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Economic Evaluation

Competency Statement:

Use economic evaluation methods to select the most profitable project and/or exploitation strategy, and formulate a project budget.

Learning Objective:

Upon completion of this module, the participant should be able to apply economic evaluation techniques that are necessary for analyzing proposed long-range exploitation strategies and/or projects in the areas of reservoir, drilling and production.

Assignment Instruction:

Based on reservoir model and well performance predictions that were generated during the exploration/appraisal period, the reservoir management team is currently looking at 3 potential development scenarios for the primary recovery stage:


Case 1a

Case 2a

Case 3a

(Maximum Design Rate)

7500 STB/D
[1193 m3/D]

15000 STB/D
[2385 m3/D]

22500 STB/D
[3578 m3/D]

Exploration/appraisal wells to be completed




Additional wells to be drilled and completed




Total number of wells




The simulator runs used to generate these cases were based on the following assumptions:

  • Volumetric (closed pressure boundary) reservoir.
  • Production begins in the first production year at the MDR, even though the reservoir actually produced at low rates under test conditions during the exploration/appraisal stage.
  • Average initial production per well = 1500 STB/D [apx. 240 m3/D]—under the assumed reservoir parameters, this appears to be the maximum natural flow rate that is sustainable for a significant time period.

In this assignment, you will compile the available information and generate net discounted cash flow predictions for each of these cases. You will then evaluate each case in terms of its primary economic indicators, taking into account the sensitivity of the evaluation to uncertainties in the input parameters.

NOTE: An MS Excel spreadsheet, Proj_Template, has been included as a reference for this assignment. You may use this spreadsheet to enter input parameters and run economics for each Case. If you do so, be sure to save each case as a separate file, because you will be referring back to it as you progress through the assignment.