2. Intro pt 2 Flashcards
Describe the industries approach to project management
- Rigid project structure
- data -> decision ->repeat
- teams working on different areas of data collection
- statistically ranked probabilities
What are some economic milestones during the appraisal and development phases
Potential to affect priject value decreases throughout the phases
- Various concepts to test technical feasibility and economic viability, use cost and income estimates to filter out unrealistic options
- Select design adn developement plan based on cost, risk and returns, to obtain funding and license from authorities to procede
- optimize design vs future changes and start procurement
- procure needed parts
- commissioning
Descibe the factors throughout the project phases that have potential to affect the project value
infered vs indicated vs measured mineral resource
Define Uncertainty
Uncertainty: a range of possible values or outcomes, resulting from imperfect knowledge. May (or may not) need to be reduced
What non geological factors can effect uncertainties?
- political instability
- inflation rates
- supply chain issues
What are some geological uncertainties?
- borehole stability
- seal integrity
- reservoir quality, Net to gross (porosity)
- interwell connectivity
- oil/gas composition
- gross rock volume
- position of fluid contacts
Define Risk
Risk: an event (or set of circumstances) that, should it occur, would have a material effect on the final value of a project - measured in monetary terms
How is risk characterized?
description of the event, probability of occurence and impact if it occurs
Risk = Impact x Probability
Description often consists of cause - event - consequence
Impact can be positive (an Opportunity) as well as negative
Needs to be managed
Risk/Opportunity have financial, technical, societal, reputational and environmental impacts
What are the risk responses?
Accept: No more work to be done (ignored, under control or unmanaged)
Mitigation: A proactive risk response; a measure taken before a risk occurs to reduce its occurence probability and/or impact
Contingency: A planned adn documented action to be taken in reaction to a risk event when it has occurred, as identified by a trigger condition
What are some geological risks?
- leakage of hydrocarbons
- sub-economic volumes
- incorrect well placement
- poo quality oil/gas
- production lower than expected
What is a risk matrix?
- A risk matric allows a team to evaluate the key risks to the project
- From this a mitigation plan - which might include data collection - can be established
Risk(Impact x Probability) vs. Ability to influence (Manageability)
Why do scientists need to consider economics?
- A sound understanding of company economics will put your work and your projects into context - what should you focus on, what is really needed?
- We cannot afford to consume more resources and wealth to obtain resources than we benefit by obtaiing it. No society has ever survived when the total expenditure of effort has exceeded the resulting benefit to that society
Define CAPEX
CAPEX- CAPital EXpenditure
- Exploration costs
- Infrastructure costs (facilities)
- All ‘‘one-off’’ charges
Define OPEX
OPEX- OPerating EXpenditure
- maintenance charges
- chemical treatment and disposal costs
- Tariffs ( charges to other organisations to use their facilities)
- Salaries, insurance
Define Government take
Government take
- royalty, tax
- Social contributions e.g. education funds
What are the five project economic indicators?
-
First Production start of gross revenue
2.Maximum exposure greatest amount of money to be lost; if company does not have capital, outside capital is needed
3.Payback time recover investment and start making money; importnat measure of financial risk for company and investors
4.Economic lifetime when net cashflow turns negative, project should be halted
5.Cumulative net cashflow available to investor at project end
Explain the time value of money
Projects run over long timescales so the changing value of money is a big factor
A project involves investment in short term to earn cash surplus in the long term
Project value needs to be discounted to net present value (NPV)
THis can change the payback time
