Exploration & Production - Oil and Gas review

The Re-development Potential of Offshore Structures Destroyed by Hurricanes Figure 5: Re-development Opportunity Matrix

1,000 100 10 1

0.10 0.01 0

0 Possible re-development Probable re-development Unlikely re-development

Table 4: Expected Value of Gross Revenue Under Different Probability and Price Scenarios

Scenario US$60/ US$80/ US$100/ US$120/ E(P) bbl

bbl

1 2 3 4 5 6 7 8 9

1 10 100 1,000

Pre-hurricane production (BOEPD) Oil structures

10,000 100,000 Gas structures

(I) Unlikely re-development, (II) possible re-development and (III) probable re-development. The probability of occurrence in each quadrant is estimated to range as following: 0.10 ≤p(I) ≤0.20, 0.40 ≤p(II) ≤0.60, 0.85 ≤p(III) ≤0.95. BOEPD = barrels of oil equivalent per day; MMBOE = million barrels of oil equivalent.

Figure 6: Oil Production Potential of Destroyed Structures Assuming All Possible and Probable Re-development Opportunities Are Undertaken

20 15 10 5 0 1964 1974 Actual 1984 1994 2004 Year Possible re-development Probable re-development

Figure 7: Gas Production Potential of Destroyed Structures Assuming All Possible and Probable Re-development Opportunities Are Undertaken

120 160 200

40 80

0 1964 1974 Actual 1984 1994 2004 Year Possible re-development Probable re-development 2014 2024 2034

A summary of expected discounted revenues under fixed price and probability scenarios is depicted in Table 4.

Production Forecast

Based on the structure production models calculated on an individual asset basis, aggregate oil and gas production forecast are classified according to possible and probable re-developments and depicted in Figures 6 and 7. We assume that all possible and probable re-development opportunities are undertaken. In reality, only about 40–60% of the possible re-development and 90% of the probable re-development opportunities are expected to be realised, which will reduce the profiles shown. Our results are also sensitive to the re-development of structure 23925, which is responsible for over half of the total production potential. n

E(REV) = ΣΣ qj

j=l 4

i=l 3

pi REVi = US$16billion 2014 2024 2034

Thus, we predict that 95% of reserves-in-place are likely to be re-developed. This is about three times larger than the 76MBOE of reserves affected by Hurricanes Ivan, Katrina and Rita.8

Expected Valuation The expected value of the re-development opportunities can be computed

by assigning a probability vector to future prices. If (q1, q2, q3, q4) = (0.35, 0.35, 0.20, 0.10) corresponds to future price expectations of (US$60, 80, 100, 120), the expected value of gross revenue, E(REV), is computed as:

bbl

0.70 0.10 0.10 0.50 0.30 0.10 0.40 0.20 0.20 0.35 0.35 0.20 0.25 0.25 0.25 0.10 0.20 0.35 0.20 0.20 0.20 0.10 0.10 0.30 0.10 0.10 0.10

BBL = barrel; E(P) = expected price. bbl

0.10 72 0.10 76 0.20 84 0.10 81 0.25 90 0.35 99 0.40 96 0.50 104 0.70 108

Expected value

(US$/bbl) of gross revenue (US$ billion) 14.2 15.0 16.6 16.0 17.8 19.6 19.0 20.5 21.3

probable re-development categories, from Table 3 the expected reserves, E(RES), is computed as 198MBOE:

E(RES) = pi Σ RESi

i=l 3

= (0.15)(276MBOE) + (0.5)(32,220MBOE) + (0.90)(201,523MBOE)

1. 2. 3.

MMS completes assessment of destroyed and damaged facilities from Hurricanes Gustav and Ike, MMS Office of Public Affairs, 2008;8:3982.

Energo, Assessment of fixed offshore platform performance in Hurricanes Andrew, Lili and Ivan, Report to MMS by Energo Engineering, Inc., 2006; TAR No 549.

Energo, Assessment of fixed offshore platform performance in Hurricanes Katrina and Rita, Report to MMS by Energo Engineering, Inc., 2007; TAR No 578.

50

4. 5. 6.

Beck RD, Davis JP, Lynch R, et al., Imaging downed platforms. OTC 19650. Presented at the 2008 Offshore Technology Conference. Houston, TX, 5–8 May 2008.

Laurendine TT, Gulf of Mexico offshore platforms-risk engineering. OTC 19576, 2008 Offshore Technology Conference. Houston, TX, 2008.

Mailey JF, Technology and innovations contribute to safety and efficiency in storm disaster recovery. SPE 111563. Presented at the 2008 SPE International Conference on

Health, Safety, and Environment. Nice, France, 15–17 April 2008.

7. 8.

Kaiser MJ, Kasprzak R, The impact of the 2005 hurricane season on the Louisiana Artificial Reef Program, Marine Policy, 2008;32:956–67.

Kaiser MJ, An Evaluation of post-hurricane recovery of platforms destoyed in the 2004–2005 Gulf of Mexico hurricane seasons, International Journal of Oil, Gas, and Coal Technology, 2009;2(3):215–61.

EXPLORATION & PRODUCTION – VOLUME 9 ISSUE 1

Gas production (billion cubic feet)

Oil production (million barrels)

Expected remaining reserves (MMBOE)

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