What is the life cycle of an oil and gas project like? Here are the steps of the process in an easy to understand way. A lot of factors, stakeholders and talented professionals are needed for the project to be successful.
Exploration
Exploration refers to the search for hydrocarbon deposits below the Earth's surface, primarily through a combination of seismic studies and drilling wells. Exploration projects can be costly, time-consuming, and risky. Drilling a well can cost tens of millions of dollars and not find any hydrocarbons; this is known as a dry well or extraction well.
However, the potential rewards can be enormous. Take the recent case of the Johan Sverdrup field, one of the largest discoveries ever made in the North Sea off the coast of Norway. It was found in an area that was previously thought to be exhausted after more than four decades of relatively disappointing exploration, and is now able to provide jobs and generate income for several decades.
Evaluation
Once a company has discovered oil and gas reserves, it must evaluate how much there is, most importantly, how much can be extracted. The evaluation phase of a project can take years and cost large sums of money, as more wells are drilled and more seismic studies are carried out to better understand the reservoir.
If an evaluation is successful, then the project will move to the development phase.
Development
After a successful evaluation, the development phase is where the operating company will determine the best methods for extracting and transporting hydrocarbons and will evaluate the overall financial viability of moving to full-scale production.
The field development plan will be created to estimate the CAPEX (Capital Expenditure) and the OPEX (Operational Expenditure) of the project. There are many factors involved, including: the number of wells that will be drilled, the recovery method, the type of facility that will be used, the separation systems for gas and fluids, and how oil and gas will be transported to a processing facility.
Once the best estimate of all costs is available, a company can decide if the project will be profitable and grant FID (Final Investment Decision) to continue construction and, ultimately, move on to production.
Production
Once a field is producing, this is the main source of income where a company can begin to recover its financial investment and eventually make a profit. Some fluctuations will occur over time as the level of production declines towards the end of field life.
Production can last from several years to several decades, depending on the size of the field and how costly it is to maintain the wells and facilities. Operating and maintenance costs amount to several million dollars each year, and safety is a primary concern at all times.
Reservoir engineers will monitor field performance to plan additional wells or improvements to increase production and maximize the amount of hydrocarbons that can be recovered.
Dismantling
Once a field reaches the end of its production cycle and it is no longer cost-effective to maintain it, it will be dismantled.
This involves the elimination of platforms, production facilities and any infrastructure that was in place. For offshore fields, this is an enormously complex operation and, whenever possible, companies will seek to bring as much material ashore as possible to dismantle it and recover as much as possible.
