Section1 TheOil&GasValueChain

Oil&GasIndustryhasthefollowingchainofvalueforitsupstreamactivity(simplified,seeFigure1).
Exploration Production Sales

Figure1.SimplifiedOil&GasValueChain The process starts with exploration activity which basically an activity to search and discover source of hydrocarbons to be extracted. Explorationprocessisahighriskactivitywithhighamountinvestment.Theprobabilityofexplorationactivitytodiscoverhydrocarbonsisapp. 20% that is 4 out of 20 wells drilled by a company are productive. The process starts from seismic activity and ended with reservoir modeling to estimate & determine the best production method (see Figure 2). A compact narration on exploration process and reserve estimation can beseeninSection2PetroleumSystem.

Exploration
Theprocessofdiscovering hydrocarbons

Production

Sales

Geophysics
Doseismicto determineif anyanticline and/orfault arefound

Geology
Determinewell locationtobe drilled

Drilling
Drillwellto prove existenceofoil &gas

Reservoir Engineering
Determine totalreserves andreservoir model

Figure2.ExplorationProcess

Once the reservoir model is built, the process continues in designing the proper production facilities to extract hydrocarbons. Project managementandprocurementprocessarecriticalinthisphase.Afterthefacilitiesarecompletelybuilt,operationsofthefacilitiesarestarted. Production control system and monitoring system play important role in this phase. Be noted that since the process of extracting the hydrocarbons are based on hydrostatic pressure, throughout the years production rate will be declined since pressure in reservoir will be depleted (See Section 4 Typical Production Profile). To maintain and improve the declined production rate, developmental projects are mandatory (See Section 4 Typical Production Profile). See Figure 3 for detail description of Production Activities. Maintenance also plays important role in assuring the operability of production facilities. It relates commonly with inventory management in term of spare part management.

Exploration

Production
Theprocessofextracting hydrocarbons

Sales

FacilitiesDesign
Engineersand constructsthe proper facilitiesto extractand process hydrocarbon

Operating
Processthe raw hydrocarbons tobeableto meetsales requirement

Developmental Projects
Projectsto increasethe always declined production rate

Storage& Transportation
Thestoringof oil/condensate /LPG/LNGand the transportation ofgasto buyers

Maintenance

Figure3.ProductionProcess Salesofhydrocarbonscanbeinformofagreement.SeeFigure4fordescription.

Exploration

Production

Sales

Gassalesneedagreement;since gascantbestored(economically), priortoproducinggas,company needstohaveagreementwith buyer Oilismoreflexible,itcanbestored andhandledwitheasiercaretothe buyer

Figure4.SalesofHydrocarbon

Section2 PetroleumSystem
Generally, Petroleum System is consisted of Source Rock, Reservoir, and Trap/Seal (see Figure 5). Source Rock is kind of sedimentary depositionalrock(formation)thatconsistedoforganicmaterialtoproducehydrocarbon(asaplacetoproducehydrocarbon).TheReservoiris a kind of place (formation) that stores and makes an avenue of hydrocarbon (as a place to store the hydrocarbon). Trap/Seal is a kind of structure/layerthatsealsthehydrocarbon.

Figure5.PetroleumSystem Source:oceanexplorer.noaa.gov Crude oil is found in oil reservoirs formed in the Earth's layer/ formation from the remains of living things. Crude oil is properly known as petroleum, and is used as fossil fuel. Evidence indicates that millions of years of heat and pressure changed the remains of microscopic plant andanimalremainsintooilandnaturalgas.Althoughtheprocessisgenerallythesame,variousenvironmentalfactorsleadtothecreationofa wide variety of reservoirs. Reservoirs exist anywhere from the land surface to 30,000ft (9,000m) below the surface and are a variety of shapes,sizesandages.

Estimatingreserves
After the discovery ofa reservoir, engineer will seektobuild abetter picture of the accumulation.In asimpletext book example of auniform reservoir,thefirststageistoconductaseismicsurveytodeterminethepossiblesizeofthetrap.Appraisalwellscanbeusedtodeterminethe location of oilwater contact and with it, the height of the oil bearing sands. Often coupled with seismic data, it is possible to estimate the volumeofoilbearingreservoir. The next step is to use information from appraisal wells to estimate the porosity of the rock. The porosity, or the percentage of the total volume that contains fluids rather than solid rock, is 2035% or less. It can give information on the actual capacity. Laboratory testing can determine the characteristics of the reservoir fluids, particularly the expansion factor of the oil, or how much the oil expands when brought fromhighpressure,hightemperatureofthereservoirto"stocktank"atthesurface. Withsuchinformation,itispossibletoestimatehowmany"stocktank"barrelsofoilarelocatedinthereservoir.SuchoiliscalledtheOriginal OilinPlace(OOIP).Asaresultofstudyingthingssuchasthepermeabilityoftherock(howeasilyfluidscanflowthroughtherock)andpossible drivemechanisms,itispossibletoestimatetherecoveryfactor,orwhatproportionofoilinplacecanbereasonablyexpectedtobeproduced. Therecoveryfactorisapproximately30%35%incommon,givingavaluefortherecoverablereserves. The difficulty is that reservoirs are not uniform. They have variable porosity and permeability and may be compartmentalized, with fractures and faultsbreaking themup and complicatingfluid flow. For this reason, computermodelingof economically viablereservoirs isoften carried out. Geologist, geophysicist and reservoir engineer work together to build a model which allows simulation of the flow of fluids in the reservoir,leadingtoanimprovedestimateofreserves.

Section3 OriginalOilinPlace
Original Oil in place is the total hydrocarbon content of an oil reservoir and is often abbreviated OOIP, referring to the oil in place before the commencementofproduction. Oilinplacemustnotbeconfusedwithoilreservesthatarethetechnicallyandeconomicallyrecoverableportionofoilvolumeinthereservoir. Current recovery factors for oil fields around the world typically range between 10 and 60 percent; some are over 80 percent. The wide varianceisduelargelytothediversityoffluidandreservoircharacteristicsfordifferentdeposits. AccuratecalculationofthevalueofOOIPrequiresknowledgeof:

volumeofrockcontainingoil(BulkRockVolume,intheUSAthisisusuallyinacrefeet) percentageporosityoftherockinthereservoir percentagewatercontentofthatporosity amountofshrinkagethattheoilundergoeswhenbroughttotheEarth'ssurface

OOIPiscalculatedusingtheformula:

[stb/standardbarrel]

Or

[m ] where

=OOIIP(barrels) =Bulk(rock)volume(acrefeetorcubicmetres) =Fluidfilledporosityoftherock(fraction) =Watersaturationwaterfilledportionofthisporosity(fraction) =FormationVolumeFactor(dimensionlessfactorforthechangeinvolumebetweenreservoirandstandardconditionsat surface)

FormationVolumeFactor
When oil is produced, the high reservoir temperature and pressure decreases to surface conditions and gas bubbles out of the oil. As the gas bubbles out of the oil, the volume of the oil decreases. Stabilized oil under surface conditions (either 60 F and 14.7 psi or 15 C and 101.325 kPa) is called stock tank oil. Oil reserves are calculated in terms of stock tank oil volumes rather than reservoir oil volumes. The ratio of stock tankvolumetooilvolumeunderreservoirconditions iscalledtheformationvolumefactor(FVF).Itusuallyvaries from1.0to 1.7. Aformation volumefactorof1.4ischaracteristicofhighshrinkageoiland1.2oflowshrinkageoil.

Section4 TypicalProductionProfile
Hydrocarbonproductionrateisalwaysdecliningovertheyears.Companyneedstohaveimprovementinincreasingproductionwith(butnot limitedto)theseways: EnhancedOil/GasRecovery InstallationofCompressor Acquiringassets DevelopmentDrilling(newwells) NewVenture(lookfornewreserve)

Productionrate

EstimatedProduction(modelbase)
Gapon Design

Productionincreasesasdevelopmental projectisfinished;thetimewhenthe projectsdoneisnamedPlaceInService (PIS) Productionrateon plantcapacity

Plantcapacity

Projectleadtime (4years) //
201 0 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Figure6.TypicalProductionProfile Projectleadtimeisconsistsoftheseactivities: Engineeringphaseoffacilitiesandflowlines Procurementofrequiredmaterialandservices Fabricationofcertaincustomizedparts Constructionoffacilitiesatsite InstallationandCommissioningofthefacilities(goonline/PIS)

WhichcommonlyknownasEPCIActivity.