Starling Oilfield Development

Risk Reward Contract

International Case Study Competition 2019
OVERVIEW:
With the falling oil prices, emphasis has been placed by the government to boost the indigenous oil
production. The best way to achieve the objective is to optimize the development of the mature oil fields
in the country with a low current recovery.

Apex Petroleum is a national oil company operating 50 fields in the country. Starling is a sandstone
reservoir and has an in-house STOIIP estimation of 200 MMm3. The reservoir is low permeability (412mD)
and porosity (12-22%). After 40 years of production, the current recovery factor of the field is 12%. The
field was deemed to be a suitable candidate to boost oil production. The field has been under water
injection for 30 years. Optimizing the waterflooding strategy has been identified to be one of the key
factors in boosting the recovery from the field.

This initiative warrants the use of latest technology and is a cost-intensive affair. Apex Petroleum decided
to bring a technology partner to share the risk and reward. The contract shall be awarded to a service
company which can offer the highest returns on investment.

BUSINESS MODEL:
Apex Petroleum is willing to enter a $/bbl fee contract for the Starling oilfield. Service partners are invited
to submit the proposal for the level of engagement (field activity – drilling/workovers etc.) and fee
estimates per incremental barrel of oil produced. It should be noted that all capital expense from today
shall be borne by the service partner and the OPEX shall be shared between Apex Petroleum and the
service partner (50% contribution each). The baseline production (no further activity) is presented in
Annexure II. The service company shall maintain the baseline and shall be paid for every incremental
barrel of oil produced based on the $/bbl fee estimates submitted by the service company. There exists a
penalty of USD 10/bbl reduction from the baseline, which the service company shall be liable to pay to
Apex Petroleum. The baseline is non-negotiable.

DELIVERABLES:
You are the owner of a service company who wants to bid for this tender. Your task is to:-

1. Submit the development plan - sequence of operations, timeline

2. Propose a suitable artificial lift method
 3. Submit the production profiles (oil and liquid) for the next 20 years
4. Submit the project economics
5. Propose $/bbl fee for the services
OBJECTIVES:

1. Boost oil production rate

2. Accelerate recovery to 30% in 20 year

ANNEXURE I:
Starling field details:-

• Area : 50 sq km
• Number of development wells: 700
• Well Active (As of today): 250
• Suspended wells: 50
• Water Injectors: 210
• Average well spacing: 250 m Mean Porosity: 15 p.u.
• Mean Permeability: 8mD
• Current Oil Production: 2000 m3/d
• Current Water Production: 600 m3/d
• Crude Oil Viscosity: 0.5 cP
• Crude Oil API: 28
• Oil Formation Volume Factor: 1.2 vol./vol.
• Gas Formation Volume Factor: 0.01 vol./vol.
• Solution Gas Oil Ratio Initial: 270 vol./vol.
• Formation Top: 3000m
• Formation bottom: 3500m
• Net pay: 70 m
• Initial Reservoir Pressure (psi): Hyrdrostatic ( 1.42 * TVD in metres)
• Current Reservoir Pressure: 60% of Initial reservoir pressure
• All the reservoirs have weak edge aquifers
• The reservoir today is below the bubble point Pressure (current Rp: 400 vol/vol)
• Cumulative Oil Production (till date): 24 MMm3
• Cumulative Water Production (till date): 8 MMm3
• Reported Cumulative Water Injected (till date): 40 MMm3
• Cumulative gas produced : 5000 MMm3
• Operating Expenditure: 20 USD/bbl oil production
• Oil Price to be used for all calculations: 60 USD/bbl

IMPORTANT DETAILS:

• The surface water injection network has reported leakages and the recent study shows that the
actual realized injected water is 40% of the injected volumes.
 • Well test was conducted in an injector well. Data is provided in the attachment
• The wells are operated on intermittent gas lift. This gas lift is currently unoptimized and there is
not enough gas to allow continuous gas lift in all wells. The gas source is the produced gas from
the field
• The electricity in the field trips once in a week which caused the entire gas lift framework to shut
down. (Hint: Continuous source of power supply is key to maintain production) AVAILABLE

INVENTORY AND COST BASIS:

This field has been allocated 4 workover rigs (750 and 1000 HP) and 2 drilling rigs. The mandatory work
program is as follows: -

Operation Nos. Unit Cost in

Million USD
New Producers 10 6

New Injectors 7 4

Workovers 128 0.3

The following inventory can be utilized if needed, on cost basis: -

1. ESP – Unit Price – 1 Million USD (including rig cost and installation)
The ESP needs to be serviced every 3 years and the service and reinstallation cost is 0.5 Million
USD
A single ESP needs 250KW to operate
2. The currently available gas is enough to generate 50 MW electricity
3. The maximum number of active wells at any time in the future cannot exceed 150
4. Gas Turbine : 3 MW capacity : Unit Cost 4 Million USD
5. There is no restriction to go for an EOR, but the approval process takes a lot of time
6. Assume a fill up period of 2 years for water injection.
7. Drilling & Completion time for producers is 4 months
8. Drilling & Completion time for injectors is 3 months
9. A workover rig can do a maximum of 16 workovers in a year

BROWNIE POINTS:
You can also propose an EOR strategy for implementation after the contract (20 years). The exact
quantification of reserves of revenue is not required. A 5 MMUSD fee shall be paid to the service
provider, if the Apex management accepts the EOR proposal.

HINT:
Waterflood profile generation can be done using WOR vs Np. Assume 50- 100 m3/d average increment.
NOTE: Refer to the Baseline APEX_Production (2 sheets) Spreadsheet issued with the case.

Points to remember
1. Solution for case study should be submitted before 11:59 PM, October 17th, 2019.
2. The PowerPoint presentation (maximum 15 slides) should be named as “Team_abc.pptx” where
abc is your team name and all the supporting documents (maximum 6 pages) should be named
as “Team_abc_abstract.docx”.
3. Only the team leader should mail the solution on icsc.spe2019@gmail.com strictly adhering to the
deadline mentioned above.