Introduction to Onshore Exploration

Your Challenge Today You are an exploration

team in charge of a new petroleum exploration area.

Your task is to find and drill for new reserves and to maximize return on investment (ROI).

You will need to work as a company as well as in partnership with others.

You will show your new understanding of exploration and be rewarded through credibility Points.

Finances You will start with $50

millionYou can apply for more later.

Creating ValueProfit is measured by the net value of the oil and gas fields discovered MINUS all costs involved.

Winning team has highest ROIROI is calculated as Value created DIVIDED by Funds received.

Credibility Points You get CPs for doing well

during the simulationCorrect answers and sensibledecisions are awarded with CPs

CPs are a measure of ability and credibilityA team’s CPs are considered when bidding for blocks and applying for funds from the HQ

You will learn Where and how to find

hydrocarbons. Various surveys during exploration.

Licensing rounds. Farm-in and Partnerships.

Drilling rigs and Sub-contractors. Environmental issues. Economically viable volumes.

Reducing uncertainty. Team work and negotiation. Critical

decision making, analytical skills. Multi-tasking.

Oil and Gas Industry Value Chain

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Main screen

MapColumns e.g C1, and C54

Row

s e

.g. R

35

and R

16

3Block

Blocks are divided into smaller cellse g. C57,R73

First challenge Challenge: Find three sedimentary

basins in the area. Basins are sedimentary rocks in the deep subsurface where oil and gas has been generated.

Procedure: Buy and study magnetic and gravimetric surveys; and to submit the coordinates, column and row number for each basin centre.

Gravimetric surveys Gravimetric surveys show the gravity

in the sub-surface. Measured by airborne sensors.

Sedimentary rocks have lower densities than the surrounding crystalline rocks. Low gravity means high probability of a basin below.

Low gravity are basins. High gravity are crystalline rocks

Surveys in OilSim

Real gravimetric survey

Survey in Oilsim Gravimetric

survey:South-east quadrant

Survey in OilSim

All four quadrant surveys in map context.

Magnetic surveys Magnetic surveys show similar

information as gravimetric surveys. The sedimentary rocks in the basins have a lower concentration of magnetic materials than the surrounding crystalline rocks. Sedimentary basins are the areas with the lowest magnetic field.

Basins have low magnetic field Non-basins have high magnetic

fields.

Real magnetic survey

Survey in OilSim

Magnetic survey:North-west quadrant

Survey in OilSim

All four quadrant surveys in map context.

Gravimetric survey analysis Locate edges

of the continous basin structure (yellow area)

Locate the diagonals and thus basin centre

Magnetic survey analysis Locate edges

of the continous basin structure (purple area)

Locate the diagonals and thus basin centre

Finding the Midpoint

Centre may not be the same

Example:Top basin on

both maps Calculate the

midpoint between the gravimetric and magnetic centres found

= C55 and R105

C50

R100

C60

R110

Enter decision

Centre Midpoint calculation

3 centres – one Centre midpoint for each basin

Example: C55, R105 Solve before deadline. All

submissions are evaluated after the deadline (and not before).

You may get 0-100 CPs. All three centres must be located to get full credibility points.

Solve task 1

Task 1 solved All teams have submitted their

answers. Basin centres are located.

Message in Inbox. All teams have answers and CPs awarded.

Challenge 2 : license round

Sedimentary basins may contain oil and gas.

The government has decided to put the blocks around one of the basins on offer.

Challenge: Identify the 3 most promising blocks and offer an amount for each of them.

Challenge 2 : license round Any restrictions involved? Yes, you need to

watch for Environmentally Sensitive Areas. What are we looking for? Hydrocarbon

Prospects. Where do we find prospects? In

sedimentary basins How do I find them? Interpreting 2D

seismic and Common Risk Segment maps.

Source and migration

1. SOURCE ROCKwhere organic material is put under sufficient pressure

2. MIGRATION ROCKwhere hydrocarbons are driven through

3. CAP ROCKImpermeable rock that stops migration of hydrocarbons 4.

PROSPECT

Traps

(c) OLFAnticline trap

Fault trap

Stratigraphic trap

Salt dome trap

Geological “pockets”, that might contain hydrocarbons.

Environmentally Sensitive Areas

Red areasYou will not be allowed to bid, drill or operate in any of the red areas. Green areasBlocks in area may be awarded.

Sensitive Rangelands Survey

Common Risk Segments Is there a sedimentary basin and a

migration route into the prospects in the area?

Is there porous reservoir rock in the area, so that the oil or gas can be stored?

Is there a sealing rock in the area, so that the oil and gas can be trapped?

If all are positive, then green If some negative, then orange If mostly negative, then red

Common Risk Segment

Layer 3 Eocene1500m below the surface

Layer 2 Paleocene2500m below the surface

Layer 1 Cretaceous3500m below the surface

CRS. Common Risk Segment surveys tell you about the probability of a structure in the block/cell containing

oil or gas

Surface

2D Seismic surveys

Traps can be found with seismic surveys

2D seismic survey is a cross section of the geological layers along either a column or a row.

2D seismic surveys are used for locating prospects.

Real Seismic

                                                                                                                                  

                                     

Real Seismic

OilSim of 2DSeismic

Unprocessed Processed

Interpreted Red is top of the sealing rock

Green is top of the reservoir rock

Anticlinal traps

Fault traps

Leakage

Leakage?

Leakage

Sealant rock

Order seismic

Buy 2D seismic from the survey shop

Order Seismic

What type of data do you want?

Columns or Rows Unprocessed or processed

data Interpreted or not

Only buy maximum of 1 block of data at a time to speed up processing

Order Seismic

It takes time to process your request

View the Seismic

Red circles – navigate through the 2D seismic

Cross-sections

Column

Row

Prospect, ReservoirBasin,Source

License Round in OilSim Minimum bid is $250K Maximum bid is $7.5M Enter numbers without commas (ex:

250000) You will bid for 3 licenses but each team

will only be awarded one license Highest bid wins the license If two teams bid the same, the team with

the most CP’s gets it Random license awarded if none of your

bids are high enough

Submit your bid before the deadline!

Enter bids Three

different blocks

Three bids

Example-

Block 1123

Bid 250000

Recap on Challenge 2

Study Sensitive Rangelands Survey to see which blocks to avoid

Use Common Risk Segment surveys to see which blocks to examine closer (look for green)

Buy and study many 2D surveys to identify which ones have the most potential traps, as well as the biggest traps.

Solve task 2

Task 2 solved Message sent

to all teams with the results

Credibility Points are given for prosperity of the blocks you bid for

Every team has got one exploration license

Challenge 3 : Exploration Drilling Company management has reviewed

the licence that you were awarded and the potential cost to drill a well.

Although the possibility of finding oil is fair, the costs involved are large. They have asked you to spread the risk.

Challenge: Farm-out a minimum of 20% on your license and farm-in as much as you can on other good licences.

Partnerships Spread the risk: e.g Investing in

other blocks divides the risks amongst all partners, much more preferable than keeping 100% of one field and all the risk.

Increase probability of profit: investment in only 1 field which could be a dry prospect is possible, whereas the likelihood of investing in 5 fields which are all dry is unlikely.

Challenge 3.1 Partnering Acquire 3D Seismic interpretations

for the block you operate, and study the results from the licensing round-can send under “surveys” to possible partners

Farm-out: Get others to invest 20% or more in your license

Farm-in: Send offers to other teams to buy shares in their viable licences. Submit an offer for each viable licence, with amount offered and share wanted in whole %.

Real 3D Seismic Shows the subsurface structure in a

cube.

3D Seismicin OilSim

Layer 1 Cretaceous

Layer 2 Paleocene

Layer 3 Eocene

Licences

Farm-in Enter the total

amount and the total % you want to buy

Add a message to the seller

Press “Send offer”

Min bid is $25000 and max is $1250000 per %

Financing

When a team receives a Farm-In offer to appears under Financing. This is where a team can receive finance or money for a % of their own blocks

Farm-in license OWNER

decides whether to ACCEPT or REJECT the offer

Partnerships established every time a license owner accepts an offer.

Overview: On the main page, you can see all licenses. 1) licenses you operate, 2) licenses you have invested in, and

other licenses.

Investing

All your farm-in offers to other teams are shown under “Investing” on the right-hand side of the homepage . This is where a team offers investments to other teams for a % of their blocks

Partnerships Partners pay a proportional share of

all future costs incurred by the partnership

Partners receive a proportional share of the net proceedings from any oil or gas found on the license.

The operator team makes all decisions regarding acquiring 3D seismics, drilling of wells and testing of wells.

Information: partners in a block can access info about drilled wells and discovered oil and gas fields.

Ready to drill

Click on drill

Choose rig Truck-mounted Rigs

Light Duty Rigs

Heavy Duty Rigs

Choose Rig

Max drilling depth is important

Rig cost = drilling days * day rate

Rigs

Few: limited number of rigs available.

If you get one: start using it within 20 minutes.

If you don’t: wait in a queue, if another team is using the rig.

Price can change: rig day rates are dynamic.

Service providers 9 Star quality: Good- costs more Bad: - cheaper,

but reliability is low

5 types of providers- Construction and Maintenance , Logistics, Well Services, Camp Services and Analysis

Penalties & Fines

Certain problems can occur if Service Provider Selection is poor quality

Other penalties can occur if you drill in areas indicated as problematic in the Environmental Impact Assessment

As in real life, problems can occur randomly and these are also applied with fines levied accordingly.

Oil spill control – 5% of overall drilling costs

Environmental Impact Assessment

Drill Position EIA:

enviromental impact analysis shows where not to drill.

Place your mouse where to drill

Drilling Position

Layer 1 Cretaceous

Layer 2 Paleocene

Layer 3 Eocene

Drill Position

Too deep for the chosen rig.

Estimated cost

Drilling Days

Drilling Result

Proven volume (MBOE) counts Test may increase proven volume Remember to tick the boxes!

Testing Only if you discover a field – find Oil

or Gas You decide whether you want more

information about that field More information by doing a

production test (and other tests) Tests costs. Tests take 10 days per

field. Tests have the same day-rate as the drilling if you use the same providers.

Value and ROI

Volume Range, e.g. 1-897 Proven Reserves e.g. 1

Value and ROI

Calculation of licence value

Sales value

Value and ROI

Costs Value of Licence

Appraisal From Probable volume to proven

reserves

Narrowing ranges

Exploration well: 0 to 572 MBOE (after drilling) 11 to 466 MBOE (after testing)

First appraisal well: 25 to 333 MBOE (after drilling) 34 to 310 MBOE (after testing)

Second appraisal well: 65 to 250 MBOE (after drilling) 101 to 152 MBOE (after testing)

Only proven MBOE counts

Increasing proven volumes

Appraisal wells - proven reserves increase

Range between proven and possible is decreased

Effect on calculation of licence

Challenge 3B Drilling

Continue... Narrow uncertainty: Drill appraisal

wells to get proven volumes Drill into other prospects to find

more proven volumes. Farm-in and -out: Get into other good

blocks. Two additional licensing rounds:

Repeat the processes. Money: Apply for more money, if you

run out of cash.

Apply For More Funds

Click on Apply for More Funds Tab. 1 CP for each $100,000 applied for. Answer the questions: All correct

gives cash and you can keep CPs. One wrong gives cash and you keep ½ of your CPs. Two wrong gives ½ cash and you lose all CPs. All wrong, you get no cash and lose all CPs.

<10 credibility points: Apply for cash and be fined $5million for each $20million requested.

Licence strategy

Access to new

exploration areas

Make new discoveries

World class project

performance

Increased recovery through

systematic plans and

actions

Exploration acreage:• Resources• Reserves• Production