UXB120 Introduction to Heavy Engineering Sector Technology Assessment
Order Code: Tv363
Question Task Id: 0
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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:
- 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.