CGE665

Facilities Engineering
Chapter 1

Lecturer: Fazril Irfan bin Ahmad Fuad

UNIVERSITI TEKNOLOGI MARA

Chapter 1 Overview Oil & Gas

Industry

Outline - Chapter1

Overview of the oil & gas industry

1 P business
E1 &
1.1) Phases of E&P Activities
1.2) Details of Project Dev. Phase
2

2E

& P Project Costs

3 Production Sharing Contract (Malay

PSC
3
4
Project
Life Cycle Concept
4
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1.1a. E&P Business- Acquisition of Rights

Phases of Activities in Petroleum Industry
Acquisition of Rights
These can be done through
A) Concessions Agreement
B) Production Sharing Contracts Agreement (PSC)
C) Joint Venture Agreement
D) Service Contract Agreement

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1.1b. E&P Business - Exploration

Phases of Activities in Petroleum Industry
Acquisition of Rights
EXPLORATION
This is a high risk activities may constitute :
a) Gravity and Magnetic Surveys
b) Seismic Survey
c) Wildcat

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Facilities Engineering - Introduction

1.1c. E&P Business Appraisal Phase

Phases of Activities in Petroleum Industry
Acquisition of Rights
EXPLORATION

APPRAISAL

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1.1c. E&P Business Appraisal Phase

EXPLORATION
EXPLORATION DRILLING
RESULTS
DISCOVERY

Dry

APPRAISAL
Appraisal drilling to define the extent of discovery
Data gathering to aid in the development studies
Development feasibility studies
Inconclusive

RESULTS

QUIT

DEVELOPMENT
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1.2d. E&P Business Development Phase

Phases of Activities in Petroleum Industry

Acquisition of Rights
EXPLORATION

APPRAISAL
DEVELOPMENT

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1.1d. E&P Business Development Phase

This is the DEVELOPMENT of Production Concept
and IMPLEMENTATION activities.
The objectives:
To meet the maximum recovery with minimum
cost.
Consideration in the Development plan are:
i) Drilling requirements
ii) Production techniques and policy anticipated.
iii) Facilities required
iv) Development time and cost expected.
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1.1e. E&P Business Production Phase

Phases of Activities in Petroleum Industry
Acquisition of Rights
EXPLORATION

APPRAISAL
DEVELOPMENT
PRODUCTION

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1.1e. E&P Business Production Phase

DRILLING OF PRODUCTION WELLS
i.

ii.
iii.
iv.

Production wells are drilled by a Drilling Contractor for

the whole drilling campaign to completely produced
the prospects.
The specified drill rig is mobilized and the drilling will
start.
The First Oil/Gas is the first Production starting at the
platform when the first well is completed and produced
The drilling campaign will drill all the planned
production wells on the platform before the drill rig is
demobilized.

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E&P Business - Summary

Phases of Activities in Petroleum Industry
Acquisition of Rights
EXPLORATION

APPRAISAL
DEVELOPMENT
PRODUCTION
Processing / Export

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1.1g. E&P Business Facilities, Transportation,

Storage and Export
Acquisition of Rights
EXPLORATION

APPRAISAL
DEVELOPMENT
PRODUCTION

Facilities Engineering, Transportation

Storage and Metering (for Export)
falls under these phases of the E&P
business

Processing / Export

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13

1.2

E&P Business Development

Phase

Field Development Evaluation.

FIELD
LEVEL

Geologist
OOIP
Fluid Contacts
Rock Quality

Platform Geologist
LEVEL OOIP

Reservoir. Eng.
EUR
No. of Plat.
No. Of Wells
Production Plan

Reservoir Eng.
EUR
Production
Plan
Production
Forecast

Facilities Eng.
Types of Platforms
Pipelines and
Support Fac.

Facilities Eng
Facilities Selection
Investment Cost
Operating Cost

Economic Evaluation

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Drilling Eng.
Max. Reach
Min. Time

Drilling Eng
Drilling Cost.

1.2a1. E&P Business Details of Project

Development & Implementation
Activities
Oil and Gas Development Activities:
a. FEASIBILITIES STUDIES
b. CONCEPTUAL DESIGN/FEED/DETAIL
DESIGN
c. FABRICATION / CONSTRUCTION
d. INSTALLATION
e. HOOK-UP AND COMMISSIONING
f. DEVELOPMENT DRILLING
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1.2a2. E&P BusinessProjects Development &

Implementation
Oil & Gas Projects Milestones.

Year 1

Year 2

Year 3

Year 4

Feasibility Study
Conceptual Design
Detail Design
Procurement / Long Lead Items
Contracting
Fabrication
Installation
Hook-up & Commissioning
Drilling & Production

Project Development

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Project Implementation

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First Oil/Gas
Production
16

Facilities Engineering - Introduction

1.2b. E&P BusinessProject Development

Oil & Gas Projects Milestones.
FEASIBILITY STUDY
i.
ii.
iii.
iv.
v.
vi.

General Concept Definition

Preliminary Cost Estimates
Economic Evaluation
Feasibility Screening Studies
Field Development Plan
Work Program and Budget

NB. Done by an In-house Project Team

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1.2c. E&P BusinessProject Development

Oil & Gas Projects Milestones.
CONCEPTUAL DESIGN (Front End Engineering)
i.
ii.
iii.
iv.
v.
vi.
vii.

More Detail Concept Definition

Facilities Optimization
Environmental / Site Surveys
Design Specifications
Contracting Strategies / Documents
Design Basis Memorandum or Conceptual
DBM Report.

NB. Usually done in-house/contractor

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1.2d. E&P BusinessProject Implementation

Oil & Gas Projects Milestones.
DETAIL DESIGN
i.
ii.
iii.
iv.
v.

Develop specifications for each equipment.

Approved for Bid (AFB) Drawings
Approved for Construction (AFC) Drawings
Detail Design Report
Materials Procurement for long lead items.

NB. Specifications, AFB/AFC are either done in-house or

by Design Consultants.
Procurement are done by Purchasing unit.

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1.2e. E&P BusinessProject Implementation

Oil & Gas Projects Milestones.
PROCUREMENT & FABRICATION
i.
ii.

iii.
iv.

Fabrication works are done at Fabrication

Yards chosen through competitive bidding.
Procurement of Materials e.g. tubular, sheet
metals, valves, welding equipment,
construction equipment such as cranes are
responsibilities of the fabrication contractors..
Pre-commissioning of individual systems e.g.
pumping unit, heat exchanger and fire deluge.
Load-out and transportation

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1.2f. E&P BusinessProject Implementation

Oil & Gas Projects Milestones.
INSTALLATION
i.
ii.

iii.
iv.

Installation is performed by Installation Contractors

obtained through competitive bidding.
Used Installation Spread consisting of Installation /
Crane Barge , Tug Boats, Supply Vessels, Divers @
Diving Equipment, Construction Crew, Steam
Hammers, Welders and Riggers and onboard
accommodation and catering.
Hook-up and Commissioning can be part of the
installation scope of works.
System Testing and Start-up.

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1.2g.E&P BusinessProject Implementation

Oil & Gas Projects Milestones.
PIPELINE INSTALLATION
i.

ii.

iii.
iv.

Pipeline installation is performed separately by a

Pipeline Installation Contractors obtained through
competitive bidding.
Used Installation Spread consisting of Pipe Laying
Barge , Anchor Handling Boats, Supply Vessels, ROV/
Equipment, Construction Crew, Welders and Riggers
and onboard accommodation and catering.
Pressure Testing and Commissioning are part of the
installation scope of works.
System Testing and Start-up.

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1.2h. E&P BusinessProject Implementation

Oil & Gas Projects Milestones.
DRILLING and PRODUCTION
i.
Production wells are drilled by a Drilling Contractor for
the whole drilling campaign to completely produced
the prospects.
ii.
The specified drill rig is mobilized and the drilling will
start.
iii. The First Oil/Gas is the first Production starting at the
platform when the first well is completed and produced
iv. The drilling campaign will drill all the planned
production wells on the platform before the drill rig is
demobilized.

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2. E&P Project Costs.

a. CAPEX Costs.

b. Operating & Maintenance Costs.

c. Abandonment Costs.

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2a. E&P Project Costs.

Development Wells

Depend on - Total Reserves

- Reserves per well
- Off-take rate
Include
- Drilling
- Casing/Cementing
- Completion equipment
- Well Heads
Type
- Production Wells
- Injection Wells
Statistics - USD 2 million / well (shallow wells:
4,000 ft.)
- USD 4 million / well (deep wells :
8,000 ft.)
Reserves - 1.5 to 4 million bbls/well
(average 2.5 million bbls/well).
Capacity

- 1000 2000 bopd/well

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2b. E&P Project Costs.

Platforms / Jacket

Depend on - Field Size (Area Extend )

- Water Depth
- Number of Slots for Drilling of wells
Include
- Structure
- Piles (depends on depth of
penetration) /
Foundation.
- Conductors (for wells)
Type
- Central Production & Processing (CPP)
- Satellite Production (SP)
- Manned / Unmanned
Water depth up to
Statistics - CPP = USD 65 million 70 meters
- SP = USD 25 million
Reserves - CPP = 60 Million Bbls.
- SP = 30 Million Bbls.

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2c. E&P Project Costs.

Production Facilities

Depend on - Throughput Volume

- Requirement for Gas and/or
Water Injection
- Requirement for Gas Lift
Requirement
Include
- Processing Facilities
- Injection Facilities.
- Pumping Facilities
- Power Generation
Statistics
- 70% of Wells Costs
(Approximation).

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2d.E&P Project Costs.

Pipelines

Depend on - Throughput Volume

(Diameter & Wall-thickness)
- Distance/Length
- Materials Specifications
Include
- Facilities (Pumps &
Compressors)
- Storage Capacities
- Loading or Pumping Rates
Type
- Oil Pipelines
- Gas Pipelines
Statistics
- 15 to 20 for oil CS X 52
(USD/in./m) - 20 to 30 for gas CS X 65

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2e.E&P Project Costs.

Terminal / Tanker

Depend on - Throughput Volume (Storage

Capacity)
- Infra - Structure
Include
- Facilities
- Storage Capacities
- Loading or Pumping Rates
Type
- Terminal (Oil)
- Tanker (FPSO/FSO)
Statistics
capacity.

- USD 400k/1000 bbls. capacity

- USD 100k-200k/1000 bbls.

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2f.E&P Project Costs.

Operating & Production

Depend on - Type of Operations

(Onshore/Offshore)
- Gas Injection
- Water Injection
Include
- Facilities Operating/Maintenance
- Overhead and management
- Wells workovers
Statistics - Based On Cumulative CAPEX
- 9% for Compressors
- 1% for Structures / Jackets
- 1% for Pipelines
- 10 % for wells tangibles
- 10% for on-shore Terminals
- USD 0.5 million USD 2 millions / well

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2g.E&P Project Costs.

Abandonment

Depend on - Type of Facilities Size & Complexity

- Location (Offshore/Onshore)
- Scope of Work ( Total/ Partial).
Include
- Platform/Jacket Removal
- Super-Structure
- Production Facilities
- Pipelines
- Wells plugging
Experience - Based on the Crane Barge Rates &
Transportation Barge Rates
(Study shows that the cost of Platform
removal
may be similar to that of installation
costs)
- Drilling Rigs Rates and Number of
wells

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3. PSC-Malaysian Model.
COMPARISON of the 1976, 1985 AND DEEPWATER PSC TERMS
MAIN FEATURES1976 TERMS
1.
2.

ROYALTY
Cost Recovery
a. Oil
b. Gas
3. Profit Split
(in favor of PETRONAS)
a. Oil

10%

10%

20%
25%

50%
60%

70:30

b. Gas
4. Contract Period (Yr.)

1985 TERMS

3+2 Expl.
4
Dev.
15 (oil) Prod.

Nil
5. a. Signature Bonus
RM2.5 million
b. Discovery Bonus
RM5.0 million
c. Production Bonus
0.5%
6. Research Cess
Nil
7. Carigalis Participation

First 10,000 bopd 50:50

Next 10,000 bopd 60:40
Above 20,000bopd 70:30
(for first 50 millions bbls)
First 2 trillion scf 50:50
Excess 2 trillion scf 70:30
5-Exploration
4-Development
15-Oil Production
20-Gas Production
Waived
Waived
Waived
0.5%
Minimum 15%

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DEEPWATER TERMS
10%
75%
75%
(In favor of Contractors)
First 50,000 bopd 14:86
Next 50,000 bopd 18:82
Above 100,000 bopd 37:63
After cumulative production
Of 300 mmbbls 50:50
To be negotiated
7-Exploration
6-Development
25-Oil Production
Waived
Waived
Waived
0.5%
Minimum 15%

4. Projects Lifecycle
Pre-Dev

Build-Up Plateau

Decline

Abandon

PRODUCTION
ENVELOP
Time
POTENTIAL PROJECTS : Funding Requirements
NEW PROJECTS : High Capital Spending
YOUNG PROJECTS : Cash Generating
AGEING PROJECTS : Self Financing
ACQUISITIONOPERATIONS MAINTENANCE
&

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ABANDONME
NT:
Cash Sink