Publications

The development phase of oil and gas fields is challenging, since wells need to be drilled and assessed for oil and gas reserves, and production facilities need to be built. The complexity of work to be carried out during the development phase is therefore relatively greater than that carried out during the exploration and production phases. A gas development project will be executed if it has attractive economic indicators (IRR, NPV payout time). With marginal gas reserves and high development costs, there will be marginal indicators in the project economic model compared with the portfolio profile of the company. The project economic model for any reserve has a total of 18 scenarios modeled into three milestones and it is combined with drilling and facilities costs by running a Monte Carlo simulation. The economic indicators can be observed for each milestone based on an estimation of probable reserves and costs. This will be a beneficial tool for management decision-making. This paper shows that the feasibility of a marginal gas field project at the development phase can be analyzed using the milestone basis as a project economic roadmap. To maintain positive NPV using the baseline scenario of a reserve, the maximum allowable development cost (drilling itangible and facilities cost) could be 323.8 US$ million. Nevertheless, the baseline scenario and project cost fails to obtain 15% IRR after ten thousand simulations. Therefore, the key activity is to monitor the performance of the project, i.e. reserve verification, drilling and facilities costs, and project schedule. Decisions about the project may be taken at each milestone according to the portfolio profile of the company. * Medco E&P Indonesia