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1、技术经济学英文版演示文稿C1 Still waters run deep.流静水深流静水深,人静心深人静心深 Where there is life, there is hope。有生命必有希望。有生命必有希望1.1 Decision Making Process Economic decisions go hand in hand with technical decisions in the petroleum industry. Each decision is associated with several steps. In most instances, we need to un
2、derstand these steps before we can determine the feasibility of a project. Starting from whether to explore （勘勘探探）for oil and gas, the economic decisions become an integral part of the project. The first decision may be whether to sign an agreement to acquire a concession（让让步步）on a lease（租租约约）. An a
3、ssociated decision would be how much of a signing bonus (签签字字定定金金)needs to be paid. Also, what types of additional commitments(义义务务) such as work programs and future drilling activities are made. In the next step, if a concession is acquired, one needs to decide if additional geological （ 地地 质质 学学 的
4、的 ） or geophysical（地地球球物物理理学学的的） data needs to be gathered before drilling a well. If sufficient data are available, where should the first well be drilled. If the well is successful, We need to decide if the hydrocarbon reserves are in sufficient economic quantities to justify additional drilling a
5、nd exploitation（开采）（开采）.After finding hydrocarbons and knowing that they can be produced in economic quantities, we first need to decide whether to develop or sell to another party. If we decide to develop, we need to consider the decisions during the production phase. . Starting from the type of dr
6、illing technique we need to use, we need to make decisions associated with the well completion techniques（完完井井技技术术), surface separation equipment, the piping(管管道道） and tubing（油油管管） requirements and the rate of production. These factors are further compounded by the changing economics of oil and gas
7、prices over which the producer may not have any control.The economic decisions continue throughout the producing life of the project. Once the production begins smoothly, we will have to worry about the possibilities of secondary（二二次次） and tertiary （三三次次)oil recovery techniques, drilling of in-fill
8、wells(加加 密密 井井 ） , and the implementation of artificial lift techniques. . Not to mention, the production scenario(方方案案) can be significantly affected by changing government regulations either related to production quotas（ 配配 额额 ） or to the environmental and political concerns. During the same time,
9、 knowing that the present reserves are going to last over a finite period, we will have to make decisions related to future acquisition and leasing of onshore and offshore lands.As discussed, the decision making process is cyclical（循循环环的的） and continues throughout the perpetual existence of the oil
10、company. Although we have only discussed the decisions related to the exploration and production of the hydrocarbons. it should be remembered that the refining and processing of hydrocarbons also involves several decisions. We need to understand the procedures involved in any of these decisions. Our
11、 objective in this course is to understand the economic principles related to exploration and production of hydrocarbons and study the economic evaluation process in the presence of uncertainty. In achieving this objective, one should realize that although a single answer to any question is desirabl
12、e and often warranted, in many realistic situations, it is very difficult to obtain a unique（唯一的）（唯一的） answer. We will first concentrate on obtaining a single answer using basic economic principles. We will then review the procedures involved in quantifying uncertainties in an economic evaluation pr
13、ocess. Once the uncertainties in making a certain decision are clearly identified, the decision maker will be aware(知知道道) of the consequences(因果关系因果关系) of the final decision.In this chapter, we will discuss the decision making process in economic analysis. Many of the steps in this decision making p
14、rocess will be expanded in the subsequent chapters.1.1 Decision Making ProcessAny decision making process has to be a rational, well informed process. It should be consistent with the available information and the constraints imposed. Unlike playing a card game or gambling, intuitive deductions(直觉推论
15、) or gut feeling(内情) are rarely useful in making an objective decision related to economic evaluation. The steps involved in such rational economic decision are as follows:1.1.1 Recognition of Problem(问题识别）问题识别）Recognition of problem includes defining the problem at hand, its importance, and associa
16、ted uncertainties and risks dealing with such a problem. As an example, typical problems faced in the petroleum industry are:* Should you buy a lease or concession?* How many wells need to be drilled?* What production scheme should be applied?* What type of drilling method should be used?If we can c
17、onsider the development and exploitation of the petroleum reservoir in a chronological order, the problems we will encounter can be stated as:Will geological/geophysical and surrounding reservoir data locate the reservoir? * Will the wild cat well(野猫井，也称初探井。在尚未发现具有商业价值的油气地区所钻的探井)produce in commercia
18、l quantities to justify additional investigation?* Will additional delineation(描述) be required before further development?* Is full development of the field economically feasible?* What should be the optimum strategy(优化策略) for exploiting the reservoir?In recognizing these problems, we also need to u
19、nderstand the associated risks and uncertainties. Some of the commonly observed uncertainties are:* Chance of discovery and effect of geological control.* Reservoir heterogeneity(不同成分不同成分).* Interest/inflation rates.* Price variations in hydrocarbons.* Government control and regulations.* Political
20、instability.* Environmental concerns.* Reliability of data.* Capital requirements.A complete recognition of a problem should include the identification of a problem and the associated risks. Without the inclusion of risks, the solutions obtained may be simplistic and are often misleading.1.1.2 Ident
21、ification of Objective/GoalOnce the problem is identified, the next step is to ascertain (确定)the objectives which need to be satisfied. For the same problem, depending upon the objectives, analysis can be different. As an example, an oil company with a goal to optimize production, and a lending inst
22、itution(贷款机构) with a goal to provide a secured loan will analyze the same prospect differently. An oil company will consider the economic analysis in the most favorable light to either secure the approval of loan or of its shareholders. The lending institute（信用机构）, on the other hand, will analyze th
23、e prospect in the most conservative fashion, its objective being providing a secured loan. It may cut the potential reserves of a prospect in half before granting a loan to assure that sufficient collateral exists on a loan.Briefly, typical objectives associated with any petroleum industry problem c
24、an be summarized as follows: * Maximization of profit/minimization of loss.* Lending of capital using secured credit.* Diversification of activities.* Determining impact of government regulations.* Public perceptions.* Maximization of jobs.* Environmentally sound operations.* Selling and buying prop
25、erties.* Capturing or increasing the market share.* Tax assessment.* Safety considerations.* Improving employee satisfaction. All the objectives are not necessarily monetary. The non-monetary objectives can result in choosing different solutions than the ones chosen by simply concentrating on the ob
26、jective of maximizing profits or minimizing losses. We will, however, concentrate on this monetary objective. Consideration of non-monetary objectives involves factors which are difficult to quantify, and as a result, difficult to evaluate. If these factors have to be considered, every attempt shoul
27、d be made to convert them in terms of monetary units, except when the non-monetary objectives have ethical considerations. 1.1.3 Assembly of Relevant dataData collection is often tedious and sometimes the most time consuming process. Without a careful collection and analysis of available data, the r
28、esulting economic analysis may be worthless. The assembly of data requires evaluation of available resources and feasibility of obtaining additional data. This step itself involves a decision making. A design of waterflood Oil and gas investmentThe evaluation of market consequencesPrediction of futu
29、re benefits Prediction of oil price Overall, collection of the relevant data is one of the most time consuming(耗费时间) and the critical steps in economic analysis. Incomplete collection can have significant effects on the final solution.1.1.4 Identification of Feasible AlternativesAnalysis of a given
30、problem may require considering several alternatives. Unless all the alternatives are identified, the overall analysis may result in a sub optimal solution. Genuine creativity(创造力) and innovation(创新) are an integral part of this process. 1.l.5 Selection of CriterionThe selection of a criterion for e
31、valuating the alternatives should be consistent with the goals and objectives of the problem. Using the selected criterion, we should be able to arrange the alternatives for solving a problem in such a manner so as to select the most desirable alternative.In selecting the criterion, only the differe
32、nces in the alternatives are relevant to their comparison. For example, if comparing the two houses with the same price, we will only consider the differences in location, type and annual maintenance costs. On the other hand, in buying a dining table, if two tables are the same quality built by diff
33、erent manufacturers(厂商), the differences in the prices would be the only consideration. If we restrict ourselves to purely economic analysis, most of the criteria can be grouped into three categories.Fixed InputThis criterion is applicable where the amount of money or resources are fixed. The object
34、ive is to effectively utilize them. An example would be a fixed exploration budget which needs to be spent on potentially attractive prospects. The number of prospects and associated exploration costs are greater than the budget. Therefore, prioritizing of the budget may be required depending upon t
35、he goals of the company. Fixed OutputThis criterion is used where a fixed task needs to be accomplished. The objective is to minimize the resources required to accomplish the task. An example would be laying a pipeline from an offshore platform. We know the diameter and the length of the pipeline, a
36、nd the location of the pipeline where it will be laid. We will have to secure the best method to minimize the resources required for building the pipeline. Neither Input nor Output FixedThis criterion is applied where both the input and output are flexible. The objective will be to maximize the outp
37、ut with minimum amount of resources. An example would be an oil production from a field. If we intend to increase the production through drilling of in-fill wells, we should select the number of in-fill wells such that the incremental cost of each new well justifies the incremental benefit received
38、from the additional production.1.1.6 Construction of ModelIn constructing a model for evaluation of the alternatives, we need to incorporate the goals of our study, the criterion to be used, and the risks associated with the project. Typically, for economic evaluations, the constructed model is comp
39、rised of a set of mathematical equations. Ideally, these equations should reflect the time value of money, cash flow schedule and quantitative evaluation of the uncertainties. Depending upon the complexity of a problem at hand, the complexity of the model will also increase.1.1.7 Evaluation of Alter
40、nativesUsing a proper mathematical model, each alternative to a given problem needs to be evaluated. Application of the model may be computationally intensive and may require the use of computers. Once the evaluation is complete, the alternatives can be ranked based upon the objectives of the projec
41、t so that a proper selection of the best alternative can be made. The best alternative is the one which provides the most desirable solution under a given criterion.1.1.8 Implementation of the Best alternativeOnce a proper selection of an alternative is made, the next step is to implement the best a
42、lternative.1.1.9 Post-Evaluation of the AlternativeAfter the implementation of the best alternative, it is important to revaluate the project after a certain time has passed. This evaluation involves comparison of the observed performance with the predicted performance. If the comparison is acceptab
43、le, no changes need to be made. If there is a difference, an assessment needs to be made regarding the reasons for this difference. Example 1.1 As a petroleum engineer, you have been asked to evaluate the feasibility of installing a compressor for a gas well. Explain all the necessary data you will
44、collect. What are the alternatives you will consider? What criterion will you use to select the best alternative?SolutionTo consider the feasibility of installing a compressor, we need to investigate the additional production received by installing the compressor versus the costs associated with the
45、 compressor.To assess this, the following information needs to be collected:l. The present capacity of the well.2. The incremental capacity as a result of the compressor.3. The price of gas.4. The intake pressure of the pipeline.5. The price of the compressor, if purchased.6. The maintenance cost of
46、 the compressor.7. The cost of leasing the compressor.Alternativesl. Produce under existing conditions.2. Buy a compressor.3. Lease a compressor.Criterion Maximizing the profitProblemCriterionPost-EvaluationImplementationAlternativesDataGoals/ObjectivesModelEvaluationFigure 1.2 Decision Making Proce
47、ss1.2 Interaction Among Various StepsExample 1.2 As an engineer, you are investigating the feasibility of improving the productivity of a well by stimulating it. Based on the calculations you have performed, you expect that the production will increase by 30 bbls/day. In reality, after the stimulati
48、on 采增产措施 为改善油井生产条件，提高油井生产能力而采取的技术措施。例如压裂、补充谢孔、洗井、控制出沙量等技术，扩大油井映出油通道，提高油井渗透略，从而提高油井产量。treatment, the production has gone up by 5 bbls/day during the first week. What possible actions would you take? Why? Solution In this instance, the estimated performance does not compare with the observed performan
49、ce. Based on Fig. l.2, some feed back in the decision making process will be needed. You may consider several options:Option l: Wait for a longer period to see if the production improves after the treatment becomes more effective. In some instances, stimulating the well will not result in an immedia
50、te increase in the production. It is better to be patient. Check with the service company to see what is the typical time period during which the effect should be observed.Option 2: Check the consistency of the input data in the stimulation program. Several sources of error are possible: a) the pred
51、icted damage, say, based on the well test data may not be correct. Therefore, the improvement is not equal to the prediction. Re-analyze the estimated damage; and b) the rock properties may not be conducive to this particular stimulation. Investigate whether this particular rock type should be subje
52、cted to the prescribed stimulation program. Additional mineralogical(矿物学的) analysis may be needed to investigate the discrepancy.(差异)Option 3: If additional data analysis reveals that the stimulation treatment was not the right treatment for this well, explore other possibilities of improving the pr
53、oduction. These possibilities may include: fracturing(压裂) the well, or increasing the number of perforations(射孔 ), changing the tubing size, etc. Although these possibilities should have been investigated before, it is still better to investigate them now rather than ignoring them completely.1.3 Eco
54、nomic Terminology（术语术语）As we discussed in the previous sections, any economic decision making involves choosing the alternative which is the most desirable under the required objectives. Although objectives for a given decision making process can vary, the most commonly used objective is monetary in
55、 nature. That is, we decide on an alternative which will either maximize the benefit, minimize the cost, or, in some instances, maximize the difference between the benefit and the cost. 1.3.1 BenefitAs the name indicates, benefits are the monetary awards received as a result of a given investment. T
56、ypically, the benefits are accrued over a period of time as a result of the present investment. For example, investing money in a newly implemented waterflooding project is going to result in an incremental production over several years in the future. These benefits are called future benefits. This
57、section explains the terminology most commonly used in describing the benefits, the costs and the difference between them. Most of the economic problems encountered(遇到) are of this nature: present investment followed by future benefits. However, in some instances, present benefits are relevant to a
58、given decision making. In these instances, the influence of time on money is not significant. These instances are:* There is no initial investment in the project. Only the operating costs and other factors are relevant. For example, the oil company investigating the feasibility of monitoring the dai
59、ly upkeep(维修) of wells by its own employees versus subcontracting(转包合同)it to another company.* The initial investments may be different. However, once the initial investment is made, the performance of the alternatives is assumed to be similar. Therefore, the alternative with the lowest cost would b
60、e the most economical. For example, if a company is investigating buying trucks for its employees for the field work. If the trucks from different manufacturers are essentially comparable in performance and maintenance, then the truck with the lowest cost would be selected.* The expected future bene
61、fits accrue over a very short period of time (typically, less than one year). As a result, the importance of time can be ignored, and the future benefits can be treated as present benefits. For example, a stimulation treatment for a well results in a relatively quick benefit. However, the benefit ma
62、y not last for a long period. The analysis to investigate the feasibility of stimulation, therefore, can be conducted by assuming the benefits to be present benefits. l.3.2 CostsIn any economic analysis, the costs can take different forms. We provide here some basic definitions of costs. Fixed Costs
63、 Fixed costs are not affected by the activity level (production changes) over a feasible range of operating conditions. That is, they are not a function of production or output. These costs remain fixed. These costs typically include insurance costs, management and administrative salaries and intere
64、st paid on borrowed capital.Variable CostsVariable costs vary as a function of operating conditions. These costs are affected by the rate of output. For example, the utility(公 用 ) costs (electricity, water, etc.) and the labor costs are strongly dependent on the overall production. Incremental Costs
65、Incremental costs represent the additional costs that will result from increasing the output of the field. For example, if the production from a field is to be improved by drilling two in-fill wells, then the incremental costs will include the costs of drilling the two wells, as well as the addition
66、al costs associated with the operation of two wells.Direct CostsDirect costs are the costs that can be directly allocated to a specific output. Costs of utilities or labor are good examples, as well as the maintenance of pumping units.Indirect CostsThese costs are difficult to attribute to a specifi
67、c output. These costs typically include costs of administration, training programs, legal fees, etc.Sunk CostsSunk costs represent an important economic concept. These costs have occurred in the past prior, current and future to decision making. These costs have no relevance to future decision makin
68、g. Since these costs have already been committed, they bear no relevance to any future decision making. Any economic decision depends on the future costs versus future benefits. Since these are the things we can control based on our analysis.Opportunity CostAn opportunity cost is the cost one has to
69、 pay by foregoing a potential investment which may result in some benefit. A personal example would be, if you lend money to your friend at a zero percent interest rate which you would have invested in the bank at 10% interest rate, then the opportunity cost for you is 10%. Life Cycle CostLife cycle
70、 cost represents the cost of the entire life cycle of the project. For a petroleum reservoir, this cost represents the total cost involved in a reservoir starting from exploration till the time of abandonment.We can divide the life cycle cost into two phases: exploration and exploitation. The explor
71、ation phase includes the collection of geophysical and geological data and drilling few exploratory wells to assess the economic feasibility of the field. If the results from the exploration are favorable, the exploitation phase will begin with the drilling of development wells, deciding on the opti
72、mum strategy of production, and exploiting the reservoir through primary and secondary recovery processes.l.3.3 ProfitsProfit represents the difference between the benefits and the costs. If we define the benefits as B, the costs as C, then profit can be written as P=B-C (l .l)when a given project d
73、oes not have either fixed benefits or fixed costs, an appropriate criterion for economic decision making would be to maximize the profit or the difference between the benefits and the costs.1.3.4 InflationMoney has two faces. It is capable of generating money through investment (earning power of mon
74、ey). If you invest money in a productive project it will earn additional money. We are going to discuss the earning power of the money and its impact on economic analysis in the next chapter. Money also has the other face. It is capable of buying goods (buying power of money). Inflation deals with t
75、he buying power of money. Inflation reflects the reduced buying power of money as a function of time. In other words, the price of goods and services increase over time in some countries, very slowly (i.e., United States); in some countries, at a very rapid rate (i.e., Brazil). Deflation（ 通 货 紧 缩 ）
76、, although not very common, is opposite of inflation. It reflects reduction in prices as a function of time. In Chapter 5 we will discuss both the inflation and the deflation in more detail.Example 1.3 An oil well requires pumping equipment. Two companies offer the pump for the well with the followi
77、ng characteristics: Company A Company BInitial Cost $50,000 $50,000Maintenance Agreement $5,000/year $3 ,000/yearPumping Costs $0.50/bbl $0.60/bblUsing the above information, answer the following:a. Which are the variable and the fixed costs?b. If the well produces 40bbls/d, which pump is preferred?
78、c. What should be the production from the well at which both pumps will deliver the same economic performance?Solutiona.Fixed costs: Initial cost of the pump, Maintenance costs Variable costs: Pumping costsb. Since the initial costs for both the pumps are the same, we need only to compare the annual
79、 costs to choose the right pump.Pump A:Annual costs = 5,000+40(bbl/d)365(d/yr)0.5(1/bbl)=$12,300 Pump B:Annual costs = 3, 000 + 403650.6 =$11,760Since the cost of operating pump B is smaller, it should be selectedc. If we assume the production is X bbls at which both pumps will operate at the same c
80、osts we can write 5, 000 + x(365)(0. 5) = 3,000 + x(365)(0.6)Solving for x, x = 54.8 bbls/d.That is, if the well produces 55 bbls/d, you can choose either of the two pumps. Example 1.4 A copying company is interested in expanding its market. Presently, it charges $.06/page of copying. The company av
81、erages about 25,000 pages per month per machine. The maintenance cost of the machine is $500 per month with an additional cost of $.03/page of copying. A recent market survey indicates that by reducing the cost it charges to the customers, the company can get a bigger share of the market. For exampl
82、e, for a reduction in the price by one cent decrement, the company can average an additional 25,000 pages per machine. What criterion should the company use to decide the price it charges to the customers? What price should it charge?SolutionSince both the benefits and costs would change with changi
83、ng the price, the criterion should be maximization of profit. Using Eq. l.l, profit is defined as P=B-CFor example, for a price of $.06/page, we can calculate the profit asP = 0.0625,000-(500+0.325,000)= $250/ machine / monthSimilar calculations can be conducted at other prices as belowCopies Made/M
84、onthPrice Charged$/PageBenefit/Month $Cost/Month$Profit/Month $25,0000.061,5001,25025050,0000.052,5002,00050075,0000.043,0002,750250100,0000.033,0003,500-500Example 1.6 Drilling of an oil well costs $250,000. Initial tests indicated a marginal well. The well will cost $40,000 to complete and will pr
85、oduce 15 bbls per day for a year declining at a rate of 20% per year. The operating costs are expected to be $30,000 per year. Should this well be completed? If it is completed, in which year should it be abandoned if the operating costs remain constant throughout the life of the project? Assume the
86、 revenue of oil production to be $19/bbl. Neglect tax consequences.SolutionIn analyzing this problem, the cost of drilling should never be considered. This is a sunk cost. Irrespective of whether we complete the well or not complete it, we have already spent the money to drill the well. The decision
87、 as to whether to complete it or not to complete it should be based on whether we can recover the cost of completion and the operating costs as a result of the production. If the revenues generated are sufficient to cover these costs, the well should be completed. This way, although we may not be ab
88、le to recover the costs of drilling, we will minimize the overall loss.The yearly profits from this well are shown below.YearProductionRevenue ($)Costs ($)Profit ($)15,475104,02570,00034,02524,38083,20030,00053,22033,50466,57630,00036,57642,80353,26130,00023,26152,24242,60530,00012,20561,79434,07830
89、,0004,07871,43527,26930,000-2,731In year 7, the costs exceed the revenues. Therefore, we should abandon the production.In year l, the costs include the cost of completion plus the operating costs. The production in each year is calculated by multiplying the previous years production by 0.8. For example, in year 1, the production is equal to, = 15 bbl/day365days=5,475bblsTherefore, production in year 2 is, = 0.85,475= 4,380 bblsEnd
