Offshore oil and gas exploitation is one of the riskiest businesses to invest in and is dominated by various uncertainties: high deepwater pressure, low temperatures, remote operation, long-distance tiebacks and transportation, as well as environmental factors such as wind, waves and ocean currents. Serving as a profitability threshold, the minimum economic field size is defined as the economic recoverable reserve level that an oilfield must exceed to achieve economic returns. This paper develops an approach for determining the minimum economic field size of offshore oil and gas reservoirs. It categorizes the capital expenditure into four major components: drilling and completion costs, platform costs, pipeline costs, and subsea production system costs. The regression models of drilling costs and subsea production costs are developed respectively, with water depth and recoverable reserves as key influencing factors. The pipeline costs are estimated using the unit pipeline cost per mile and pipeline length. A profit model for the offshore field is established under the constraints of the contract, which allocates the oilfield’s production profits between the contractor and the government according to the contractual fiscal terms. Finally, taking the Lucius oilfield in the Gulf of Mexico as a case study, the paper simulates its investment, operating costs, and oilfield revenues. The minimum economic field size is calculated, accompanied by the derivation of the sensitivity boundaries for the primary parameters.
Zhang et al. (Fri,) studied this question.