Unitization

Project development and joint

development utilization oil field
production operations
CONTENTS
 What is a Project?

 Project Phases / Stages

 Oil and gas field Life cycle

 Appraisal Phase

 Joint Development/Unitization

 Cross-border unitization.
What is a Project?

A project is a series of tasks that need completion to get a specific outcome. Every project is unique in
that it is not a routine operation. A specific set of inputs & outputs are designed for a singular goal in the
form of a project or service..

Project Life Cycle

A project life cycle specifies the sequences of stages that a project involves through from its initiation to
its closure. 

What is Project Management?

Project management is the art of planning, controlling, and executing a project to ensure a successful
outcome. The primary challenge of project management is to achieve all the project goals within the
deadlines.
 •Economic Feasibility.
•Legal Feasibility.
•Operational Feasibility.
•Scheduling Feasibility.

Conceptual design is a set of disciplines

that contributes to identifying the optimal
design at nominal operating conditions of
industrial processes/products in the field
of engineering.

Project Phases / Stages

Preliminary Front
End Engineering
Design
Project Management
1. Project Plan— a document which fully describes the basis for undertaking the project.

2. Organizational Structure — organization charts and position descriptions that define the
complete organization.

3. Project Control Schedule — includes the work breakdown structure (WBS), work package
description sheets, milestone charts and networks.

4. Project Control Budget — related to the WBS, properly coded, structured to recognize the
manner in which costs are actually collected and with a system for tracking contingency.

5. Project Procedure Manual — a document which presents the exact management work
procedures to be used, work scopes, responsibilities, authorities, interfaces and reporting methods.
Appraisal Phase
• It is the phase of petroleum operations that immediately follows successful exploratory drilling.

• During appraisal, delineation wells might be drilled to determine the size of the oil or gas field
and collect cost-effective information useful to decide if and how to develop it most efficiently.
Field Appraisal Objective [1]
The objective of performing appraisal activities on discovered accumulation is to:

• Reduce the uncertainty in: - Volume of hydrocarbon in place (OHIP)

- Description of the reservoir

• Provide information with which to make a decision on the nest actions.

The next action may be to: -

Undertake more appraisal
Commence development
Stop activities
Sell the discovery
Field Appraisal Objective [2]
Goal: Improving the quality of the data and reducing uncertainty.

Outcome: Well fluid characteristics, OOIP, Recoverable oil, production profile, with sufficient uncertainty.

Method: More appraisal wells will be drilled, more measurements.

Reservoir Model Tuning PDF ‐ CDF Production & Pressure

Making Good Decision [1]
 The decision to undertake more appraisal activity is a cost-effective information only if the value of
outcome with the appraisal information is grater than value of the outcome without the information.
Supposing:
- Cost of appraisal information is $[A]

- The profit of the development without the appraisal information is $[B]

- The profit (net present value, NPV) of the development with the appraisal information is $[C]

The appraisal activity is worthwhile only if [C - A] > [B]

OIL IT IS OIL IT IS EXCELLENT OIL IT IS
EXCELLENT LET ME EXRACT MORE EXCELLENT
OIL
WELL 1
OWNER A

WELL 2 WELL 3
OWNER B OWNER C

A ‘s B ‘s C ‘s
land land land

RESERVOIR
Joint Development/Unitization
• Competing interests in the same field, either within one country or across boundaries, is an issue for
considerable effort in the earliest states of development.

• In addition to the concerns of any individual producer (project size, production expectations,
investment), societal interests are also intricately involved,

• As the maximization of ultimate oil recovery is important to society and the state, while the costs and
returns of its production are obviously important to any private interests involved in development.

Rate of production and unitization

• In the early days - first principle of oil production - faster is better - sooner oil and gas is produced, the
faster returns on investment are generated.

• industry soon realized that an oil reservoir or field should be developed with its geophysical properties
in mind, particularly the maintenance of its natural drives which force the oil and gas to the surface.

• Studies yielded the maximum efficient rate (MER) of field production, which was soon the standard
used by both industry and regulators.
• If there are a number of different wells attempting to produce the same field, the wells are competing for
migratory oil

• In most countries this is not a problem, as the state owns and regulates the development and production

• But in United States private parties are free to own and exploit mineral resources

• A common oil field could lie underneath hundreds of different tracts of land and mineral leases.

• Each lease holder would then move as quickly as possible to produce the oil and gas within the reservoir
before the next competing producer, the so-called rule of capture.

• The US Bureau of Mines recognized the costs and risks associated with common pool overproduction
as early as 1916

• The development of compulsory field unitization required private parties to

coordinate reservoir production to minimize surface and production costs while
managing reservoir pressure to maximize recovery.
• The unitized area, usually a reservoir, is treated as a single unit for
development purposes. It is as if the separate leases and licenses are merged
into one single lease or license, with a single unit operator appointed to
manage the development of the field, within the limits of the authority
granted the unit operator by the unit operating agreement and the
management committee composed of all the different lessees or licensees
with interests in the unit.

• In most countries today, the law allows first for the producing parties to
create their own unitization production plan and only require a compulsory
process if voluntary efforts fail.
 Cross-border unitization.
• Unfortunately, oil and gas fields do not acknowledge geopolitical boundaries

• Cross-border unitization involves two or more different governments and two or more licensees.

• International unitization agreements (IUAs)—have a set of standard features:

1. Unitization is required only after discovery

• This area, termed a joint
2. The area of unitization is defined by the oil reservoir itself; development zone (JDZ)

3. The participating countries collaborate via international agreement on all production issues related to the
optimal development of the field;

4. All countries maintain their own sovereign rights related to activities within their borders;

5. The licensees agree to a single development plan and a unitized operating agreement;

6. Each licensee bears the proportion costs and receives proportion returns—the participation factor—of the
field’s oil and gas that lies underneath their physically defined borders and license.
The Nigeria–São Tomé & Príncipe
Joint Development Zone (JDZ)
Other joint development zones around
the world include:
Saudi Arabia, Bahrain, Kuwait and Abu Dhabi;
Japan–South Korea;
Sudan– Saudi Arabia;
East Timor–Australia;
Malaysia-Vietnam;
Colombia-Jamaica; and
Guinea Bisseau–Senegal.
The East Timor–Australia JDZ serves as a case in
point. Australia, Indonesia, and East Timor have
been unable to agree on maritime boundaries.
They have, however, concluded a joint
petroleum development agreement (JPDA)
splitting the petroleum product of the Timor
Sea (“Timor Gap”), with 90% flowing to East
Timor
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