Drilling & Production Project Management

Topic: Management
Words: 1543 Pages: 5

Oil and gas ventures have unique characteristics that necessitate a specialized approach to project management. Project management is the most crucial instrument for completing a successful project (El-Reedy, 2016). A daily income stream with endless potential is available with an oil and gas exploration and drilling business. The board has requested a presentation of a new drilling and production project, “Plan of Action,” for the firm to invest. This project presents the location, estimated potential reserves, lease considerations, the drilling and production plan, infrastructure, transportation system, target market, and potential risks.


I chose the central north slope of Alaska, an untapped energy frontier. The location can be extended to the Beaufort Sea north of Alaska. Northern Alaska comprises metamorphic marine and marginal sediments, carbonate platforms, and oceanic igneous and volcanic rocks (DGGS, 2015). Using geology-based assessment techniques, the U.S. Geological Survey assessed billions of cubic feet of undiscovered natural gas and millions of barrels of undiscovered oil (USGS, 2018). The prospect’s average depth is 1004m (the Beaufort Sea, 2021), a marginal sea of the arctic ocean. The oil is not forced up from the wells but flows out under natural pressure when a reservoir is tapped. This implies the wells are modest and quiet (Anderson, 1993). The pore pressure at the site is hydrostatic, approximately 8.7 pounds per gallon.

Beaufort Sea
Figure 2: (Beaufort Sea, 2021)

Estimated Total Potential reserves

It is appropriate for businesses to invest money in finding a resource that will likely be utilized in a project. Around 300,000 km3 of gas and 250 km3 of oil are considered in the area, with a lot of the research and development effort still in its early stages (Houseknecht et al., 2020). In various areas of the assessment area, the Ellesmerian, Beaufortian, and Brookian Patterns include rich, oil-prone source rocks. In contrast, specific oil accumulations were primarily sourced from one of those source rocks (Wang et al., 2014). The middle North Slope is regarded as a component of the Arctic Alaska Composite Total Petroleum System since the spatial distribution of the oil generated from each distinct source rock is poorly understood, and oil mixing from many source rocks occurred. Therefore, this region offers a vast reserve of undiscovered oil and gas ready for tapping.

Figure 1: (Houseknecht et al., 2020)

Lease Considerations

Consideration must be given to the company’s payments to the state regarding rent and any needed bonuses. Charges are subject to the terms of the lease agreement, including any applicable clauses and mitigating clauses that the state included in the lease (BLM Alaska, 2018). The lease will be contracted with the federal government, and bonus payments will be necessary as stipulated. An advance payment of $1.00 per acre or part of an acre is required for the first year. According to federal law and regulations, we shall analyze the Exploration Project in 30 calendar days.

When developing oil production abroad, it is necessary to consider local legislation. Consequently, playoffs will be required according to local taxation. The cost of producing crude oil in shallow water is about $5 per barrel, sometimes about $4 per barrel (BLM Alaska, 2018). Political stability affects oil production, as contractual obligations may be violated. In addition, an additional security system is needed depending on this situation and the general security in the country.

Sodexo Catering and Facilities Management Services for Energy & Resources
Figure 3: (Sodexo Catering and Facilities Management Services for Energy & Resources, n.d.)

Drilling and Production Plan

There is an upstream component to the project. Hydraulic fracturing is the extraction process to be employed. Development wells will be drilled to aid in extraction techniques such as flowing production or artificial lift production. The drilling machinery will cut through the rock vertically and dig a borehole. The vertical drill before deviation will be approximately 15 meters for safety and resource optimization purposes. If vertical access to the deposit is not possible, horizontal directional boring will be employed to get to the reserve and aid with excavation. Fracking will not be necessary. We will engage Petrotechnical Resources of Alaska, offering experienced professionals in integrated teams. A water source is readily available for fracturing as the Beaufort sea has four distinct water masses. Groundwater sources will be protected by controlling the pressure from the wells.

Drilling and Production site

Due to its strategic site, the project looks to utilize both onshore and offshore drilling. The onshore site relatively has a sound road network system. The company will, however, need to incur approximately 5 million dollars to develop an adequate remote-off-the-road plan for accessing the drilling and production sites. Temporary onshore accommodations are functional (editor, 2016). The design and layout consider the effects on the environment, society, health, welfare, and hygienic conditions. The consultant will be in charge of choosing, designing, and installing the necessary camp facilities. An innovation in road technology has reduced the need for gravel roads, which have an environmental impact. Ocean water is poured onto the tundra, where it freezes and forms an ice road, which can be maintained during the winter. The streets are used by vehicles with massive rubber tires.

Mobile platforms will be used for drilling offshore. Floating rigs must be used to conduct oil exploration in water depths of more than 100 meters. We will employ Drill ships containing all the drilling equipment required due to the harsh environmental conditions of the arctic region. Helicopters will serve as the principal mode of transportation and living quarters; cranes to transfer equipment and material, and riggers to raise the wellhead above the mud line. An FSPO will be unnecessary due to the presence of the pipeline system. Crew Boat will be necessary in order to simplify access to the drilling site. Under these scenario conditions, the development of a massive deposit can be carried out by 3 wells.

Production infrastructure

Natural formation water coexists with compounds in the porous aquifer. For every barrel of crude oil, around seven to ten barrels of water are created. Water is treated as waste to be discarded in this business and is regarded as a byproduct of oil and gas production (Scanlon et al., 2020). The price of the hydrocarbon source is the primary factor in produced water management methods. To dispose of the created water, a subsurface injection will be used. We will employ a gravity injection well for this. In addition, the mesh separator is used for purification of extracted natural gas in industrial installations. This is where liquids are extracted from raw materials.

Secondary recovery

An oil well’s internal pressure changes during its existence. It will eventually decrease and fall. Now that the natural pressure has subsided, secondary recovery is applicable. To achieve this, pressure will be increased by infusing water, natural gas, or other gases into the reservoir. Pumps, including electrical submersible pumps, are another option. The secondary deployment process typically conducted before the third stage in the life of the field (Muggeridge et al., 2014). The wells are estimated to have reserves for up to fifty years, and a secondary survey can be done. It is a result of the requirement to verify the existence of reserves to scale up technologies that might be used safely in challenging offshore settings.

The Estimate for Profit and Loss

The wells will be clustered in a field of our onshore drilling facility, spanning from an acre per well enough for heavy crude oils to 80 acreages per well for natural gas. The network of wells is connected by carbon steel tubes that transport oil and gas to an extraction and processing facility and treat it using chemicals and heat. Oil will cost $1.39 per gallon to produce ($58.26 per barrel), but to turn a profit, we must also account for distribution, refining, and taxes. Oil and gas production had an average net profit margin of 4.7% in 2021 and 31.3% in Q4 of that year (Investopedia, 2022).

Target Market

Global supply and demand govern crude oil prices. Economic growth is one of the main elements influencing the market for petroleum products and crude oil (U.S. Energy Information Administration, 2022). Indications that the world’s petroleum market is constricting as a result of decreased supply have caused oil prices to increase. We make an application to the market. We primarily focus on the United States as our market. Profit margins for oil and gas production are erratic and highly dependent on energy prices. We shall utilize the Trans-Alaskan Pipeline system and tankers for road transport. They are effective due to the fact that they are able to take on board a large amount of cargo and transport it at a low cost.

Other considerations

Procedures for Northern Slope development and field production are made to account for the environment’s unique needs in the Arctic. To guarantee that environmental protection procedures are effective in on-site everyday operations, senior management guidance and commitment must be translated into action by allocating sufficient financial and human resources. To reduce the amount of sulfur-containing substances, sulfurous oil is subjected to hydrotreating. H2S can be removed from gases by absorption in a solution with ammonia derivatives. Tough Production Problems here include the ice formation on the sea throughout most of the year. Progress has been impeded by several obstacles, including high development costs, a harsh climate, environmental concerns, and local politics.


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