Evaluating Net Cash Flow in Greenfield Oil and Gas Projects: A Case Study of Low, Base, and High Scenarios
Keywords:
Net cash flow, greenfield project, oil and gas, sensitivity analysis.
Abstract
This study conducts a comprehensive net cash flow (NCF) analysis of a greenfield oil and gas project, utilizing secondary data to evaluate low, base, and high case scenarios. The field, expected to produce oil for 19 years (2020-2039), has estimated recoverable reserves of 1,086 million barrels (MMbbl). In the base case scenario, the project yields an NCF of $27,748,650, with significant cost components including water variable costs at $3/bbl, oil variable costs at $7/bbl, and an oil price of $50/bbl. Sensitivity analysis via a tornado diagram reveals oil price as the most influential variable, with fluctuations significantly impacting NCF. The low case scenario results in an NCF of $9,815,950, driven by lower oil prices and reduced costs, while the high case scenario projects an NCF of $45,681,350 under favorable economic conditions. The project's financial performance transitions from negative NCF during initial high-cost phases (2020-2023) to positive NCF from 2024 onwards, peaking in oil production years (2024-2029) and subsequently declining due to reduced reservoir pressure. These findings underscore the critical role of oil price and operational efficiency in the financial viability of greenfield oil projects, providing strategic insights for future investments and operational planning.
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References
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Paidin, W. R., Mwangi, P., & Rao, D. N. (2010). Economic evaluation within the scope of the field development and application of the Gas-Assisted Gravity Drainage (GAGD) process in an actual Northern Louisiana field. SPE Hydrocarbon Economics and Evaluation Symposium, 65–77. https://doi.org/10.2523/129723-ms
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Peacock, D., & Duncan, A. (2019). Management of reserves in mature oil and gas fields. Society of Petroleum Engineers - SPE/IATMI Asia Pacific Oil and Gas Conference and Exhibition 2019, APOG 2019, October, 29–31. https://doi.org/10.2118/196252-ms
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http://dx.doi.org/10.1017/CBO9780511800917%0Ahttp://public.eblib.com/choice/publicfullrecord.aspx?p=3004653%0Ahttp://books.google.com/books?id=F4Y_AQAAIAAJ%0Ahttp://catalog.hathitrust.org/api/volumes/oclc/297147090.html%0Ahttp://proquest.safaribooksonline
Raniolo, S., Mancini, S., Vimercati, S., Gentil, P., Simeone, D., & Buchanan, A. (2014). The use of new technologies to maximize oil production in a viscous oil field in arctic environment: The Nikaitchuq experience. Society of Petroleum Engineers - 30th Abu Dhabi International Petroleum Exhibition and Conference, ADIPEC 2014: Challenges and Opportunities for the Next 30 Years, 3, 2335–2343. https://doi.org/10.2118/171896-ms
Sinha, A. K., Jalan, S., & Garimella, V. S. S. (2024). Notional Development Concept Screening using Probabilistic Workflow for Prospects & Greenfield Projects. International Petroleum Technology Conference, IPTC 2024. https://doi.org/10.2523/IPTC-24030-EA
Stanley, L. T. (1982). Petroleum Engineering Economics Today. JPT, Journal of Petroleum Technology, 34(4), 691–695. https://doi.org/10.2118/10896-pa
Sundberg, K. (1980). Effect of Impregnating Waters on Electrical Conductivity of Soils and Rocks. Log Analyst, 21(3), 19–31.
Thapar, S. (2024). Project Economics (Vol. 2). https://doi.org/10.1007/978-981-99-9384-0_5
Thompson, R. S. (1998). Spe 49179. 567–574
Proceedings - SPE Annual Technical Conference and Exhibition, 2441–2445. https://doi.org/10.2523/84332-ms
Ashikwei, D., Iledare, O., & Amarfio, E. (2023). Fiscal System Design and Economic Evaluation for Petroleum Resource Development in Ghana (Comparative Analysis Between Fixed Royalty and Sliding Scale Royalty). Society of Petroleum Engineers - SPE Nigeria Annual International Conference and Exhibition, NAIC 2023.
https://doi.org/10.2118/217256-MS
Azizurrofi, A. A., & Firdaus, R. R. (2019). Forecasting and modelling the oil and gas reserves in Indonesia using the creaming curve and linear regression analysis. SPE Middle East Oil and Gas Show and Conference, MEOS, Proceedings, 2019-March. https://doi.org/10.2118/194786-ms
Bo, Z., Hurter, S., Hoerning, S., Underschultz, J., & Garnett, A. (2023). Accounting Green and Blue Hydrogen in a Net Cash Flow Model for Techno-Economic Assessment on Underground Hydrogen Storage in Australia. Society of Petroleum Engineers - Asia Pacific Unconventional Resources Symposium, APUR 2023. https://doi.org/10.2118/217336-MS
Dhall, P. (2019). Quantitative Data Analysis. Methodological Issues in Management Research: Advances, Challenges, and the Way Ahead, 109–125. https://doi.org/10.1108/978-1-78973-973-220191008
Fanchi, J. R., & Christiansen, R. L. (2017). Introduction to petroleum engineering / by John R. Fanchi and Richard L. Christiansen.
Feineman, D. R. (2009). Realizing value from real time well monitoring in greenfield assets. Digital Energy Conference and Exhibition 2009, 79–86. https://doi.org/10.2118/122676-ms
Ferro, S., Tomasini, J., Soto, M., Morales, E., Rodríguez, P., Conti, B., & De Santa Ana, H. (2012). Risk analysis and economic evaluation of oil and gas prospects offshore Uruguay. SPE Latin American and Caribbean Petroleum Engineering Conference Proceedings, 1, 224–237. https://doi.org/10.2118/151825-ms
Fleckenstein, W., & Zimmermann, J. (2013). Stochastic model and sensitivity analysis of the economics of a “shale” development program. Unconventional Resources Technology Conference 2013, URTC 2013, August, 12–14. https://doi.org/10.1190/urtec2013-255
Gonzalez, S., Gomez, F., Gonzalez, G., & Montero, J. (2019). Benchmarking well, reservoir and facility management WRFM performance in greenfield heavy oil assets. Society of Petroleum Engineers - SPE Kuwait Oil and Gas Show and Conference 2019, KOGS 2019. https://doi.org/10.2118/198167-ms
Grecco, M. G., & Corp, U. (1987). aTe 5545 Deepwater Development Economics.
Iledare, O., & Fubara, S. A. (2017). Pragmatic joint venture financing options in Nigeria: Implications on economic metrics and government take statistics. Society of Petroleum Engineers - Nigeria Annual International Conference and Exhibition 2017, 1220–1231. https://doi.org/10.2118/189095-ms
Khasanov, M. M., Bakhitov, R. R., Sitnikov, A. N., Ushmaev, O. S., Dmitruk, D. N., & Nekhaev, S. A. (2013). Optimization of production capacity for oil field in the Russian Arctic. Society of Petroleum Engineers - SPE Arctic and Extreme Environments Conference and Exhibition, AEE 2013, 2, 1636–1648. https://doi.org/10.2118/166905-ms
Kuuskraa, V. A., Ryan, P., & Muller, J. M. (1977). Economics of Offshore Oil Production. Table 1, 217–232.
Lima, G. A. C., & Suslick, S. B. (2002). The Effects of Environmental Studies Requirement on the Investment Decision Process under Real Options Approach: A Case Study of Recent Brazilian Petroleum Industry. International Conference on Health, Safety and Environment in Oil and Gas Exploration and Production, 952–964. https://doi.org/10.2523/74023-ms
Lucchesi, R. D. (2019). Main factors impacting oil projects return: A sensitivity analysis. Proceedings of the Annual Offshore Technology Conference, 2019-May(May), 6–9. https://doi.org/10.4043/29594-ms
Ma, K. (2020). OTC-30578-MS Developing an Offshore Greenfield by Exploration and Development Integration-A Case Study of LD Oilfield LD Oilfield Description Greenfield Introduction Favorable reservoir analysis and evaluation strategy.
Mazeel, M. (2010). Petroleum Fiscal Systems and Contracts. In Diplomica Verlag. https://books.google.com/books?id=Le0xhJkRJ8wC
McGee, M. D., & Dysert, J. E. (1986). Milne point production facilities: A design for a marginal arctic oil field.
Proceedings of the Annual Offshore Technology Conference, 1986-May, 107–113. https://doi.org/10.4043/5094-ms
Merklein, H. A., Aime, M., & Dallas, U. (1972). SPE 41 32 Petroleum Economics.
Mian, M. A. (2015). Volume 1 Deterministic Models. In International Journal of Production Research (Vol. 53, Issue 9). www.pennwellbooks.com
Mian, M. A. (2020). Application of stochastic analysis in project economics. SPE Reservoir Evaluation and Engineering, 23(4), 1373–1380. https://doi.org/10.2118/202496-PA
Nascimento, J. H., Santos, A. A. S., & Schiozer, D. J. (2018). Dynamic uncertainties appraisal throughout a development project, applying prms indicators of resource and reserves categorization. Proceedings of the Annual Offshore Technology Conference, 6, 4131–4160. https://doi.org/10.4043/28889-ms
Nesvold, E., & Bratvold, R. B. (2023). Field Features Do Not Explain Greenfield Production Forecasting Bias. SPE Journal, 28(3), 1290–1306. https://doi.org/10.2118/212834-PA
Ortiz-Volcan, J. L., Ahmed, K., Azim, S., Issa, Y., Pandit, R., Al-Jasmi, A. K., Hassan, M. O., Sanyal, A., & Taduri, S. (2018). Opportunity assessment of a deep extra heavy oil green field: Scenarios for life cycle cost optimization under uncertainty and risk. Society of Petroleum Engineers - SPE International Heavy Oil Conference and Exhibition 2018, HOCE 2018. https://doi.org/10.2118/193675-MS
Ortiz, T. (2015). Using composite modeling as a means to maximize profitability. JPT, Journal of Petroleum Technology, 67(11), 71–73. https://doi.org/10.2118/1115-0071-jpt
Paidin, W. R., Mwangi, P., & Rao, D. N. (2010). Economic evaluation within the scope of the field development and application of the Gas-Assisted Gravity Drainage (GAGD) process in an actual Northern Louisiana field. SPE Hydrocarbon Economics and Evaluation Symposium, 65–77. https://doi.org/10.2523/129723-ms
Parti-, E. O. F. G., In, C., & Companies, O. (1979). Spe 7713 economics of government parti- cipation in operating companies.
Peacock, D., & Duncan, A. (2019). Management of reserves in mature oil and gas fields. Society of Petroleum Engineers - SPE/IATMI Asia Pacific Oil and Gas Conference and Exhibition 2019, APOG 2019, October, 29–31. https://doi.org/10.2118/196252-ms
Peterson, M. T. A.-T. T.-. (2009). An introduction to decision theory LK - https://tue.on.worldcat.org/oclc/698022813. In Cambridge introductions to philosophy (Issue 2008).
http://dx.doi.org/10.1017/CBO9780511800917%0Ahttp://public.eblib.com/choice/publicfullrecord.aspx?p=3004653%0Ahttp://books.google.com/books?id=F4Y_AQAAIAAJ%0Ahttp://catalog.hathitrust.org/api/volumes/oclc/297147090.html%0Ahttp://proquest.safaribooksonline
Raniolo, S., Mancini, S., Vimercati, S., Gentil, P., Simeone, D., & Buchanan, A. (2014). The use of new technologies to maximize oil production in a viscous oil field in arctic environment: The Nikaitchuq experience. Society of Petroleum Engineers - 30th Abu Dhabi International Petroleum Exhibition and Conference, ADIPEC 2014: Challenges and Opportunities for the Next 30 Years, 3, 2335–2343. https://doi.org/10.2118/171896-ms
Sinha, A. K., Jalan, S., & Garimella, V. S. S. (2024). Notional Development Concept Screening using Probabilistic Workflow for Prospects & Greenfield Projects. International Petroleum Technology Conference, IPTC 2024. https://doi.org/10.2523/IPTC-24030-EA
Stanley, L. T. (1982). Petroleum Engineering Economics Today. JPT, Journal of Petroleum Technology, 34(4), 691–695. https://doi.org/10.2118/10896-pa
Sundberg, K. (1980). Effect of Impregnating Waters on Electrical Conductivity of Soils and Rocks. Log Analyst, 21(3), 19–31.
Thapar, S. (2024). Project Economics (Vol. 2). https://doi.org/10.1007/978-981-99-9384-0_5
Thompson, R. S. (1998). Spe 49179. 567–574
Published
2024-07-23
How to Cite
Mota, T., Saldanha, E., Naikosou, M., Guturres, S., Guterres, S., Santos, I., Amaral, F., Neto, T., Guterres, M., de Jesus, O. and Santos, J. (2024) “Evaluating Net Cash Flow in Greenfield Oil and Gas Projects: A Case Study of Low, Base, and High Scenarios”, Timor Leste Journal of Business and Management, 6, pp. 29-41. doi: 10.51703/bm.v6i0.168.
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