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Field Development Plan

Jan BygdevollDiscipline leader Reservoir Engineering

Norwegian Petroleum DirectorateManila 7. February 2006

Jan-06 2

Objectives

w Resource management aimsw Authority's functionw Authority’s toolw Development plan w why?w authority focus and rolesw content w approval procedures

Jan-06 3

Resource Management Aims

w The petroleum resources must be managed such as to provide the best possible economic outcome for the society.w The petroleum resources must be managed within

the context of an environmental sustainable society.w The oil and gas industry should be developed in a

way that makes due consideration to the viable development of other sectors of the society.

Jan-06 4

Petroleum administration body

w Authorities Functionsw Manage the resources to the best of the peoplew Establish regulations to guide the activity towards the

national goalw Monitor/Supervise that the companies comply with

regulationsw Give advice to the politicians (President/Parliament)w Keep administrative records of obligations and rightsw Manage the information

Jan-06 5

Society vs company interestw Increase oil recoveryw Small/marginal fieldsw Joint developmentsw National budgetw Abandonmentw Life cycle analysesw Environmental issuesw Field development plan, area studiesw Transport capacity and tariffs (third party access)

Jan-06 6

Management tools

w Licensing roundsw Approval of Plan for Development and Operation

of a petroleum deposit (PDO) w Approval of Plan for Installation and Operation of

facilities for transport and utilisation of petroleum (PIO)w Production permits (Export of gas from a field

requires a government approval)w Regulation of the gas transport system

Jan-06 7

Objectives

w Resource management aimsw Authority's functionw Authority’s toolw Development plan w why?w authority focus and rolesw content w approval procedures

Jan-06 8

What is a PDO?

PDO = Plan for Development and Operation(Hydrocarbon deposit)

PIO = Plan for Installation and Operation(Pipeline/infrastructure)

Jan-06 9

Why PDO?

w Ensure maximized added value for society at largew Ensure a qualitative good government approval

processw Ensure efficient evaluation of development plan

Jan-06 10

The information received in a PDO

w The authority is able to…

w do strategic planningw control big international oil companiesw challenge the oil companies (resource

management & safety)w increase the ”government take” by assisting oil

companies to operate more efficiently

Jan-06 11

Petroleum Policy

w Good estimates for resources, costs, production and prices give a solid basis for decisions in all phases of the Petroleum Activity:

w Explorationw Planning for optimal use of infrastructurew Developmentw Productionw Abandonment

Jan-06 12

What is a PDO?

In Norway:

Time

Operator creates a PDO

NPDAnalysis

Recommend

TermsMPE

Recommend

TermsParliament

Gives permission

Jan-06 13

Authorities’ PDO process

w Impact assessment (when required)w Received by the Ministry 2-3 months before submission of the PDOw Consultation process with all relevant authorities, institutions and groups

w PDOw Received by the Ministry of Petroleum and Energy (MPE)w Consultation with

Norwegian Petroleum DirectorateMinistry of Labour and Government Administration/Petroleum Safety Authority

w MPE drafts white paperw Consultation with relevant ministries

w Proposition submitted for approvalw Approval by the Parliament or by the King in Council (Government)

Jan-06 14

Development PlanningNPD interaction prior to PDOw Objectives:w To ensure that the authorities considerations are smoothly included

in the field development during the early planning phasew Obtain an efficient approval process

w Measures:w Perform ”Area-study” (study the effect of the new field

development in a broader geographic perspective)w Gather information by participation in licence committee meetingsw Have an early dialogue with operatorw Make in-house evaluations and investigate alternative

solutions/interpretationsw More meetings with operator to influence decisions or clarify

questions

Jan-06 15

Requirement to Submit a PDO

w A PDO is a description of all important aspects of the development

w A PDO shall be submitted to the Ministry for approval when a license decides to develop a petroleum deposit (field)

w The Ministry may require an account of the impact on the environment or other affected activities (Impact Assessment)

w Substantial contractual obligations must not be undertaken, nor construction work started, until the PDO has been approved, unless by consent from the Ministry

w On application from the licensee the Ministry may waive the requirement to submit a PDO

Jan-06 16

PDO - Content

1. Geological evaluation2. Reservoir evaluation3. Drilling and completion4. Field installations5. Costs and schedule6. Health, safety and environment7. Organisation and execution8. Economic evaluation9. Removal10. Area considerations

$ $ $

Jan-06 17

8. Economic evaluation

Assumptions: Real-term economics analysis:Reservoir/profile Before taxCapex Discount factorOpex NPV (/IRR)Schedule Break-even oil pricesTariffs SensitivitiesPrices After taxExchange ratesFinancing

PDO – Economic analysis

Jan-06 18

PDO – Economic analysis

w General economic assumptions and evaluation methodw Price developmentw Currency developmentw Rate of returnw Tariff/income/expenses

w Resultsw Pre taxw Post tax

w Economic uncertainty evaluations

Jan-06 19

PDO - Economic Policy

w Good estimates for resources, costs, production and prices give a solid foundation for:

* Economic Policy* A sustainable long term finance-policy* Planning monetary policy issues

w High quality forecasting is needed

Jan-06 20

What is a PDO?

In Norway:

Time

Operator creates a PDO

NPDAnalysis

Recommend

TermsMPE

Recommend

TermsParliament

Gives permission

Jan-06 21

w Ensure that the plans are consistent and with conclusions that are thoroughly evaluated and documented

w Ensure that all important aspects of the development are included in the plan, according to acts and regulations

w Focus on areas where there is a difference between what is optimal for the society and what is optimal for the licensees

w Make recommendations and provide the best possible basis for decision for Ministry and Parliament/Government

w Present conclusions to the Ministry

Approval of PDONPD’s role

Jan-06 22

NPD interaction after PDO approval

w Follow-up of conditions in the PDO approvalw Follow-up that safety and working environment are in

line with regulationsw Report discrepancies to the Ministryw Informationw licensee meetings w Ad hoc meetings on project status

Jan-06 23

Field development plan

w Differences between a company’s interest and a society’s interestw A field development plan is used to achieve the

society’s interestw The authority has to do their own evaluation of the

areaw Good estimates in a field development plan give a

solid foundation for decision in all phases of the petroleum activity

Sum up