/sharing verifying project aimed at verifying and
quality and improving work in
sustainability progress
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Division
Assurance Reviews
Assurance Review
(AR)
Mandatory formal
reviews aimed at
verifying project quality
and sustainability
Technical Review Project Review Opportunity Review

Assessment of Assessment of project Assessment of the
prospect/project technical and economic opportunity within
geological & evaluation exploration portfolio
geophysical quality
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Division
OPES Assurance Reviews
Opportunities Opportunities Pre-drill Drill & Post-drill Evaluation

GE1 GE2 GE3 Evaluation GE4
Generation Evaluation Exploration
O T P O T P O T/P
O Opportunity Review
P Project Review
T Technical Review
Assurance Review mechanisms are provide throughout the process,

to enhance confidence in the recommendation before each gate is
accessed.
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Division
Drill &
Opportunities G 1 Opportunities G 2 Pre-drill GE 3 GE 4
E E Post-drill
Pre- Screening Portfolio

screening & Selection Selection
Assurance Reviews
Opportunity
submission
Tools
update
Opportunities
evaluation
Opportunity
validation
are described in the
relevant Best Practice
Activity Inputs Activity Description Outputs Roles Timing
Every time a new

Opportunity Play inventory and Submission of the opportunity HEM
Opportunity report opportunity
submission play chance to the Exploration Body Tool owner
occurs
Insert new opportunity in the Every time a new

exploration portfolio Opportunities
Tools update Opportunity report Tool owner opportunity
positioning occurs
Printout of the results
Evaluate opportunity impact on Quarterly / Every

Opportunity report risk, reward, cost, timing, time a new
Opportunities List of Evaluated EB
Opportunities materiality and other aspects of opportunity
evaluation Opportunities Tool owner
occurs for
positioning the exploration portfolio
performance specific cases
Opportunity Quarterly / Every

Validate opportunity feedback document time a new
Opportunity List of Evaluated
consistency with the Exploration Tool owner opportunity
validation Opportunities occurs for
exploration portfolio portfolio profile
specific cases
update
33

Division
The Decision Support Package (DSP)
Of course, any proposal must be accompanied by a set of documents,

in order to give the Decision Maker all the necessary elements to take
his/her decision.
Both the content and the format of these documents are estabilished
by the OPES system and are fully described in the Best Practices.
This set of documents is called DSP – Decision Support Package.
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Division
OPES: the Decision Support Package (DSP)
The Decision Support Package (DSP) is a self-contained, comprehensive summary of key

Project information required to support the decision-making process at gates
• Subject of authorisation
• Project Team’s recommendations to the Decision Makers
• High level overview covering key areas relating to business issues

Executive (e.g country data, geology, volumetrics, economics, risks) necessary
Section to demonstrate that gates expectations have been addressed
• Specific project deliverables for in-depth assessment of

Reference Section key aspects
• Feedback Document including Project Team’s

response
Attachments
• End of phase Feedback Report i.e. lessons
learned at the conclusion of the phase
• Technical Annexes optional documentation

containing maps, geological data, other details
35
• Specific plans for the next phase

Division
Decision Support Package (DSP) of Phase 1
Opportunities Generation - DSP1

Deliverables Contents
Executive
Section
• Country overview
Opportunity proposal • Eni presence & Strategy
• Basin/Play summary
• Eni presence in the country & competitive advantage

Country Report, synthetic report • Geo-political description, legal, fiscal and contractual framework
Reference Section
• Oil and gas activities (upstream and downstream)

containing the most relevant • Project materiality: prospective resources (oil&gas) and potential
country aspects: • Social economic scenario and possible health & environmental
effects
• Geological framework
Basin/Play description • Play inventory and play chance
• Volumetrics and risks
• Major critical risk analysis (identification, level assessment and

Risk Register prioritisation)
Attachments
• Maps
Technical Annexes • Seismic and/or geological sections
• Geological data
AC1 Feedback Document • Opportunity Feedback Document
36

Division
OPES: the Gate
Only when the DSP is complete, then we can access the Gate.
Gate process consists of a management decision aimed

at deciding whether to proceed to the next phase
Before Gate After Gate
Gatekeeper
Decision Support Package
Proceed
Rework
Assurance Check Reports Gate Hold
Change
End of Phase
Feedback Report Decision Kill
Makers
37

Division
38

Division
Functional competencies
Functions Key support requirements
Activities of Exploration
Business Planning & To provide economic model and “release“ monitoring, in order to provide an
Business independent review on project consistency with company vision, goals and
Controlling
Planning strategy
Exploration To provide planning and control of exploration activities through cooperation

Planning & Control with exploration units, securing exploration projects economic sustainability
Administration To provide cost and fiscal control services and define partnering accounting
& Control procedures in accordance with Eni requirements
Human To provide and allocate professional human resources to the project in terms of
Human Resources
Resources skills and competencies in a timely and proper manner
To provide support for corporate Hardware and Software management, DB

IT Services
organization and management and specific DB projects management
To provide legal counseling and deliver legal services consistent with corporate
Legal &Legal
Contractual vision, goals and strategy, and with the requirements of the legal and
contractual framework
To generate value ensuring that works, goods and services of the appropriate
Procurement quality are made available at the specified place according to required
schedules
39

Division
Stakeholder, Risk and Knowledge management
40

Division
Eni E&P Management Systems share a common
architecture
Management Systems Architecture
Management System
Set of requirements and

rules: what is required and Phased process framework
when High level handbook
Supporting best practices:

how to meet process Supporting system
requirements
Specific handbooks, best practices, workflows, tools
Responsibilities definition: Processes & Organisation

who does what
Flowcharts, Procedures, Organisation charts, Job Descriptions...
41

Division
Exploration Management System
PMS / VMS elements

OPES
OPES
PMS
PMS VMS
VMS TMS
TMS
Document Description
Technical Assurance Review:
PV- Prospect Validation
Activity Denomination
Opportunities evaluation set-up

Objective
Assess geological & geophysical quality of the hydrocarbon accumulation to be appraised and consistency with company standards
Define which
deliverables
Input
Technical Evaluation - PRD technical Supporting technical data
Activity Description
Key Review Questions

• Set-up of organisational aspects for • Is the activity aligned with the Company’s global exploration Programme?
have to be
Inputs Opportunities based on available Output/Deliverables
OPES
• Is the evaluation of the activity technically sound?
data Evaluation phase addressing • Have corporate standards for technical evaluation been adopted?
• DSP1 • Project scope &

• Gate 1 Approval objectives Activities
• Joint Study statement update • Develop background on technical aspects of the projects
produced
Agreement (JSA) • Work plan and • Review, discuss and debate proposals
Handbook
• Joint Bidding resources
• If necessary, ask for external expert opinion
Agreement (JBA) • Risk register
• Understand key issues and propose possible solution
update
• If necessary, request modifications and suggest changes
• Stakeholder
• Document key risk/uncertainties and recommendation via Feedback Document
management plan
and when
HEM EM H • HSEQ plan
Output
• PV Feedback Document
Head office
Exploration Drilling & • Validated PRD technical
HEM Exploration EM E Explorationist G G&G R Reservoir W F Facilities H HSEQ
Management Manager Completion
•
•
PMS Handbook
Team Management
Project Administration
VMS
Handbook
Describe
PMS/VMS •
•
Project Planning &
Control
Document and Data
• Value what has to
Assurance
Handbook •
•
Management
H,S,E,Q management
Procurement
• Risk
Assessment
be done for
each task
Management
• Economics • Knowledge
Management
VMS
PMS
Best Best Practices:
Best Practices: Describe
Value how tasks
Practice Economics
Assurance
should be
carried out
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Division
PMS Handbook
ESP.PMS.MA.0001.000
Project Staffing
ESP.PMS.BP.0001.000
Stakeholder Management
ESP.PMS.BP.0002.000
Internal Interface
ESP.PMS.BP.0003.000
Decision Tree
ESP.PMS.BP.0004.000
Project Org. Cha

Economic
EconomicEvaluation
Evaluation
ESP.PMS.BP.0005.000
ESP.PMS.BP.0005.000
ESP.EMS.BP.0001.
EMS
Documents Map
Job Description
ESP.EMS.BP.0002.
43

Division
OPES Roadmap
Rework, Hold, Change, Kill Rework, Hold, Change, Kill Rework, Hold, Change, Kill Rework, Hold, Change, Kill
Drill &
Opportunities Opportunities Pre -drill
G E1 G E2 GE3
Proceed Proceed Proceed

Post -drill GE4
Evaluation
Does the opportunity deserve Is the acreage valuable Is the prospect technically Does the discovery
further investigation? enough to proceed to the and economically mature to deserve to move to the
license acquisition? proceed to the drilling phase? Evaluation phase?
To evaluate specific opportunities from a To implement the operational programme To confirm the presence of hydrocarbons and
To generate generic exploration opportunities
within strategic guidelines technical/economic perspective and decide aimed at detailing the prospect and evaluating update the technical evaluation according to
whether to proceed securing the legal right how to proceed to the drilling phase well results
Roles Activities Deliverable Activities Deliverable Activities Deliverable Activities Deliverable

• Proj . scope & obj. statement update
• Work programme
• Risk Register update
• Projects Scope & Objectives • Proj. Scope & Obj. statem . update • Stakeholder Management Plan
• Report with information/data on
• Scouting competitor and on exploration • Opportunities Evaluation statement update • Work programme • HSEQ plan update
• Head -office exploration activities by country/opportunity • Geological & Drilling well program.
management • Data, information and set -up • Work plan and resources • Pre-drill Exploration set -up • Budget • Environmental Impact Assessment
studies collection • List of data sources • Risk Register update • HSEQ plan update • Drill & PDE set -up • Health Impact Assessment
Competencies
• Country Report • Collect additional data • Stakeholder Management Plan

• Collect/acquire additional • Risk Register set -up/update • Drilling Exp. Authorisation Request
• Exploration Manager • Basin & play analysis • Basin/play description
• HSEQ plan data • Stakeholder Management Plan • Well Planning • Well Drilling Data
• Opportunities Evaluation/Summary • Perform technical • Well Drilling Operational report
Technical
• Preliminary screening • Basin data • Perform technical • Environmental Screening

• Explorationist Report
evaluation ( Volumetrics & • Drilling and data collection • Drilling & Op. Geology report
• Opportunities • Opportunity inventory • Lead/prospect generation
evaluation (Volumetrics & • Health Impact Assessment • Testing Exp. Authorisation Request
selection/updating • Selected Technical Opportunities Risk) • Completion and testing • HSEQ records
• G&G • PRD - technical
Risk)
• Processed data
• Preliminary well testing programme
• Database feeding • Database feeding • Technical final report
• Opportunities Generation • Project Scope & Objectives • Perform economic • Post -drill Evaluation • Well testing programme
• Reservoir set -up Statement
• PRD – economic • Perform economic • Database feeding • Well testing data
• Work plan and resources
evaluation (Production • Database feeding evaluation (Production • PRD – technical • Discovery evaluation • Well testing operational report
• Drilling & Completion • Additional data • Well testing interpretation report
/information acquisition • Risk Register set -up profile, CAPEX, OPEX, • Decision tree and 7 exhibits
profile, CAPEX, OPEX, • PRD - economic • HSEQ records
• Data for regional study • DSP 2 Deliverable • Database feeding • Drill & Post -drill Evaluation • Environmental analysis
• Facilities • Regional geological study • Play inventory and play chance EMV) • AC 2 Feedback Document EMV) • Decision tree and 7 exhibits • Well results document ( prel version)
• DSP 1 Deliverable
DSP submission • Final Well Report
• Opportunities Generation • Opportunities evaluation • End of Phase Feedback Report • Budget proposal • DSP 3 Deliverable • Post -drill Evaluation Summary
• HSEQ • AC 1 Feedback Document • Bidding document/letter of • AC 3 Feedback Document
DSP submission • End of Phase Feedback Report DSP submission • Well results documents
acceptance • End of Phase Feedback Report • Updated phase 3 PRD
• DSP 4 Deliverable
• AC 4 Feedback Document
• End of Phase Feedback Report
• Evaluate opportunity impact on
• Economic model • Develop/upgrade and provide a
bdg/4 years plan, long term plan
• Investment proposal model for economic evaluation • Economic model • Monitor and control project value
Business Planning • Define econ. eval . methodologies
authorization (“ Rapporto • “Release” creation drivers
• “Release”
• Monitor & Control project value
• Develop/upgrade and provide a creation drivers
Preliminare ”)
model for economic evaluation
• Assure cooperation with Exp.
• Assure cooperation with Explor . • Assure cooperation with Exp.
Division competent areas Division competent areas
• Assure cooperation with Division competent areas • Manage and coordinate Service
• Validated PRD contribution • Manage and coordinate Service
Exploration Division competent • Participate in negotiation activ . Agreement with Business Units
• Preliminary agreements Agreement with Business Units
areas for identification and • Manage and coordinate Service • Validate within the ESB the tech/ • Validated Discovery Declaration
Exploration Planning & selection of new exploration • Opportunities recommendations Agreement with Business Units
• JSBA, AMI, JOA, Shareholder • Validate within the PRC the tech/
• Validated PRD contribution econ. sustainability of successful (SEC classification proposal for
Control Agreement, Petroleum econ sustainability of exp. Proj .
projects • Validate within the PRC the Explor . Projects (HC discovery) Exploration Well)
Agreements, Farm -in, Sales and • Assistance for compliance with
• Manage and coordinate Service technical -economic sustainability • Assistance for compliance with
Purchase Agreement obligation under PA
Agreement with Business Units of exploration projects • Participate in negotiation activity obligation under PA
• Participate in negotiation activity
• Coordinate 3 rd parties relations • Coordinate 3 rd parties relations
• Coordinate 3 rd parties relations
• Define tax impact
• Financial evaluation of tax impact • Cost proj . monitoring vs budget • Cost proj . monitoring vs budget
• Set up procedures to meet
Administration & Control financial and administrative PA,
• Petroleum Agreement , JOA • Implement procedures to meet • JV accounting procedure • Set up/revise procedures to meet • JV (revised) accounting procedure
accounting procedure financial & adm. JV requirements financial & adm. JV requirements
JOA requirements
Competencies
• Make necessary competencies • Make necessary competencies

• Formulate ad hoc specific training available for exploration project • Project roles available for exploration project • Project roles
Functional
• Resources management for • Resources management for

Human Resources • Advice on organisational issues project optimisation • Specific organisational project optimisation • Specific organisational
• Monitor health related issues • Implement ad hoc spec. training circulars/official communication • Implement ad hoc spec. training circulars/official communication
• Monitor health related issues • Monitor health related issues
• Support creation of Preliminary
• Support/manage applications and
Project Database (PPDB) • Support creation of Project
databases
• Set up of collaborative Database (PDB) • Revision of guidelines and • Support/manage applications and • Revisions of guidelines and • Revisions of guidelines and
• Support update of exploration
environment to provide access to • Support and manage applications procedures, if requested by databases procedures, if requested by project procedures, if requested by project
IT Services federated databases and tools
• Back Up of Preliminary Project DB
and databases project needs • Support update of exploration needs
databases
needs
• Review of exploration databases
• Set up of task specific • Support creation and update of • Backup of Project Data Base databases • Backup of Project Data Base • Backup of Project Data Base
for alignment and consistency
applications exploration databases
with Development Project DB
• Historical data recovery
• Assistance for review, drafting & • General assistance to oper . activ . • General assistance to oper . activ .
• Evaluation of legal and
negotiation for AMI finalisation • Support to procurement activities • Support to procurement activities
• AMI - Area of Mutual Interest contractual opportunity
• Assistance for review, drafting • Assistance for compliance with • Assistance for compliance with
Legal and negotiation of agreement(s )
• CA - Confidentiality Agreement framework • Advice on specific issues
obligation under the PA
• Advice on specific issues
obligation under the PA
• Advice on specific issues
• Purchase Data Agreement • Assistance for reviewing, drafting
to obtain data through • Possible amendment to existing • Possible amendment to existing
and negotiation
acquisition or simple disclosure contracts & Dispute resolution contracts & Dispute resolution
• Evaluation of procurement • General assistance to oper . activ .
framework in PA • Assistance for compliance with • General assistance to oper . activ .
• Assistance for reviewing and obligation under the PA • Assistance for compliance with
advising on agreements with • Procurement activities for obligation under the PA
• Define and negotiate contracts tendering and awarding for
for data and studies purchasing • Contracts partners in the opportunity (JOA) • Contracts • Contracts • Procurement activities for • Contracts
services of G&G data acquisition
Procurement • Advice on possible procurement • Reports / Analysis / Procedures
• Advice on possible procurement
• Reports / Analysis / Procedures • Logistic assistance for import, • Reports / Analysis / Procedures
tendering and awarding for goods
• Reports / Analysis / Procedures
implication in future activities export, transportation services and services mainly for drilling
implication in future activities • Define and negotiate contracts • Define and negotiate contracts operations
for data and studies purchasing for data and studies purchasing • Logistic assistance for import,
• Define procurement procedures • Procurement activities for export, transportation services
• Finalisation of service tendering and awarding
• Develop background on technical • Develop background on technical
aspects of the projects aspects of the projects
• Review, discuss, debate proposal • Review,discuss&debate proposals
Technical • Ask for external expert opinion • PV Feedback Document • Ask for external expert opinion • PV Feedback Document
• Validate the Discovery data
PV Team • Understand key issues and • Validated PRD technical • Key issues & propose solution • Validated PRD technical
propose possible solution • Require&suggest modifications contained in the updated well
results document • Hydrocarbon Discovery Declaration
• Request modifications & changes • Document key risk/uncertainties
Assurance
• Evaluate the project, highlight • ESB Feedback Document including

• Document key risk &recommend and recommendation
the possible local constraints and project class and type
Check
• Key issues & propose solution • Key issues & propose solution the critical issues for the asset
Project • Assess project econ. analysis • Assess project econ. analysis development
using best practices &procedures • PRC Feedback Document using best practices &procedures • PRC Feedback Document • Propose project class and type
PRC Committee – • Require&suggest modifications • Validated PRD economic • Require&suggest modifications • Validated PRD economic
Exploitation Steering Body • Track and document committee • Track and document committee
member’s dissent member’s dissent
• Insert new opportunity in the • Insert new opportunity in the • Define parameters for ranking
exploration portfolio exploration portfolio • Opportunity Feedback Document • Feed and run the ranking tool to
Opportunity • Inventory of drillable prospect
• Evaluate opportunity impact on • Opportunity Feedback Document • Evaluate/re -evaluate opportunity preliminary select prospects
• Opportunities exploration • Projects’ pre -selection
Exploration Body risk, reward, cost timing, • Exploration portfolio profile update impact on risk, reward, cost • (Re)Evaluate opportunity impact
materiality timing, materiality portfolio profile update on risk, reward, cost, timing • Exploration drilling budget proposal
44
• Sanction opportunity consistency • Sanction opportunity consistency • Sanction expl . portf . consistency
• Opportunity Proposal • Investment Proposal • Budget Proposal • HC Discovery Declaration
• PRD Technical • PRD Technical • Post Drill Evaluation Summary
• Country Report (synthetic report) • PRD Economic • Well Result Document
• Basin/Play Description • PRD Economic
• Risk Register • Updated phase 3 PRD
DSP
• Risk Register
• Risk Register • Stakeholder Management Plan • Risk Register
Exploration Manager • Technical Annexes
• HSEQ plan • HSEQ plan update • Stakeholder Management Plan
• Technical Annexes

• Opportunities Evaluation TOR • Technical Annexes • HSEQ plan update
• Pre-drill Exploration TOR • Drill & Post -drill Evaluation TOR • Technical Annexes
• AC1 Feedback Document • AC2 Feedback Document • AC3 Feedback Document • AC4 Feedback Document
• End of phase Feedback Report • End of phase Feedback Report • End of phase Feedback Report • End of phase Feedback Report
• To decide whether to proceed to
• Approve expenditures for evaluation the license acquisition on the • Approve New Ventures • To assess whether the Discovery
Gate
• To decide if the opportunity is • To decide whether a selected • Commit resources, define project
requirements (manpower basis of tech & economic investment proposal • Commit resources for Drilling and deserves to be evaluated and to
Decision Maker potentially attractive and
deployment, data and studies potential of the opportunity and • Commit resources for license
prospect is drillable and to
Post -drill Evaluation Phase (budget) proceed to the Evaluation phase
class, appoint DPM and start with
consistent with strategy allocate funds in the budget the Evaluation phase
Division
purchase, …) its consistency with strategic acquisition of the OPDS
guidelines
http://wwwdsc.sd.agip.it/ems/
45

Division
Exploration activity: the steps
1) Basin regional study and specific areas identification

• preliminary evaluation
• data acquisition
1) Acreage acquisition
• the bid round
• the farm-out
• the company take over
• the direct negotiation
1) Area/block detailed study
• seismic acquisition and interpretation
• prospect generation
• prospect evaluation and validation
1) Drilling, appraisal and development
• evaluation of a discovery
• transition to Development
• appraisal planning and execution
46

Division

• the bid round
• the farm-out
47

Division
The basin regional study
The preliminary evaluation of an area is generally based on scouting

and other data already available to the Company.
The basin regional study is primarily aiming at the identification of a

petroleum system, if any.
The petroleum system is a combination of geological factors which,

coming into action in the right order, may give origin to an accumulation
of producible hydrocarbons.
48

Division
Phase 1: Opportunity Generation
Monitoring
Opportunities Opportunities Additional data

Strategic Regional
selection/ generation & information EB
guidelines geological study
updating set-up acquisition
Data, Opportunities
These activity is described in
Scouting the Phase 2 of the OPES
workflow… GE1
Legend

Decision
49

Division
Location of Mauritania Salt Basin
MSGBC Basin
50

Division
Offshore Northwest Africa
96 offshore wells
have been drilled
in the NW African margin
from 1966 to 2000
52 offshore wells drilled

in the MSGBC
Mauritania 11
Senegal 30
Guinea Bissau 11
AT LEAST 50% INDICATED

PRESENCE of HYDROCARBON
at DIFFERENT LEVELS
51

Division
Arctic resources potential
52

Division
Arctic Resou
53

Division
RUSSIA
BARENTS-PECHORA SEA
PROJECT
Seismic Grid & Prospects
EXPLORATION STATISTICS:
● >400.000 2D SEISMIC SHOT

● THREE 3D SEISMIC SURVEYS
-PRIRAZLOMNAYA
-VARANDEY
-SHTOKMANOVSKOYE
● > 50 WELLS DRILLED
● AROUND 90 STRUCTURES &
10 FIELDS DISCOVERED
● > 25 BILLION T.O.E.
LICENCE HOLDERS:
● “SEVMORNEFTEGAZ”
- SHTOKMANOVSKOYE
- PRIRAZLOMNOYE
● “ARCTICMORNEFTEGAZ”
- VARANDEY & MEDYNSKAYA
- KOLOKOLMORSKOYE
54
Fig.
Eni Exploration & Production 22
Division
Malesia
New country
The result of the technical
evaluation of the area is only
Company name one of the criteria on which
the decision is based.
Political and economic

consideration on the hosting
country are also taken into
account.
xx / xx / xxxx
55

Division
…as well as the consistency of the expected producible hydrocarbons
with the medium and long term corporate portfolio strategies.
STRATEGIC FIT
MATURITY
RESOURCE POT 56

Division
The basin regional study
Assuming that our regional basin analysis has produced a geological model
indicating the possibility of an active petroleum system, capable of yelding
the right type of hydrocarbons in a country that matches our corporate
strategic orientation…
…what do we do?
We try to look more in depth, in order to identify specific areas / block of

interest to propose for acquisition. This quite often means that we need
to buy spec seismic data, data packages, reports etc. and then employ a
significant amount of human resources for their interpretation. To do so,
we need a specific management approval.
57

Division
OPES Phase 1
Drill &
Phase

GEE 1 GEE 2 G
To
To evaluate
evaluate specific
specific To
To implement
implement the the To
To confirm the
the presence
presence
To identify
identify generic
generic opportunities
opportunities from
from aa operational
programme of
of hydrocarbons
hydrocarbons andand
Objective
exploration
opportunities technical/economic
aimed atat detailing
detailing the
the update
technical
within
within strategic perspective
perspective and
and decide
decide prospect
prospect and
and evaluating
evaluating evaluation
according to
to
guidelines
guidelines whether
whether to
to proceed
proceed how
how to
to proceed
proceed toto the
the well
well results
results
securing
securing the
the legal
legal right
right drilling
drilling phase
phase
Main Gate
Is
Is the
the acreage
acreage Is
Is the
the prospect
prospect Does
Does the
the
question
Does
Does the
the valuable
valuable enough
technically and
and discovery
discovery deserve
deserve
opportunity
opportunity deserve
deserve proceed
proceed to to the
the economically
economically mature
mature to
to to
to move
move to
to the
the
further
further license
license proceed
proceed toto the
the Evaluation
Evaluation
investigation?
drilling phase?
phase? phase?
phase?
We just completed the work of OPES Phase 1. Now, to move to the

next phase and carry out specific evaluations, we need to pass
through Gate GE1! 58

Division
Phase 1: Opportunity Generation
Monitoring
Opportunities Opportunities Additional data Regional

Strategic generation & information geological EB
selection/
guidelines set-up acquisition study
updating
Data, Opportunities
Scouting
GE1
Before accessing the Gate, we still need to have the proposal validated
by the Opportunity Assurance Review called EB – Exploration Body. Only
if the EB’s concurrence is obtained the proposal can be submitted to the
Decision Maker.
59

Division

• the bid round
• the farm-out
60

Division
Phase 2: Opportunity Evaluation
Perform Perform
Opportunities economic
Collect technical
evaluation set- PV evaluation PRC EB
additional data evaluation
up (Volumetrics & Risk)
(Production profile,
CAPEX, OPEX, EMV)
Opportunities
evaluation DSP
These activity is described in the Phase 2 of the OPES workflow, submission
the “Opportunity Evaluation”.
Objective of the activity is to identify, evaluate and possibly
propose for acquisition assets of economic interest to the
Company GE2
Legend License
acquisition
Decision
61

Division

• the bid round
• the farm-out
62

Division
The Bid Round
An international bid is a process by means of which a country assigns

to selected oil companies the rights to explore for and to produce
hydrocarbons in specific areas (blocks, licences) within its boundaries.
The areas can be either on land or in the offshore.
The bid is on competitive basis: each of the companies (that must possess
an adequate level of standards and experience) makes an offer in cash and
work programme, and proposes a scheme for sharing the future production
with the hosting government.
Often, these bids include only part of the blocks in a basin. Other are put
on offer at a later stage, and sometimes the process is repeated several
times. Each offer of exploratory acreage is therefore referred to as a “Bid
Round”.
The next slides show few examples…

63

Division
RUSSIA – BARENTS-PECHORA SEA PROJECT
Barents & Pechora Sea Tenders 2005-2010
BIDDING BLOCKS
2005-2010 AND
RESERVES ESTIMATION
(Russian Sources)
64

Division
SABRATHA
Lybia
2006 Bid Round III
GHADAMES
CIRENAICA
SIRTE
MURZUQ
KUFRA
65

Division
Morocco - Bid Round 2001 Rabat - Safi Area
66

Division
Data Base
7750 km SPECULATIVE 2D SEISMIC SURVEY

TGS-NOPEC 2000 (5x15 km mesh size)
IHS TECHNICAL REPORT - A technical evaluation of

the deep water areas of the Rabat-Safi sector NW
Morocco - Offshore licensing round 2000
DSDPs WELL DATA
SEVERAL WELL DATA relevant to surrounding basins
ENI REGIONAL DATA (SEAGAP, IFNI etc.)
BIBLIOGRAPHY DATA
67

Division
Regional Seismic Data Base
1000
1000
1 00 0
10 00 1000
10 00
20 0
200
10 00
50
2 00 0
2 00 50
20 0
200
2 00
50
20 0 50
50
20 00
20 00
20 00
20 00
2000
2 00 2000
200
2 0 00 20 00
10 00
200
1000
20 00
20 0
20 00
2 00 0
2000
2000
10 00
10 00
20 0
200
20 00
10 0 0
2000
20 0 0
1000
100 0
200
2000
200
1000
20 00
10010 000
20 0 0
20 00
2000
2000
1000
2000
20 0 0
2000
2000
200
10 00
2000
1000
1000
10 00
2000
200 0
2 00
2000
50
20 0 10 00
1000
10 00
200
2000
200
50
1000
1000
1000
3000
10 0
20 0
2 00
200 0
10 0 0
2000
10 00
1000
20 00
2000
200
10 00
20 20000 0
20 0
1000
1000
20 0
2000
2000
2000
10 00
200
300 0
100 0
1000
10100000
20 0
1000
200
30 00
50
2000
20 0
30 0 0
2000
20 0 0
1000
2000
200
20020000
68

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Regional Seismic Line
NW DSDP 547B SE
Intra Tertiary
Base Tertiary
Albian
Top Jurassic
Triassic
69

Division
Petroleum System
SOURCE ROCKS (T.O.C. Values) REGIONAL SEALS

• PRERIFT SEQUENCE:
• SILURIAN (12 % )
• TRIASSIC SALT
• DEVONIAN ( 6 % )
• APTIAN TO CENOMANIAN SHALES

• POSTRIFT SEQUENCE:
• TOARCIAN ( 4 % )
• ALBIAN/APTIAN ( 6 % )
RESERVOIRS (Porosity Values) TRAPS

• PRERIFT SEQUENCE
• ORDOVICIAN SANDSTONE ( 8 -11 %) • STRUCTURAL
• DEVONIAN CARBONATE ( 5 -14 % ) • 4 WAY DIP CLOSURE (SEDIMENT
DRAPING OVER SALT DIAPIRS)
• SYNRIFT SEQUENCE
• TRIASSIC SANDSTONE (10 - 16 % ) • STRATIGRAPHIC
• TRUNCATION AGAINST THE DIAPIRS
• POSTRIFT SEQUENCE FLANKS
• JURASSIC CARBONATES ( up to 35%) • UP-DIP PINCH OUT, CONFINED
• LOWER CRETACEOUS SAND. ( 25% ) CHANNEL SYSTEMS ETC.
70

Division
Post-Salt Play Types
Sea Level
1 CARBONATE PLATFORM EDGE - REEFAL BUILDUPS

1 CARBONATE PLATFORM EDGE - REEFAL BUILDUPS
2 STRATIGRAPHIC PINCH-OUT
2 STRATIGRAPHIC PINCH-OUT
3 DIAPIR RELATED CLOSURE:
3 DIAPIR RELATED CLOSURE:
3A PIERCED DIAPIRS 1
3A PIERCED DIAPIRS
3B SEDIMENTS DRAPING OVER DIAPIR
3B SEDIMENTS DRAPING OVER DIAPIR JUR
A SSI
C PL
ATF
2.0 OR M
NW 2 SE
4.0
BED
SEA
Y 3B
IA R
T ERT
E Mk
BAS US
C EO
TA
RE
R AC
INT 3A
k TRIASSIC SALT
SM
E OU
TAC
RE
E RC
W
LO
71

Division
Lead A1 - LC3
A1
10 km
LC3 - DEPTH MAP
AREA (oil) 17,9 Sqkm

VERT. CLOSURE 814 meters
HYDR. COLUMN (max) 350 meters
OOIP 341 Mbbl
POS 12%
72

Division
The Bid Round
After having determined the technical value in terms of resources

and probability of success, we need to assess the economic value of
a development project, based on the expected amount of producible
reserves.
The balance between the expected development and maintenance

costs and the expected revenues of the hydrocarbons sale is an
indication of the project profitability. This index is called EMV
(Expected Monetary Value)
The EMV must be positive in order to proceed with the submission

of an acquisition proposal to the Decision Maker (Gate GE2)
Before doing that, however, we still need to pass through three

separate Assurance Reviews:
73

Division
Phase 2: Opportunity Evaluation
Perform Perform
Collect technical Screening &
evaluation PV evaluation PRC
additional data evaluation Selection
set-up (Volumetrics & Risk)
CAPEX, OPEX, EMV)
Opportunities
evaluation
DSP
… technical review, submission
… project review,
… and opportunity review! GE2
Licence
acquisition
Only if everithing is ok, then we may proceed with the submission of our
proposal to the Gate.
74

Division
The Bid Round: application and contractual terms
We said that he Expected Monetary Value (EMV) must be positive to

allow the decision to try and acquire the acreage. Another purpose of
the economic evaluation is to define the amount of cash bonus offer
and the level of commitment we would be prepared to take in order to
secure the block.
These terms are part of the “application” which is presented to the

licensing government
The following slide shows an example of the most common contractual

terms…
75

Division
Exploration Periods & Committments
Eni
76

Division

• the bid round
• the farm-out
77

Division
The Farm-out
The farm-out (and its reverse, the farm-in...) is a commercial agreement

between two oil companies whereby one of them, as the owner of a licence,
assigns its interest, or a part of it, to the other in exchange for cash and/or
other benefits in kind (wells, seismic, etc.)
When two companies agree to exchange their interests in two or more

blocks, the deal is called “cross assignement” or “swap of assets”.
78

Division
Farm-Out : Corisco Block (Guinea)
EQ.
GUINEA
GABON
CONGO
79

Division
Location of Prospect Analogs
Blue: dry wells

Red: oil well/fields
Alpha N/S/Baja Area

mixed/stratigraphic traps
458 MMbbl risked
Medium/High risk
Beta, Gamma, Delta

stratigraphic traps
1,1 Gbbl
High risk
80

Division
Southern Equatorial Guinea Regional Cross Section
81

Division
Southern Equatorial Guinea Play Types
82

Division
Alpha North Prospect
ALPHA AREA
Main Features
• Structure related to a toe-thrust

anticline with Aptian salt core
• Main target represented by Senonian

ponded turbidites confined along the
eastern flank of the structure
(age: Lower Senonian?)
Main reservoir
facies • Cluster type prospect, being 5/1 the
main target
• Water depth: 200 ÷ 1100 m (700 m

av. for target 5/1)
• Reservoir av. depth: 2750 m ssl
83

Division
Corisco Deep Block Summary
• Multiple proven play types / 56 Prospect Targets
• Large recoverable resources
• Block expected mean resources 7.4 billion STB
• Low risk exploration
• Good fiscal terms / robust economics
• Seeking partners for comprehensive exploration & development

program
84

Division
Farm-out terms
Company “X” is farming-out 50% of its working interest and is seeking:
two partners, for a 25% working interest each
a commitment to a defined carried work program (3 NFW + 1 and
3 OUT + 1)
cash bonus
“X” will maintain the operatorship and is not interested in a swap with
other exploration blocks
85

Division
The Farm-out
Once again, a sound decision on the course of action must be founded on

a technical and economic evaluation of the project.
The evaluation activities and the Assurance Review process, as well as the
DSP to be produced, are exactly the same we saw before for the bid round:
farm-out is by all means an exploration new venture of Phase 2!
But here are also other ways to acquire new acreage…
86

Division

• the bid round
• the farm-out
87

Division
The take over and the direct negotiation
Very simply, the take over is a financial operation by means of which

a company takes control of another company. This can be achieved
either by buying the target company, or by acquiring the majority of
its shares on the stock market.
Take overs can be friendly (the two companies agree on the operation)
or hostile (the target company doesn’t wish to be controlled).
One example is shown in the following slides…
88

Division
Mauritania offshore 2000 licences acreage
17°30 ’ 17°00 ’ 16°30 ’ 16°00 ’ 15°3019°00
’ ’
Oct-2 N
V-1 TIOULIT
Oct-1B
PSC C
TANIT
BLOCK 6
18°30 ’ 18°30 ’
PSC BCoppolani-1
COPPOLANI
TARFAIAT EL
BLOCK 5 BLOCK 5 SW
DEEPWATER MANSOUR
18°00 ’ 18°00 ’
MTO-3
BLOCK 4
DEEPWATER BLOCK 4 SW
17°30 ’ 17°30 ’
MTO-1
Loup de Mer-1 TAMZAC
MTO-2
PSC A
BLOCK 3
17°00 ’ 17°00 ’
PSC C
0km 50km
BLOCK 2 Autruche-1
17°30 ’ 17°00 ’ 16°30 ’ 16°00 ’ 15°3016°30
’ ’
89

Division
Mauritania offshore exploration History
September 1996
Group lead by Only regional studies and farm-out campaign

HARDMAN Sell 70 % of W.I.
August 1998
WOODSIDE
10.359 Km 2D ACQUISITION
BRITISH BORNEO
May 2000
WOODSIDE
3.500 Km2 3D ACQUISITION
ENI
90

Division
Mauritania offshore exploration History
September 1996
Group led by Only regional studies and farm-out campaign
HARDMAN Sell 70 % of W.I.
August 1998
10.359 Km 2D ACQUISITION
WOODSIDE
40 2D Leads at different levels
BRITISH BORNEO
3.500 Km2 3D ACQUISITION
May 2000
7 2D leads killed
WOODSIDE 4 + 2 2D leads to be re-evaluated
9 2D leads to be upgraded CHINGUETTI-1
ENI 4 3D new leads
April 2001
10/04 - 26/05 Chinguetti - 1

91

Division
The take over and the direct negotiation
In some countries there is also the possibility to obtain exploration

acreage from the government as a result of a private deal. In this case
the offer and the contractual terms are negotiated privately between
the company and the hosting government.
Perform Perform
Collect technical Screening &
evaluation PV evaluation PRC
additional data evaluation Selection
set-up (Volumetrics & Risk)
CAPEX, OPEX, EMV)
In any case, whichever the method for acreage acquisition, the new
Opportunities
venture must always be evaluated, reviewed and approved according
evaluation
DSP
to OPES workflow and procedures. submission
GE2
92

Division

• the bid round
• the farm-out
93

Division
Phase 3: Pre-drill Exploration
Collect/acquire
additional data
Pre-drill
exploration set-
up
Perform Perform
License
technical economic Portfolio Budget
acquisition PV PRC
evaluation evaluation selection proposal
(Volumetrics & Risk)
CAPEX, OPEX, EMV)
These activities are described in the Phase 3 of the OPES workflow.

The Phase 3, also called “Pre-drill exploration”, is aimed at defining GE3
drillable prospects.
Legend

Decision
94

Division

• the bid round
• the farm-out
95

Division
3D marine seismic acquisition
96

Division
Sometimes seismic acquisition can be difficult. An example: Mauritania
97

Division
3D Seismic Data
3D seismic acquisition produces

a “cube” of data
98

Division
Structural map
99

Division

• the bid round
• the farm-out
100

Division
What we are looking for is a peculiar situation, within the basin, where
all the necessary conditions for generation, expulsion, migration and entrapment
of hydrocarbon have materialized in the right chronological
order. This type of geological feature is called “prospect”.
Once the prospect has been firmed up to a sufficent degree of confidence

and its economic value has been estimated to be beyond the minimum threshold
set by the Corporate, it becomes “drillable”.
101

Division
“B”
ALFA
ALFA
ALFA
102

Division
Prospects Location Map
ENI’s LICENCES
PRODUCTION LICENCES
ENI
CONCESSION
OTHER LICENCES
OPEN ACREAGE
GHADAMES BASIN
103

Division
TUNISIA – B PERMIT
CONTRACTUAL SCHEME AND WORK PERFORMED
YEAR 199119921993199419951996 1997199819992000 20012002 2003200420052006
Block awarded to Elf 100% LASMO UTP farm-in LASMO buy Phillips ENI take- CONOCO sell to PIONEER
ELF leave Group overs LASMO
on 14 Dec 1990 farm-in and Arco shares
Arco buy UTP
BP buy Paladin and Gulf CONOCO buy Gulf Canada
EQUITY CHANGES Phillips farm-in 50% on 17 Sep 91
Arco Canada Farm in
1 2 3 4 5 6 7 THIRD EXPL. 8
EXPLORATION PERIODS FIRST EXPL. PHASE (5 YEARS) FIRST EXT. SECOND EXT. SECOND EXPL. PHASE EXT. EXT. PHASE
(1,5 YEARS) (2,5 YEARS) (2,5 YEARS) (1 YEAR) (1 YEAR) (2,5 YEARS)
• 1500 KM 2D SEISMIC SURVEY • 500 KM 2D SEISMIC SURVEY • SEISMIC • 500 KM 2D SEISMIC
COMMITMENT • 1000 KM REPROCESSING • 1 WELL
•NO
REPROC SURVEY
BORJ EL KHADRA
• 1 WELL (4000m) 800km • 1 WELL
• 620 KM 2D SEISMIC SURVEY • 544 KM 2D SEISMIC SURVEY

• 1500 KM 2D SEISMIC SURVEY (1991)
WORK PERFORMED • 1000 KM REPROCESSING
(1998) (2001)
• 611 KM REPROCESSING (97) •REPROCESSING REGIONAL
• 200 KM REPROCESSING (98) DATA (2000)
0,2
FINANCIAL COMMIT. 17 MMUS$ 7 MMUS$ MMUS$ 7 MMUS$
RELINQUISHMENT S= ORIGINAL AREA 5816 Sqkm 80% S=4653 Sqkm *3172 Sqkm
OPERATIONS
SEISMIC
1500 KM 620 KM 544 KM
DRILLING
WELL 1
ENI 25% (Op) ENI BEK 25%, PIONEER 40%,
JOINT VENTURE
PALADIN 10%, ETAP (carried)
1 14-12-1990 4 13-12-1999
2 13-12-1995 5 13-06-2002
3 13-06-1997 6 13-06-2003
7 13-06-2004
8 13-12-2006
104

Division
CARBONIFEROUS SOUTH TUNISIA - SILURIAN ACACUS PLAY
AGE FORMATION PLAYS
LwPer NO DEPOSITION
HERCYNIAN EROSION
UP.
MID UPPER LOWER
EROSION
M'RAR
TAHARA In the North eastern part of GHADAMES
A. OUENINE IV
A. OUENINE III Basin the play concept is:
DEVONIAN
A. OUENINE II
A. OUENINE I
OUAN KASA
LOWER
• The oil and gas are trapped mainly in the

TADRART Silurian Acacus sandstone’s structural small
anticlines and sealed by intra-formational
C
C C shales.
ACACUS
UPPER
Acacus «A» depth map

B
SILURIAN
SILURIAN
A
ACACUS • The base Silurian ‘Hot Shales’ represent
TANEZZUFT the main source rock and is distributed
LOWER
PLAY
almost everywhere in the basin
HOT SHALES Ord TWT map
UPPER
JEFFARA
ORDOVICIAN • oil charging occurred probably by vertical
GAS LAY
and lateral migration and the gas,
ORDOVICIAN
MIDDLE
BIR BEN TARTAR generated later, or in the deeper portion of

the basin, replaced the oil starting from the
lowest levels (i.e. T2 & A9 level).
LOWER
KASBAH LEGUINE
SANRHAR 105

Division
TRAP Definition (= Ordovician)
TRIAS GRESEUX
FM.
CUS
AC A
M.
FT F
N NEZU
TA
D.
OR ANTICLINE
Low amplitude anticlines

• generally small structures
conformable to Ordovician
4way-dip closures
• Seismic resolution represents

a limit for the correct
structural definition of the
reservoir facies.
• Considerable uncertainty remains about the volume of these

traps. 106

Division
SILURIAN ACACUS RESERVOIR
107

Division
Acacus (silurian) Facies Distribution Model
SHELFAL AREA MOUTH BAR AREA
(HYPOPICNAL FLOW)
BUOYANT PLUME
Time 1 SEA LEVEL
RIVER IN FLOOD
TURBULENT FLOW
(HYPERPICNAL FLOW)
OVERPRESSURED
GRANULAR FLOW
Time 2 SEA LEVEL
TURBULENT FLOW RAPID DEPOSITION OF

TRACTION
GRANULAR FLOW
TRACTION PLUS FALLOUT
FACIES F10 a FACIES F10

SHELFAL SANDSTONE LOBE
MO
A UT
AL ARE HB CORED SEDIMENTARY FACIES
SHEL F AR
AR
EA
TRACTIVE FACIES
of k m
l tens
Severa F1 F2 F3
TRACTIVE-SUSPENSION FACIES
Tens of m
F4 F5 F5a F6
MOUTH BAR
DENSITY FLOW FACIES
F 10 F 10 a
SUSPENSION FACIES
F7 F8 F9
SHELFAL SANDSTONE LOBES
The Acacus Fm is usually represented by multilayers reservoirs deposited in sub-

aqueous mouth bar and in interlobe/lobe fringe to shelfal environment. 108
Eni Exploration & Production Fig. 4d

Division
2B SEDIMENTARY MODEL 109

Division
Ghadames Basin Source Rocks
Average Total Organic Carbon (TOC)
Tanezzuft Fm.
(Hot Shale Mb.)
110
Eni Exploration & Production Fig. 4f

Division
Acacus A - Depth
Aca A + Tz isopach applied to Ordovician
CI 2 m Datum: SL
Alfa
prospect
111

Division
Acacus A
Line 1
Depth
Acacus A
Top @ 3081 mssl
Vertical closure
25m
Spill Area Li n
e2
2.9 km²
Prospect
1 km Alfa
112

Division
MIGRATION DRAINAGE PATHWAYS
Acacus A
ALFA
is the
carrier HIGH LOW 113

Division

• the bid round
• the farm-out
114

Division
Prospect evaluation
The process of prospect evaluation is meant to provide the

Management with an “a priori” estimate of the likelihood of
the project to generate economic value.
Apart from representing the necessary support to take a

sound decision on the project itself, the result of the
evaluation enables the comparison between different
projects competing for funds.
To this effect, it is important that the evaluations carried out

worldwide are done according to omogeneous criteria and
making use of the same tools.
115

Division
Prospect evaluation
The economic evaluation of the project is not sufficient to

describe its real potential, unless it incorporates two very
important elements: risk and uncertainty.
The risk is the chance that the prospect will not contain the
expected amount of hydrocarbons, whereas the uncertainty
relates to the expected volume of resources.
Both these elements affect the evaluation and must be

correctly estimated and taken into consideration.
116

Division
Prospect evaluation
The first thing we need is the volume of hydrocarbons the

prospect could contain. The value we are looking for is called
OHIP (Original Hydrocarbons in Place) and represents the
total amount of petroleum in the reservoir in case of success.
It is calculated with the “volumetric formula” and, while

assessing this element, we need to take into consideration
the uncertainty.
117

Division
HOIP =
A x h x N/G xφ x (1 – WS)
FVF
A acreage of the reservoir filled with hydrocarbon

h average thickness of the hydrocarbon bearing
zone
N/G ratio between net pay and gross thickness
φ porosity
WS water saturation
FVF hydrocarbon formation volume factor
118

Division
In exploration this formula is applied in a stochastic
way, in order to accomodate the usually large amount
of uncertainty deriving from the poor knowledge
of the fluid and of the reservoir characteristics.
Rather than with a single value, each parameter of the

formula is therefore expressed with a range of values,
with an associated distribution of probability.
For example:
φ =
15 % 35 %
119

Division
Various types of probability distributions can be used:
Each value within the range has the same

Uniform probability to be true
min max
One value such as min <= X <= max

Triangular has the highest probability to be true
min m.l. max
It applies to many natural phenomena;

e.g. porosity distribution within a formation
Gaussian
min m.l. max
When sufficient information are available

Histogram to allow for a statistical analysis
120

Division
RANDOM NUMBER GENERATOR
10,000 trials
A x h x N/G xφ x (1 – WS)
HOIP =
FVF
The calculation is repeated many times, using

PROB values selected at random from each parameter’s
distribution.
The values are always consistent with their own

distribution of probability.
121
HOIP

Division
The resulting set of 10,000 values represents a realistic simulation
of all possible occurrences and can be sampled.
The frequency curve has a lognormal shape and incorporates the
uncertainties about the input paramenters.
FREQUENCY
min mode max

RESOURCES
122

Division
The derived resources Vs probability curve is usually displayed in
a “equal or greater than” cumulative fashion.
In this way, the values on the Y axis represent the probability of
a volume of hydrocarbons equal or greater than the corresponding
values on the X axis.
100
90
PROBABILITY
50
10
P90 P50 P10

CUMULATIVE RESOURCES
123

Division
We can also apply a risk factor to take into account the
geological risk associated with the prospect. For example,
this is what happens if a risk factor of 40% is introduced
(Risk Factor = 1 – PoS)

PROBABILITY
60
54
30
P90 P50 P10

CUMULATIVE RESOURCES
124

Division
CHANCE OF FAILURE
UNRISKED RESERVES
RISKED RESERVES
RC COMMERCIAL THRESHOLD
RE ECONOMIC THRESHOLD
PROBABILITY
CHANCE OF GEOLOGICAL SUCCESS
CHANCE OF COMMERCIAL SUCCESS
CHANCE OF ECONOMIC SUCCESS
Chance
Chance of of Commercial
Geological
Economic Success
Success
Success
“The
“The Chance
"The Chance
POS of
of Commercial
is the Economic
probabilitySuccess
Success”
of is the
geologicalis the
probability
success,
namely theSome
probability
of finding an
to atmore
accumulation
find
probabilityleast a useful
of
volume concepts…
producible
of finding of producible
hydrocarbon
an accumulation
hydrocarbon
in
at a specific prospect
to allow their
target” sufficent
exploitation
to allow at their
economical
exploitation
conditions
at economical
in a conditions
looking forward
in a full
project
life project
perspective”
perspective”
RC RE
CUMULATIVE RESERVES
125

Division
SPE/WPC/AAPG/SPEE Project based Resources evaluation

Division
SPE/WPC/AAPG/SPEE Resources classification
PRODUCTION Project Status
P90 P50 P10

On Production
Lower Risk
RESERVES
Commercial
Under Development
Proved 1P Probable 2P Possible 3P
DISCOVERED IIP
TOTAL PETROLEUM INITIALLY-IN-PLACE (IIP)
Planned for
Development
Increasing Commercial Certainty
Project Maturity
CONTINGENT Development Pending
Sub-commercial
RESOURCES
Measured Indicated Inferred Development on Hold
1C 2C 3C
Development
not Viable
UNRECOVERABLE
Higher Risk
Prospect
UNDISCOVERED IIP
commercial
PROSPECTIVE
Potentially
RESOURCES Lead
Low Best High
Estimate Estimate Estimate
Play
UNRECOVERABLE
Range of Technical Uncertainty

127

Division
The Eni E&P Division corporate tool to run probabilistic
resources / reserves evaluations is
PRES (Prospect Reserves Evaluation by Scenarios)
128

Division
PRES has been entirely developed in-house over the last 25
years. The system uses a latin hypercube random number
generator and applies the simulation to an evolute version
of the volumetric formula.
The system incorporates many advanced features:
possibility to work with a set of depth maps, to take

into account the uncertainties in the depth conversion
velocities
capability to deal with different hydrocarbon phases in

the same reservoir
129

Division
capability to define and mantain the correlation between
dependent parameters (e.g. water saturation and porosity)
possibility to produce reliable production profiles straight

from the volumetric evaluation (no reservoir modelling
needed)
possibility to compound randomly different targets in a

single reservoir, either independent or totally / partially
dependent one from the others
130

Division
Prospect Gamma B
Top Cretaceous Depth Map Top Albian Depth Map
131

Division
Gamma B: Upper Cretaceous Reservoir
Top Creta Depth Map (Top Reservoir) Isopach Map
• Trap: 4 Ways Closure

• Type of Play: Toe Thrust
• Seismic Facies = Lower slope
• OOIP = 952 MMBO
• Reserves = 287 MMBO
Top Cenomanian Depth Map (Bottom Reservoir) 132

Division
Gamma B: Upper Cretaceous Reservoir
133

Division
Gamma B: Lower Albian Reservoir
Top L. Albian Depth Map (Top Reservoir) Isopach Map
• Trap: 4 Ways Closure

• Type of Play: Toe Thrust
• OOIP = 574 MMBO
• Reserves = 172 MMBO
Top Aptian Depth Map (Bottom Reservoir)

134

Division
Gamma B: Lower Albian Reservoir
135

Division
Gamma B Prospect
Water Depth • 2100 m
Target depth • 3500 m (U. Creta ); 3800 m ( L. Albian )
Closed Area • 66 km² (U. Creta) 38 km² (L. Albian)
Reserves • 287 MMBO (U. Creta); 182 MMBO (L. Albian)
W E N
Top Creta
Top L.
Albian
Gamma B
Allochtonous Salt
Allochtonous Salt
Top Lower Albian TWT
136

Division
Gamma B Prospect Summary Data
Water Depth • 2100 m
Play • 4 ways closure related to a toe thrust structure at the edge of the salt
basin
Targets • Upper Creta Sands (Basin floor fan/Lower slope sand waves)
• Lower Albian Sands (Basin floor fan/Lower slope sand waves)
Targets Depth • 3500 m (U. Creta ); 3800 m ( L. Albian )
Confidence / Defined • Very Good / 3D Volume

on
Closed Area • 66 km² (U. Creta); 38 km² (L. Albian)
Reserves • 287 MMBO (U. Creta); 172 MMBO (L. Albian)
POS • 20%
Critical Risks • Reservoir quality; charging from kitchen area 137

Division
Prospect Summary
Beta E West Beta E
Beta D
Beta C Beta D East

Beta B
Beta B East
LEGEND
Beta A Upper Creta & Lower Albian

Prospects
Lower Albian Prospects
First Tier Prospects (Top Creta

& Lower Albian)
Gamma A
Licence Outline
Gamma B
Gamma C
Gamma D
138

Division
Prospect Reserve Ranking
Beta E West Beta E LEGEND
Upper Creta & Lower Albian

Beta D Prospects
Beta C Beta D East Lower Albian Prospects

Beta B
5 First Tier Prospects (Top Creta
Beta B East & Lower Albian)
2
Licence Outline
Beta4A
PROSPECT RESERVES
3 (MMbo)
Gamma B 459
Gamma A Beta B 452
1 Gamma A 264
Gamma B Beta A 163
Gamma C
Gamma D Beta C 107
Total 1445
139

Division
Risk assessment: probability of success
• The geological risk associated with the prospect is conventionally

expressed by the POS (probability of success), which varies from 0 (0%
of discovery probability – certainty of failure) to 1 (100% of discovery
probability – certainty of success).
• As an example, attributing a POS of 0,5 is equivalent to say that we
think there are 50 probabilities out of 100 of finding the expected
quantity of hydrocarbons
• The POS is calculated taking into account the probability of occurrence
of each single play and prospect element: each of them must exist to
allow for an hydrocarbon accumulation!
• The calculation is done, in E&P Division, with a tool called PAPA (Play
And Prospect Assessor)
140

Division
Risk assessment: POS
Country:
Licence:
Prospect:
Target:
141
CLICK on each Chance

Division
Prospect Risked Reserves Ranking
Beta E West Beta E LEGEND
Upper Creta & Lower Albian

Beta D Prospects
Beta C Beta D East Lower Albian Prospects

Beta B
5 First Tier Prospects (Top Creta
Beta B East & Lower Albian)
3
Licence Outline
Beta4A
RANKING PROSPECT RESERVES POS RISKED

1 (MMbo) RESERVES
(MMbo)
1 GAMMA A 264 0,30 79,20

Gamma A
2 GAMMA B 459 0,12 55,08
2
Gamma B 3 BETA B 452 0,10 45,20
Gamma C
Gamma D 4 BETA A 163 0,15 24,45
5 BETA C 107 0,20 21,40

142

Division
Collect/acquire
additional data
Pre-drill
exploration
set-up
Licence Perform Perform
economic Budget /
acquisition technical PV PRC
Portfolio
1st Forecast
evaluation evaluation Selection
(Production profile, proposal
CAPEX, OPEX, EMV)
GE3
After having completed the estimation of
1. the expected resources for each prospect in the area and

2. the associated risk (or its converse: the PoS) for each of them
according to the OPES requirements we must submit our geological model

to the Technical Assurance Review
143

Division
The economical assessment of the prospect
Having obtained the technical validation to the OOIP of the prospect and to its
PoS, we now need to:
• estimate the reserves according to a development plan and production profile;

• estimate the amount of investments (Capital Expenditures - CAPEX) required to
develop the field (production wells, plants, pipelines…);
• evaluate the economic return of the production by supposing a scenario of
crude prices (for the subsequent 25-30 years, average life of the field);
• estimate the operative costs (OPEX), needed for the maintenance and
operations of the field production plants;
• consider the contractual conditions regarding the permit.
All these elements concur to the calculation of a cash flow, from which all the
other indicators of the economic value of the prospect are derived
144

Division
The economical assessment of the prospect
All these evaluations are, of course, based on hypotheses on

the nature of the reservoir and its productive performance, and
generally are worked out according to different development
scenarios, in order to accomodate as far as possible all the
residual uncertainties.
The following cases give an example of such an approach…
145

Division
ALAN W Prospect Evaluation
CASE 1 Possible Well Location
Most probable OWC
Producer
Development Hypothesis
Injector 4 Prod + 3 Inj 146

Division
Most probable OWC
Producer

Division
Most probable OWC
Producer

Division
Case 1 Production Profile
70000.0 100000000.0
90000000.0
60000.0
80000000.0
50000.0 70000000.0
Oil Cum (STbbl)

Oil Rate (STbbl)
60000000.0
40000.0
50000000.0
30000.0
40000000.0
20000.0 30000000.0
20000000.0
10000.0
10000000.0
0.0 0.0
0 2 4 6 8 10 12 14 16 18 20
Time (year) 149

Division
120000.0 250000000.0
100000.0
200000000.0
80000.0
Oil Cum (STbbl)

Oil Rate (STbbl)
150000000.0
60000.0
100000000.0
40000.0
50000000.0
20000.0
0.0 0.0
0 2 4 6 8 10 12 14 16 18 20
Time (year) 150

Division
160000.0 350000000.0
140000.0 300000000.0
120000.0
250000000.0
100000.0
Oil Cum (STbbl)

Oil Rate (STbbl)
200000000.0
80000.0
150000000.0
60000.0
100000000.0
40000.0
20000.0 50000000.0
0.0 0.0
0 2 4 6 8 10 12 14 16 18 20
Time (year) 151

Division
ALAN W Tree (tie back case)
C1-91 MBO 54,5% 23% dev 91 MBO

15,7 15,7
C2-198 MBO 30,3% 13% dev 198 MBO
42,7 42,7
DISCOVERY 42,6% Chance
0 30,6
C3- 312 MBO 15,2% 6% dev 312 MBO
59,8 59,8
ALAN W Chance
10,74
DRY 57,4% 57% dry
-4,0 -4,0
152

Division
ALADIN Prospect Evaluation
Assumption
Provided Ultimate Recovery:
 LM 93 106 bbl
 MM 35 106 bbl
 UMa/b 30 106 bbl
 UMc/d 35 106 bbl
 Well draining radius: about 1 Km

 Down time applied: 10 %
 Aband. rate: about 500 bbl/day
DEVELOPMENT WELL LOCATIONS ARE DEFINED TO ALLOW

MULTIPLE COMPLETIONS
153

Division
ALADIN LM
Possible Well Location Development Hypothesis
4 Prod + 3 Inj
1
1 3
2
2
3
Producer 4
Injector
154

Division
ALADIN LM
Production Profile
70000.0 100000000.0
90000000.0
60000.0
80000000.0
50000.0 70000000.0
Oil Cum (STbbl)

Oil Rate (STbbl)
60000000.0
40000.0
50000000.0
30000.0
40000000.0
20000.0 30000000.0
20000000.0
10000.0
10000000.0
0.0 0.0
0 2 4 6 8 10 12 14 16 18 20
Time (year) 155

Division
ALADIN MM
4
2 Prod + 2 Inj
2 3
Producer
4
Injector
156

Division
ALADIN MM
Production Profile
35000.0 40000000.0
30000.0 35000000.0
30000000.0
25000.0
25000000.0
Oil Cum (STbbl)

Oil Rate (STbbl)
20000.0
20000000.0
15000.0
15000000.0
10000.0
10000000.0
5000.0 5000000.0
0.0 0.0
0 2 4 6 8 10 12 14 16 18 20
Time (year) 157

Division
ALADIN UM a/b
2 Prod + 1 Inj
5
3
Producer
Injector
158

Division
ALADIN UM a/b
Production Profile
35000.0 35000000.0
30000.0 30000000.0
25000.0 25000000.0
Oil Cum (STbbl)

Oil Rate (STbbl)
20000.0 20000000.0
15000.0 15000000.0
10000.0 10000000.0
5000.0 5000000.0
0.0 0.0
0 2 4 6 8 10 12 14 16 18 20
Time (year) 159

Division
ALADIN UM c/d
2 Prod + 2 Inj
5
2
Producer
3
6
Injector
160

Division
ALADIN UM c/d
Production Profile
35000.0 40000000.0
35000000.0
30000.0
30000000.0
25000.0
25000000.0
Oil Cum (STbbl)

Oil Rate (STbbl)
20000.0
20000000.0
15000.0
15000000.0
10000.0
10000000.0
5000.0
5000000.0
0.0 0.0
0 2 4 6 8 10 12 14 16 18 20
Time (year) 161

Division
ALADIN
Well Location Summary
4
2 1 3
2
3
2 3
5
Producer 1 5
2 3
Injector 1 4
4
6 3
Same number for the same well
Same color for wells in the same level
162

Division
Prospect "ALADIN" - Wells: 10 pr.+ 8 W Inj.+1 Gas Inj. -
Res: 195,6 MMBBLS - (Pozzi appraisal recuperati).
SURVEY & STUDIES 20 MMUSD

SUBSEA FACILITIES 147 MMUSD
RISER, FLOWLINE and EH UMB. 97 MMUSD
EXPORT MMUSD
FPSO+FPSO 400 MMUSD
SUBTOTAL 1 664,0 MMUSD ALADIN – Capex Details
ENGINEERING & PM (10%) 64 MMUSD
SUBTOTAL 2 728,0 MMUSD maximum scenario (196 Mbo)
Re-entry & Completion
Drilling & Completion 331,0 MMUSD
DRILLING 331,0 MMUSD
TOTAL 1 1059,0 MMUSD
OTHERS (20%) 211 MMUSD
TOTAL 2 1270,0 MMUSD
ONSHORE FACILITIES MMUSD
OTHERS 15% MMUSD
GRAND TOTAL 1270,0 MMUSD
163

Division
Usually, due to the large amount of uncertainties, the evaluation is
carried out on a discrete number of scenarios derived from a statistical
analysis of the OOIP.
In the example that follows, Prospect P3 to be developed jointly with

two already existing discoveries P1 and P2, statistical analysis has led
to 4 different scenarios:
Dry case
Scenario 1: OOIP = 169 MMBO from level y
Scenario 2: OOIP = 276 MMBO from levels x+y
Scenario 3: OOIP = 382 MMBO from levels x+y+z
164

Division
Scenario 1: OOIP=169 MMBO from y
W.I. W.P. W.P. W.I.
Development Plan:
Level x
– Producers: 2
Level y
– Water injectors: 2
– Gas Disposal (1)
Level z
• Reserves 50.7 MSTB (RF 30%)

• Average drainage area for production well ~1000 m
• Initial well flow rate 7500 STB/d
• Production Plateau (%)=20
• Down time 10%
165

Division
Scenario 2: OOIP=276 MMBO from x+y
W.I. W.P. W.P. W.I.
Level x
Development Plan: Level y
– Producers: 2 (1 smart completion well) Level z


• Average drainage area for production well ~1000 m
• Down time 10%
166

Division
Scenario 3: OOIP=382 MMBO from x+y+z
W.I. W.P.W.I. W.P. W.I.
Level x
Development Plan:
Level y
– Producers: 2 (2 smart completion wells)
Level z

• Average drainage area for production well~1000 m
• Down time 10%
167

Division
CAPEX & OPEX detail
CAPEX = Capital Expenditure
Units: MUSD
Scenario 1 Scenario 2 Scenario 3
Pre-project 16.0 16.0 16.0
Company 25.8 34.8 43.3
FPSO 81.0 141.2 192.4
Risers and flowlines 73.4 88.5 102.8
Subsea system 60.7 60.7 65.5
Subtotal 257.0 341.2 420.0
Contingency 25.7 34.1 42.0
Drilling & completion 89.7 104.7 127.7
Prospect Total 372.4 480.0 589.7
OPEX = Operating Expenditure
Opex: fixed costs 2.5% of total capex + variable costs 1.5 USD/bbl of production
Abandonment costs: 10% of total capex at the last year of production
168

Division
Input data for economics: scenario 2
SCENARIO 2
year Production Capex Abandonment Opex
(bbls) (MUSD) (MUSD) (MUSD)
-3 48.00
-2 144.00
-1 288.00
0 14751292 34.13
1 13162419 31.74
2 10695078 28.04 350 16000000
3 8623687 24.94 325 CAPEX
4 6984901 22.48 300 14000000
OPEX
5 5683376 20.53 275 Production Profile 12000000
6 4645516 18.97 250
Production [bbls]
7 3814411 17.72 225 10000000
200
[MUSD]
8 3145967 16.72
9 2605944 15.91 175 8000000
150
10 1715323 14.57 6000000
125
11 1271723 13.91
100
12 1107846 13.66 4000000
75
13 965086 13.45 50 2000000
14 840723 13.26 25
15 732385 13.10 0 0
16 638009 12.96
11
13
15
17
19
-3
-1
17 555794 12.83 Ye ars
18 484173 12.73
19 421782 12.63
20 172483 48.00 12.26
Total 83017918 480.00 48.00 376.53
169

Division
Economics
Project assumptions for economic computation:
•EVALUATION REFERENCE DATE: Jan 2007

•Residual & Full Life evaluation
•DISCOUNT RATE: 8% (WACC)
•INFLATION: Eni scenario
•HYDROCARBON PRICE: Eni scenario
•ECONOMIC MODEL: Prospect Permit model
•FISCAL REGIME: PSA type
170

Division
Input form for economics
INROSSOI PARAMETRI CONTRATTUALI ( DANONCAMBIARE)
INBLUI DATI DI INPUTDAINSERIREPERLAVALUTAZIONE
INIZIARELACOMPILAZIONEDALLATABELLINA" VALUTAZIONEAVITAINTERA"
ENI AGIPDIVISION ========== ==========
PORV\VECO NATION: CONGO Release: 1.0
data odierna 08/06/04 AREA: M
MT
TPS
P SO
OU
UT
TH
H ultimo agg.: 20/8/2001
CON. TYPE: P.S.A. posizione: G:\Archivio Ewaf\PRC\Congo\MTPS\MTPSTREEUNITIZZATA\[I_M
RISERVE : POSSIBLE ========== ==========
FIELDCODE: Andromede &Pegase CASO: BASE
I VALORI DI INPUTPERGLI ANNI PRECEDENTI AQUELLODI VALUTAZIONE(essendoda consuntivo) SONOGIA' CORRENTI
CONSTANTVALUES- 100% ABANDONMENTCOST- 100% 157.759
PRODUCTION INVESTMENTS OPEX CONSTANT
YEAR OIL GAS EXPL DEVEL FIXED OILPRICE
KBLS STMCM K$ K$ K$ $\BBL.
2001 - - - 21,20
2002 - - - 21,20
2003 - - - 21,20
2004 - 18.000 - - 20,78
2005 - 17.000 157.760 - 19,33
2006 - 473.280 - 17,96
2007 46.262 946.550 108.833 17,59
2008 42.234 - 102.791 16,23
2009 34.998 - 91.937 16,24
2010 28.693 82.480 16,25
2011 23.615 74.862 16,25
2012 19.509 68.703 16,26
2013 16.176 63.704 16,27
2014 13.461 59.631 16,27
2015 11.241 56.301 16,28
2016 9.418 53.566 16,28
2017 7.285 50.368 16,29
2018 5.133 47.140 16,29
2019 4.459 46.129 16,30
2020 3.874 45.251 16,31
2021 3.366 44.489 16,31
2022 2.926 43.828 16,32
2023 2.543 43.254 16,32
2024 2.210 42.755 16,33
2025 1.460 41.629 16,34
2026 1.189 41.223 16,34
2027 845 40.707 16,35
2028 290 39.874 16,36
2029 - 16,36
2030 - 16,36
16,36
TOTALE 281.187 - 35.000 1.577.590 1.289.455 - - - -
ANALISI DEGLI SCOSTAMENTI: VAL. STANDALONE

INIZIOPROD. (MESEEANNO): 1 2007
FINEPROD. (MESEEANNO): 12 2028 171

Division
Decision Tree
Prospect P3 and discoveries P1 and P2
Dev P1+P2+P3 Oil sc 1

First Option Dev P1+P2+P3 Oil sc 2
Dev P1+P2 & Drill P3
Dev P1+P2+P3 Oil sc 3
Dev P1+P2 & P3 Dry
Dev P1+P2
Second Option
(Software for Risked Net Present Value – EMV - evaluation by scenario) 172

Division
Collect/acquire
additional data
Pre-drill
exploration
set-up
Licence Perform Perform
economic Budget /
acquisition technical PV PRC
Portfolio
1st Forecast
evaluation evaluation Selection
CAPEX, OPEX, EMV)
GE3
Now that we have estimated the Expected Monetary Value of our drillable
prospect, before inserting it in the next year budget for drilling we must
have our conclusions validated by the Project and Opportunity Assurance
Reviews
173

Division
OPES Phase 3
Drill &
Phase

GEE 1 GEE 2 G
To
To identify
identify generic To
To evaluate
evaluate specific
specific To
To implement
implement thethe To
To confirm
confirm the
the
exploration
opportunities from
from aa operational
programme presence
presence of of
opportunities
opportunities within
within technical/economic
aimed at
at detailing
detailing the
the hydrocarbons
hydrocarbons andand
Objective
strategic
strategic guidelines
guidelines perspective
perspective and
and decide
decide prospect
prospect and
and update
whether
whether to proceed
to proceed evaluating
evaluating how
how toto evaluation
according to
to
securing
securing the
the legal
legal right
right proceed
proceed to the drilling
to the drilling well results
well results
phase
phase
Main Gate
Is
Is the
the acreage
acreage Is
Is the
the prospect
prospect Does
Does the
the
question
Does
Does the
the valuable
valuable enough
technically and
and discovery
discovery deserve
deserve
opportunity
opportunity deserve
deserve proceed
proceed to to the
the economically
economically mature
mature to
to to
to move
move to
to the
the
further
further license
license proceed
proceed toto the
the Evaluation
Evaluation
investigation?
drilling phase?
phase? phase?
phase?
If everything is ok, we can then submit our prospect to Gate GE3 for
drilling consideration.
174

Division

• the bid round
• the farm-out
175

Division
Phase 4: Drill & Post-drill Evaluation
Project
Drill & PDE Drilling and Completion Post-drill Discovery
Well planning Results
set-up data collection and testing evaluation evaluation (ESB)
Drilling Testing
expenditure expenditure Drill & PDE
authorization authorization DSP
submission
The drilling activitiy and the ensuing evaluation of a possible
discovery are described in the Phase 4 of the OPES workflow.
This Phase, called “Drill & Post-drill evaluation”, is aimed at
verifying the presence of commercial hydrocarbon within the GE4
drillable prospect.
Legend

Decision
176

Division
Drilling rigs
177

Division
Off-shore drilling rigs
Fix platform Jack up

500 m 100 m Drilling ship Tension legs Drilling ship
Semi sub (anchored) (dynamic pos.)
1000 m
Maximum operating depth

3000 m
178

Division
Offshore drilling operations
179

Division
Well logs
180

Division
Well tests
181

Division
Discovery Location
Eni Operated
Eni Non
Operated
Acreage held by
other
companies
M
C
EB GB GC AT
KC
AC WR LU
182

Division
Discovery Development
Total Number of Development
Reserves Wells Capex, M$
(mmboe)
Case 1 610 30 1,767.7
Case 2 444 22 1,287
Case 3 277 13 742.2
Case 4 117 6 340.3
140
Case 1
120 Case 2
Gross Production, KBOE/day

100 Case 3
Case 4
80
60
40
20
-
2005 2010 2015 2020 2025 2030
183

Division
Drilling & Completion Cost Estimate
Most Likely Case (4)
Appraisal Cost 90 MM$
Development Cost 340.3 MM$
Facilities 141.6 MM$
TOTAL 632.8 MM$
184

Division
Discovery Gross Production Profiles
140
Case 1
120 Case 2
Gross Production, KBOE/day
100 Case 3
Case 4
80
60
40
20
-
2005 2010 2015 2020 2025 2030
185

Division
Discovery Cumulative Net Cash Flow
4250
4000
3750 Case 1
3500
3250 Case 2
3000
Cum. Cash Flow, M$
2750 Case 3
2500
2250 Case 4
2000
1750
1500
1250
1000
750
500
250
0
-250
-500
-750
-1000
-1250
-1500
2010
2012
2014
2028
2016
2018
2020
2024
2026
2004
2006
2008
2022
186

Division
Discovery NPV vs Reserves
$900
$800
y = 387.15Ln(x) - 1705.5
$700
Eni Net NPV, M$
$600
$500
$400
$300
$200
$100
$0
0 100 200 300 400 500 600 700
Gross Reserves, MBOE
NPV Threshold reserves (mboe) = 82

187
Eni Exploration
0.60
& Production
Division
Discovery Decision Tree
188

Division
OPES Phase 4
Drill &
Phase

GEE 1 GEE 2 G
To
To identify
identify generic To
To evaluate
evaluate specific
specific To
To implement
implement thethe To
To confirm
confirm the
the
exploration
opportunities from
from aa operational
programme presence
presence of of
opportunities
opportunities within
within technical/economic
aimed at
at detailing
detailing the
the hydrocarbons
hydrocarbons andand
Objective
strategic
strategic guidelines
guidelines perspective
perspective and
and decide
decide prospect
prospect and
and update
whether
whether to proceed
to proceed evaluating
evaluating how
how toto evaluation
according to
to
securing
securing the
the legal
legal right
right proceed
proceed to the drilling
to the drilling well results
well results
phase
phase
Main Gate
Is
Is the
the acreage
acreage Is
Is the
the prospect
prospect Does
Does the
the
question
Does
Does the
the valuable
valuable enough
technically and
and discovery
discovery deserve
deserve
opportunity
opportunity deserve
deserve proceed
proceed to to the
the economically
economically mature
mature to
to to
to move
move to
to the
the
further
further license
license proceed
proceed toto the
the Evaluation
Evaluation
investigation?
drilling phase?
phase? phase?
phase?
Having evaluated the discovery, we are now ready to take the

project to the next phase (the first one of the OPDS). This
decision is taken at Gate GE4
189

Division
Phase 4: Drill & Post-drill Evaluation
Before submitting a proposal to Gate GE4, we need to pass through a

compounded Technical and Project Assurance Review: the Exploitation
Steering Body, which decide on the merit of the discovery. Let’s see
how it works more in detail…
190

Division

• the bid round
• the farm-out
191

Division
OPES / OPDS interaction
Drill & Post-drill Evaluation

GEE4
Evaluation (including appraisal)
Well
Well results
results
Exploitation Steering Discovery
Discovery
Body (ESB) Declaration
Declaration
Head-office
Exploitation Decision
OPES / OPDS interaction Exploration
Steering Body Maker
Management
After
After an
an hydrocarbon
hydrocarbon discovery,
discovery, calls
calls the
the
Exploitation
Exploitation Steering
Steering Body
Body
“Rework”
Assesses
Assesses discovery,
discovery, the
the preliminary
preliminary project
project or “Kill”
(including
(including the eventual appraisal plan)
plan) and
and
evaluates
evaluates local constraints
Decides
Decides to
to start
start evaluation
evaluation
Proposes
Proposes project
project type
type and
and class
class
Approves
Approves project type and class and assigns OPDS
development
development project and responsibility
192

Division
Is this the end of OPES?
Evaluation
Drill & Post-drill Evaluation GEE4 (including appraisal)
Well
Well Results
Results
Discovery
Discovery
Declaration
Declaration
Exploitation
Steering
Body
193

Division
The appraisal phase: a joint effort
Management
System OPES OPDS
Evaluation phase
Project GE 4 Appraisal
G1
Multifunctional Integrated Team

Team
(Exploration and Development required competencies)
194

Division
The appraisal phase: a joint effort
195

Division
Evaluation Phase - Appraisal
OPES OPDS
Drill &
Opportunities
GE 1 OpportunitiesGE 2 Pre-drill GE3 Evaluation phase G1
Post-drill GE 4
Evaluation Appraisal well
Appraisal Appraisal
economic Appraisal
Appraisal technical
evaluation AR-A budget GA 1
set-up assessment
CAPEX, OPEX, EMV)
Appraisal Drilling and

Completion Post-drill
well data
and testing evaluation
planning collection
Drilling and testing

expenditure
Legend authorization
Preparation Gate Internal/

Key Activity Decision
Activity External
Assurance Decision
The workflow for the appraisal is essentially the same as for the
Phases 3 and 4 of the OPES (AR, DSP, Gate…) 196

Division

• the bid round
• the farm-out
197

Division
Post-drill Top ‘A’ Sands depth structure map
198

Division
Well -1 “A” sands
N S
Gas Sands
“A” Reservoir: 2445 - 2529 m MDRT

• Gross Thickness = 129 m
• Net Sand = 24 m
Salt
500 m
199

Division
Critical spill
point
Structural spill
point
200

Division
Critical spill
? point
?
1
Structural spill
point
201

Division
2 Critical spill
point
Structural spill
point
202

Division
Arbitrary line through Well 1 and 2
well-2 well-1
O.D.T.
Structural spill point
203

Division
WELL -2 preliminary results arbitrary line through Wells 1 and 2
well-2 well-1
?
O.D.T.
W.U.T. O.D.T.
Structural spill point
204

Division
2 Critical spill
point
Structural spill
point
205

Division
2 Critical spill
? point
1 ?
Structural spill
point
206

Division
2
2 Critical spill
point
3
1
Structural spill
point
207

Division
Well - 1 to Well - 3 seismic tie
well-1 well-3
(projected)
well-1 O.D.T.
Structural S.P.
O.W.C. (?)
S
SE
208

Division
3
1
Structural spill
point
209

Division
2
? ?
3
1
Structural spill
point
210

Division
And so on…
Sometimes, the more wells we drill, the more complicate becomes our
view of the actual geological model.
Luckily, most of the times one or two appraisals are enough to gain a
good understanding of the reservoir. When this happens, then we are
at the beginning of a development project.
But this is another story…
211

Division
Thank you for your attention!
212

Division

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Exploration Management

Eni Exploration & Production

• WHY WE –still- DO EXPLORATION?

Eni Exploration & Production

Exploration is the first of the main activities constituting the upstream

Its purpose is to identify new areas prone to reservoir producible

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Once the prospect has been firmed up to a sufficent degree of confidence

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PLAY LEAD PROSPECT

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“a project associated with a prospective trend of

Project activities are focused on acquiring additional data and/or

From: Petroleum Resources Management System – SPE, 2007 7

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“a project associated with a potential accumulation

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From: Petroleum Resources Management System – SPE, 2007 8

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“a project associated with a potential accumulation

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From: Petroleum Resources Management System – SPE, 2007 9

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Before a well is drilled we can only achieve an understanding of the

Several options are available, depending on the stage of the analysis

In the preliminary regional basin analyses surface geology, magnetic

Subsequently, interpretation is based primarily on seismic data.

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Of all the indirect methods of investigation, which include gravimetric,

Virtually all the pre-drill exploration analyses and interpretations are

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• seismic is less expensive than drilling

• seismic data provide information on:

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• a source sends acoustic energy into the ground

• the resulting echoes from underground rocks are detected by seismic

• the sensors transform the echoes into electrical signals proportional to

• the signals are recorded on magnetic tapes for computer processing

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Mechanical drilling through the

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Acreage Prospect Drilling &

Commonly, the exploration activity is subdivided into four different

Eni Exploration & Production

Prospect Drilling &

When the exploration licence is acquired, data and information from

These data are used for “prospect generation” work.

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Prospect Drilling &

The same type of evaluation is performed each time an investment

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Prospect Drilling &

All methods and techniques (seismic, geochemistry, basin modelling

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To guarantee the highest level of quality in its activities, Eni E&P

Each activity is described in a set of Handbooks, Best Practices and

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Exploration, Development & Operations Management Systems

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Technical Scientific and Know-how Portals