UXB120 Introduction to Heavy Engineering Sector Technology Assessment

Parts A and B: Background of Your Role and  Your Company 

Background for Part A and Part B 

You are employed as a Cost Estimating Engineer in a company named “MYGOODCO”.  Your manager’s name is MANAGER. 

MYGOODCO is an upstream petroleum exploration and production company. As a Cost  Estimating Engineer, you provide services to Exploration Teams, Project Development  Teams, and ongoing Operations Teams. For your current role as a Cost Estimating  Engineer, you only have these internal company stakeholders to work with and satisfy. 

MANAGER comes to you with assignments and associated deliverables as needed. 

Part A: Briefing on a Conventional Gas Development 

Current Status for Part A 

• MYGOODCO has successfully explored for, discovered, and now appraised a gas condensate field in NEWCOUNTRY. This will be the first petroleum development for  MYGOODCO in NEWCOUNTRY. 
• The hydrocarbon reservoir is a good quality sandstone with a traditional anticline structure.  It has a surface outline of an oval. Maximum width of the field is about 3 kilometres. It runs  from about 3 kilometres offshore in the shallow bay waters to 8 kilometres onshore in  reasonably level and well drained cane fields. 
• Appraisal of the hydrocarbon field shows sufficient quantities of gas and associated  condensate oil to be commercial as a smaller and lower cost development. The gas from  the field can be connected to a gas pipeline grid. The engineers and geologists advise the  hydrocarbon field has a very strong aquifer water drive. 
• In NEWCOUNTRY, a significant seaside community, BIGTOWN, exists that already  supports the oil and gas industry. Near BIGTOWN, a competitor company owns and  operates a crude oil tank farm, crude oil loading jetty, and associated infrastructure to store  produced oil and then pump it onto passing mid-size tankers for oil export into the normal  worldwide oil commodity market.
• Having successfully completed their goals, the exploration/appraisal team is now handing  off to a project team that will progress the gas and condensate oil production opportunity  forward into a development. 
• MANAGER will be part of the overall Governance Board that creates the project team organization and selects the project team members. MANAGER has a strong technical and  project management background. However, MANAGER is new to MYGOODCO, and  comes from a refining background. MANAGER has no experience and no direct knowledge  of oil and gas developments and operations. 

Your Part A Assignment 

MANAGER asks you to brief him/her with a detailed description and understanding of a development of a gas and associated condensate field which uses primary recovery of the  hydrocarbon resource. Your description will begin with hydrocarbon reservoir and progress  through to sales of gas and condensate oil. In a “real life” company/corporate setting, this  briefing would likely be an informal discussion around a table, with a whiteboard for  drawings, and maybe a collection of various drawings, photos, reports, etc. However for  this Assessment No. 2, your briefing will be in the form of a written brief. Feel free to  include figures and tables as you deem appropriate. All figures and tables must include  appropriate explanation and discussion. 

The goal of your brief is to educate MANAGER on what to expect for this hydrocarbon field development project. Naturally, you wish to impress MANAGER, and you also wish to  provide good information so MANAGER can make good decisions when structuring the  project team and selecting the people to fill the roles. As a Cost Estimating Engineer, you  will be providing services and support to the project team, and you wish to work with team  members that can deliver a successful oil development project. 

For your brief, prepare and structure your thoughts into a way that aids understanding to  MANAGER. As you feel appropriate and as one possible example, decompose the  hydrocarbon field development project into major components for discussion. For each  major component, your briefing may include information such as: 

• How and why does this major component fit into the “big picture” of a hydrocarbon field development? 
• What are key technologies, processes, steps, subcomponents, etc.? 
• What are key risks and opportunities for the major component? These should be  grouped and presented in TECOPS categories. 
• What questions do you anticipate coming from MANAGER to help in setting up a  project team? What are your answers?

As some final framing for this brief: 

• The target audience for this brief is MANAGER, not some other internal or external stakeholder. MANAGER will have good knowledge of cost estimating principles such as the AACE cost estimating guide table, and MANAGER will already  understand the project management principles and processes. 
• Mid to high level descriptions are expected for this brief. In your brief, you are free to  include statements that qualifies (e.g., higher, same, lower, etc.) any of your  discussion about scope, quality, schedule, and/or cost. You are not expected to  provide detailed schedule and cost estimates for this brief. For example, if you need  to discuss a vehicle, you can say that it will be a heady duty transport truck. You do  not need detailed descriptions such as a 100 tonne B-Double costing $500,000.

Part B: Planning Conventional Oil Exploration Current Status for Part B 

MYGOODCO has a portfolio consisting of several exploration permits in NEWCOUNTRY.  All permits have prospective conventional oil potential; permit acreage starts onshore and  extends to shallow offshore. A business requirement for the exploration team is a multi year plan of estimated schedule and costs at AACE Class 4 quality. 

Your Part B Assignment 

MANAGER has come to you and requested you to frame and forecast a typical exploration  and appraisal plan for this permit over coming years. This will include schedule, costs, and  associated explanation. Your estimate quality will be “top down AACE Class 4” which  comes from your personal experience and database (i.e., your cost estimating toolbox - see  below). 

For developing your plan, assume a start date of 1st January 2018. You can assume that  oil and gas services are available when needed from BIGTOWN. The exception is that  MYGOODCO is staffed and funded to operate only a maximum of 2 drilling rigs at time.  The normal wet season runs 4 months from December through March each year. During  wet season, onshore field activities are generally differed due to increased costs.  

Management at MYGOODCO would like to complete the full exploration program in the shortest time that is reasonably practical with the above conditions. MYGOODCO would  avoid working in the wet season as those onshore operations double costs and schedule. 

For this Assignment Part B, the format of your framing document shall be a written report  that contains (1) a work breakdown structure (WBS), (2) a high level schedule, (3) other  tables and text as necessary to explain your exploration and appraisal plan, and (4)  explanations of the calculations and assumptions built into your cost estimates. Your  overall plan, WBS, schedule, etc. shall remain at an AACE Class 4 level, not down to  AACE Class 3 type of details.

As a Cost Estimating Engineer, you already have a cost database (toolbox) of past  schedule and cost data in NEWCOUNTRY. This database includes:

Item 

• Annual Inflation Rate 
• Onshore 2D Seismic for follow-up  appraisal activities on an  
• exploration discovery
• Onshore 800m Depth Oil  
• Exploration Well Construct Only
• If needed for Well Testing, Well  Completion of 800m well
• Onshore 2000m depth 
• Conventional O&G Exploration  Well – Construct & Completed
• Well Testing Operations for  extended oil, gas, and water flows
• Barge supported offshore activities  which are near infrastructure, and  in shallow and calm waters
• Geological & technical evaluations 
• Engineering and design for a  Petroleum Development (i.e.,  Front End Engineering), and  Submission for a Production  License
• Wet Season 
• Others as needed – Data to be  individually provided on request  on a well-defined and specific  activity (e.g., what is the cost of a  tall ladder?)

You have met with the Exploration Team to gain more understanding of your task ahead.  Based on their preliminary work to date, the Exploration team advises: 

• The area is approximately 40% in offshore shallow bay waters. Nearby communities  and good infrastructure cover another 20% of the permit area. The remaining 40%  permit area is remote onshore. 
• The area already has good aerial sourced gravity and magnetic data. No further  major gravity and magnetic surveys need to be planned at this time. If needed in the  future, the extra gravity and magnetic surveys would be ground based, localized, and  relatively low cost. 
• Initial geological mapping combined with gravity and magnetic data has identified 10 geologic leads which require further petrophysical data before more geologic  evaluations can be performed. These geologic leads are: 
  •  2 remote area onshore at 2300m 
  •  3 remote area onshore at 2000m 
  •  2 populated area onshore at 1800m 
  •  3 offshore at 1500m. 
• Statistical analysis of these 10 geologic leads indicates that only 3 will mature and become drillable prospects. Of the possible drillable prospects, statistics show that 1  is remote area onshore and 2 are offshore. 
• Of the drillable prospects, statistical analysis indicates that 2 of the drillable  prospects will become oil discoveries. Of the discoveries, 1 is remote area onshore  and 1 is offshore. 
• Final statistical analysis indicates that 1 of oil discoveries would be very small, non commercial, and requires no appraisal. However, the other oil discovery could  progress into a proven commercial oil discovery if appraised. Ultimately if success  occurs, this commercial oil discovery would become the target for an application for a  production licence and associated oil field development. 
• The exploration team prioritises one onshore lead as their very best lead. Therefore  for your planning purposes, the Exploration Team advises you to use this lead as the  one lead that is forecasted to ultimately become a commercial oil discovery.