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PEEG 460 Petroleum Economics & Risk Analysis

Spring 2017


Your team has been selected by ADNOC to study an interesting prospect – a sour gas reservoir in a foreign country. The host government is proposing two alternative methods to develop the field, with gas used in local power generation, but at present only limited data is available, primarily from one well test (currently waiting for the service company to provide the data) and other reservoirs in the same country. You need to supplement existing data by consulting the literature and/or making engineering estimates as required.

Working in your teams, you will do the following:

  1. Complete your individual CV as instructed previously. These will be included in an Appendix in your final report. [Deadline Mon. 10th Apr. by e-mail]
  1. Each team member must carry out the following personal assignment:
    1. Divide the following subjects among team members:
  1. Likely future product prices for gas and other products
  2. Decommissioning techniques and costs for facilities after abandonment
  • Political and economic issues in your “host” country (to be revealed shortly)
  1. What new technology could be applied to improve recovery and/or economics
    1. Each team member will write a report on their subject which will form an appendix in the final project report. The report should summarise the issues in the subject area associated with the project description. Then it should make recommendations about what to do or what data to use which relate to the project above. The rest of the project should be aligned with the recommendations as far as possible.
    2. There must be at least one reference to the course textbook and at least three to other published work. You can use web page references but at least one reference must be to a refereed publication or book. Use SPE guidelines for the citation.
    3. The report should use a minimum of 1000 works but not exceed 3000 words.
    4. Don’t forget your Student Pledge of Academic Integrity!
    5. Please submit your agreed assignments for your team by Mon. 10th Apr. by e-mail. The deadline for this individual report is Sunday 16th April but you should try to complete the work earlier, as other project work is likely to depend on it.
    6. This assignment will be worth 20% of the overall project grade.
  1. Make a simple plan stating which team members will be responsible for the remaining tasks on the project as described below (max. 2 per task) and giving target dates for tasks. The work should be shared out evenly. [Deadline Weds. 12th Apr. Send assignments by e-mail]
  1. Based on the agreed assignments carry out the following tasks:
    1. Estimate the reserves and recoverable hydrocarbons for the reservoir.
    2. Make a development plan for the reservoir (number of wells, timing, production etc.).
    3. Develop a cash flow model using Excel spreadsheets.
    4. Plan for the entire field to be decommissioned by plugging and abandoning wells and removing and scrapping all facilities or other more-economic option.
    5. Compare the two development options proposed by the host government:
  1. A special service contract where the operating or service company handles all costs and is paid a fixed price per unit of gas produced (with ownership of any oil or condensate produced being transferred to the host government).
  2. A concession contract in which all costs are handled by the operator, products are sold at market rates, and the government charges royalties and corporate tax.
    1. Estimate financial parameters which management could use to compare your project with others.
    2. Perform a risk analysis, including sensitivity studies using the cash flow model you have built, and use of other techniques to be presented in classes.
    3. Write a report (minimum 2000 words) describing all the work done above, and making recommendations as to which if any development option is worthy of more detailed evaluation. You must take into account the findings of individual projects assignments.
    4. The report must contain the individual reports as appendices (they do not contribute to the 2000 word limit above).
    5. Proof read the report checking consistency, spelling, units, rounding etc.
    6. Submit Word report by e-mail [Deadline Sun. 30th April – start of the final week of the semester]. Note: If for any reason the PI indicates that there will be no deadlines on this day, the deadline will be moved earlier to whichever day is permitted to be a deadline.


  1. You are at liberty to enhance the scenario according to your own ideas, providing these build on the basic scenario.
  2. Teamwork means different members work on different tasks, but communicate with others to ensure work is towards the same goals. If disagreements occur, the team should meet to find a solution.
  3. If a team is unable to agree on the distribution of tasks, let me know and I will attribute them to you by “drawing lots out of a hat”.

More data on your particular project will be send shortly

John M. Williams                    27th March 2017

Khalifa University of Science and Technology

(Note: We have been told to use this new name in all PI communications)

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