Quantification of uncertainty and risks for developing marginal fields

Thesis Overview

<p> </p><p><strong>1.0 INTRODUCTION</strong></p><p><strong>1.1 PROBLEM DESCRIPTION</strong></p><p>The Niger Delta is situated in the Gulf of Guinea and has prograded south westward from Eocene to the present forming various depobelts. It is Africa’s largest and most prolific oil producing basin and also one of the world’s largest delta systems of tertiary age and covers</p><p>an area of about 75,000 km2. Several discovered marginal fields exist in the onshore delta area which provides attractive opportunity for development due to presence of multi stacked good quality reservoirs associated with growth fault related structures (Sahu et al, 2011). The development of marginal oil fields has become an important strategic issue in Nigeria. This is because government and indigenous investors both believe that, acquisition of fields which remained undeveloped or abandoned for a period of 10 years from major oil companies by government and re-allocation to intending investors would go a long way in improving the country’s proven and recoverable reserves. Marginal field operators have then been given fields to develop but majority of the marginal operators are facing challenges in developing such fields.</p><p>These limitations being faced by marginal operators mostly arise because of improper planning for field development. An important aspect of any field development planning exercise is inherent in adequately quantifying risks and uncertainty, particularly when information availability is limited. For marginal fields, accurate evaluation of the project downside becomes even more crucial, as different development options carry a substantial probability of negative net-present-value and project economic viability relies on oil field risk minimization.</p><p>Thus, it is essential to undertake a complete and detailed risk analysis in order to identify key contributors to uncertainty in field developments, and determine their combined effect and impact on field economics. If the risks and uncertainties are better understood, ability to make good development decisions will be greatly enhanced. These will then help to mitigate uncertainty and shift to the right and/or narrow the distribution of recovery and net present-value. The evaluation and quantification of the effect of key risk factors is sometimes a complex process because of the multiplicity of combinations in development options are most times represented by running simulations.</p><p>In general, quantitative risk and uncertainty is an important tool for the regulation of any industrial development, as well as the decision-making in oil field development investment. Uncertainty quantification creates value only to the extent that it holds the possibility of changing a decision that would otherwise be made differently (Bickel and Bratvold, 2008). Therefore quantifying risks and uncertainties help a great deal in decision-making. Various methods are currently used in decision-making in the oil industry. Some of them are: Worst Case/Best Case Scenario, Tornado Plots, Boston Grid, Expected Net Present Value, Decision Trees, Monte Carlo Simulation and Real Options. These methods are characterized by different degrees of complexity and specific theoretical assumptions. This work will utilise some of the methods used in decision making to formulate guidelines for understanding and managing risks for successful marginal field development in the Niger Delta.</p> <br><p></p>