here. - Cognizance.org.in

Transcription

here. - Cognizance.org.in
Case Study
Problem Statement
Shell Day
28th March 2015
Cognizance, IIT Roorkee
1. Introduction
VishwaOorja Inc. is a large integrated oil and gas company aspiring to expand its
business in the country of Telghar which has large undeveloped offshore natural gas
resources. VishwaOorja Inc. has partnered with the government on a discovered field
named Khazana. The local government sees this as an opportunity to attract investments
in the country’s nascent LNG industry through a production sharing contract (PSC). In the
production sharing contract there is an agreement between the successful bidder and the
host government, whereby the successful bidder bears all the cost associated with
exploration, development and production. In return, the bidder receives a stipulated
share of the production to sell on the open market. VishwaOorja won an extremely
competitive bid for the Khazana gas-condensate field in the latest licensing round. This
field is an opportunity for VishwaOorja to establish itself as an operator in the country,
opening up opportunities for future expansion. VishwaOorja aims to be the most
innovative and competitive energy company in the world, but with a clear focus on safety
(no harm to people and no leaks) and sustainability (environmental, economic and social
responsibility).
2. Scenario
2.1.
Political Scenario
Telghar is an under-developed country with a pristine ecology. The country does not
have a large domestic gas market mainly due to historical lack of industrial development
and the strict regulations around preserving natural habitats. In recent times, Telghar is
experiencing a rapid transition with a desire to be set on the path of greater
development. The political situation in the country is currently stable with a new
democratically elected government with a clear majority. The new government has
ridden a populist wave by promising more development, while at the same time, taking
steps to conserve the natural ecology of its land and aquatic flora and fauna. The
government is keen to develop the necessary skills in country to develop their resources.
As a result there is a strong push to use local talent and companies in the engineering,
construction and operation of gas development projects. But there is a shortage of skilled
labor and reliable quality contractors/suppliers in the country at present.
Doordesh is a more developed island-country located 600km south-west of Telghar.
There is a nascent domestic gas market but with an estimated potential demand upwards
of 4.5 billion m3 of gas per year with the right investment in infrastructure. Doordesh has
beautiful coral reefs surrounding the island which are a UNESCO world heritage site.
The Doordesh government is aggressively pushing to grow the domestic natural gas
market as it is perceived as a cleaner energy alternative.
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Case Study
Problem Statement
Shell Day
2.2.
28th March 2015
Cognizance, IIT Roorkee
Field Description
Khazana is a gas-condensate field located 200km offshore Telghar. The field is within
the territory of Telghar. The reservoir is in deep-water and is composed of turbidite
sands. It is estimated to contain 6 billion m3 of gas, with a reservoir area of 45 km2. The
gas has to be processed to bring it up to market specifications. A feasibility study has
established that transporting the gas to mainland by ship is not an efficient options, a
subsea pipeline (on seabed/buried) is required. The processed and liquefied gas (LNG)
however can be transported using ships. There are currently no existing gas processing
facilities in Telghar or Doordesh.
Figure 2.1 - Geographical Location of Khazana Field
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Case Study
Problem Statement
Shell Day
2.3.
28th March 2015
Cognizance, IIT Roorkee
Contractual terms
The contract between VishwaOorja and Telghar is a production sharing contract for 12
years. There is a potential for a 6-year extensions, but this is subject to government
approval, pending field performance and operator performance. As per this contract,
30% of the Gas from the field has to be sold in the local Telghar market at the prices
stipulated by the government (see Table 2.1). The rest of the Gas can be sold wherever
VishwaOorja wishes to sell.
Year
1
2
3
4
5
6
7
8
9
10
11
12
Gas Price Telghar
($/MMBTU)
1.86
3.19
4.31
5.47
5.83
6.25
6.42
5.28
5.19
5.06
4.78
4.36
Table 2.1 - Govt stipulated Gas prices - Telghar
Also included in the contract is a clause that within 5 years, 60% of the skilled labor
employed by the production facility shall be sourced from local market and within 7
years the plant manager shall be a local person.
2.4.
Additional Data
The current drilling rig count is 3 in the region. Sourcing a new rig will take long lead
time and is uneconomical. VishwaOorja’s Well Engineers estimate that the optimum well
for this particular field will be a well with a drainage area of 0.75 km2 each. Time taken
to drill one such well is 3 months and the cost of drilling one well is $2 million.
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Case Study
Problem Statement
Shell Day
28th March 2015
Cognizance, IIT Roorkee
Additional data as below:
gas rate per day per well
(MMSCFD)
0.85
0.83
0.81
0.80
0.78
0.76
0.74
0.73
0.71
0.69
0.67
0.65
Year
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
Table 2.2 – Gas rate per day per well over the years
Year
1
2
3
4
5
6
7
8
9
10
11
12
Gas Price
Doordesh
($/MMBTU)
3.69
5.17
6.28
7.39
8.5
8.22
8.22
7.39
7.11
7.11
6.83
6.28
Table 2.3 – Stipulated Gas prices in Doordesh
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Case Study
Problem Statement
Shell Day
28th March 2015
Cognizance, IIT Roorkee
Processing
capacity (million
m 3/d)
Capex (million $)
1.3
0.91
0.39
100
73
48
Table 2.4 - Capex for constructing Gas processing plant

Surface processing plant operating cost = 1,541 $/million m3 of Gas processed.
Pipeline Capacity (million
m 3/d)
1.3
0.91
0.39
Subsea pipeline (on
seabed) (million $/km)
0.88
0.79
0.44
Subsea Pipeline
(buried) (million
$/km)
1.10
0.99
0.55
Table 2.5- Pipeline costs ($/km)

Additional CAPEX (apart from the normal processing cost) for liquefying the gas -
Processing capacity
(million m 3/d)
Capex (million $)
1.3
0.91
0.39
22
19
9
Table 2.6- Additional CAPEX for liquifying the gas

Additional OPEX for a liquefying the gas – 462.3 ($/million m3)
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Case Study
Problem Statement
Shell Day

28th March 2015
Cognizance, IIT Roorkee
Additional CAPEX for regasification of LNG (assuming the processing rate is
equal to the shipping rate)-
Shipping capacity (1000
m3 LNG)
Capex of regasification
plant (mn $)
3.3
11
22
26
10
15
21
24
Table 2.7- CAPEX for regasifying the gas

OPEX for the regasification plant – 5 ($/m3 LNG)

Transport of LNG via ships –
We have four ships with different capacities and different cost/km (see table 2.8).
We can use maximum two of them at a time. It takes the ship - 14 days for a
round trip from Telghar to Doordesh (600 kms) , 5days for a round trip from
Khazana to Telghar (200 km), and 12 days and 17 days for a round trip from
Khazana to Doordesh depending on the two routes respectively (500 kms and
700 kms).
Ship capacity (1000 m3
LNG)
US $/km
3.3
11
20
40
18
45
22
26
50
60
Table 2.8 - LNG Carrier ship costs
2.5.
New Technology
FLNG is an upcoming revolutionary technology, currently under development by
VishwaOorja, which can help unlock new resources of natural gas by processing it to
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Case Study
Problem Statement
Shell Day
28th March 2015
Cognizance, IIT Roorkee
LNG at sea itself. A giant floating liquefied natural gas (FLNG) facility will produce
process and store the gas before it is shipped overseas. The FLNG technology will reduce
the use of manual labor as well.
For this region, the FLNG Capex costs are given in Table 2.9. The Opex cost is $123,21
per million m3 of Gas processed.
Processing capacity
(million m 3/d)
Capex (billion $)
1.3
0.91
0.39
0.3
0.2
0.08
Table 2.9 - FLNG Capex costs
2.6.
Local Environment
Telghar has world class flora and fauna, both onshore and offshore. The local
environmental NGOs are strongly against development that will damage this pristine
environment. The area near the coast of Telghar is of particular importance as it is
inhabited by a species of endangered dolphin (shown as light blue color in the map).
Any changes in the natural environment may lead to strong repercussions for the
government and the responsible company, both locally and internationally.
Apart from the seas being habitats for dolphins, they also form a key area for fishing
activities for Telghar, which has agriculture, cattle rearing, fishing and forestry as the
predominant means of occupation. The local fishing community is concerned about the
impact of exploration and production activity on their livelihoods.
Note – Assuming any additional data required. Clearly state your assumptions in your
final presentation.
3. Deliverables
As the Opportunity Manager (OM) for the Khazana field, you are required to prepare a
strategy for the optimum development of the field. The strategy should cover the following
with suitable technical, economic and social justification:





Development plan for the Khazana field that must include at least the well count
and development timeline.
Plan to transport the gas – by pipeline/ships
Surface operating facilities placement and the markets being targeted.
Key risks for the field development; and the mitigation steps.
Strategy for mitigation of other key risks.
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Shell Day

Case Study
Problem Statement
28th March 2015
Cognizance, IIT Roorkee
Identify key stakeholders and develop a comprehensive strategy for managing
them
4. RULES:







Team – Minimum 2 members per team; maximum 5.
Screening - Preliminary strategy to be submitted in a one page MS Word
document with Arial Font and Font Size -10, Justified. The abstract should also
mention the names and email ids of the team member.
Send in your entries to both – [email protected] and
[email protected] with Subject Line – “Cogni2015 Case submission - <Team
Name>”
For any queries related to the case study, directly contact the above mentioned
email ids.
Last Date for Submission 23th March 2015, midnight.
Selected Teams will be notified latest by 25th March 2015 to make a final
presentation before the judging panel on 28th March 2015 (Saturday).
Each selected team will be allowed 15 minutes for presentation + 10 minutes for
questions and answers. So, limit the main presentation to maximum eight slides.
All the Best!
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