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Kosmos_Introduction to O&G education deck_EN

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Delphine Marques

Kosmos is an international oil and gas exploration and production company based in Dallas, Texas. They have a track record of success in deepwater exploration, such as discovering the large Jubilee Field in Ghana. The document outlines Kosmos' focus on under-explored areas and their self-funded exploration and appraisal drilling program. It then describes the typical 6-phase process for oil and gas exploration, which includes entering a new market, exploring a block through surveys, undertaking exploration drilling, appraisal drilling if discoveries are made, development if a reservoir is deemed commercially viable, and ultimately production. Key activities, opportunities, and challenges of each phase are outlined.

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AN INTRODUCTION TO OIL & GAS
Kosmos is a premier international oil and gas exploration and production company, based in Dallas (US): • Experts who are proven oil finders: - Track record of deepwater exploration success - in 2007, Kosmos found the massive Jubilee Field in Ghana’s deep waters • Focused on under-explored offshore frontier / emerging basins with substantial hydrocarbon potential • Fully self-funded to undertake ambitious exploration and appraisal drilling program
The Process Breakdown PHASE 6 Production PHASE 2 Exploring the block through site and seismic surveys PHASE 1 Entering a new market PHASE 3 Undertaking exploration drilling PHASE 4 Appraisal drilling PHASE 5 Development
1. Identify potential under-explored or overlooked geological territories 3. Assess geopolitical, operational and financial viability of operating in territory 2. Aquire existing seismic surveys 4. Secure rights to explore area through licenses with host governments Timeline: up to a year PHASE 1 Entering a new market Key activities:
Opportunities • Opening a new petroleum basin • Exploring new horizons can result in good commercial terms Challenges • Proving to investors and the stock market that it is worth proceeding • Ensuring that the conditions are mutually beneficial between host nation and company Opportunities and ChallengesPHASE 1
Upstream - refers to exploration, production and transport of oil and gas prior to refining Downstream - the refining of crude oil and the processing and purifying of raw natural gas, as well as the marketing and distribution of products derived from crude oil and natural gas. Exploration licence - permits geological and geophysical surveying and drilling of exploratory wells Production licence - confers exclusive rights on the licensee to search and drill for oil or gas Production sharing - agreement between parties to a well and a host country regarding the percentage of production each party will receive Exploration - the search for oil and gas deposits Discovery - confirmation of the presence of a petroleum-bearing reservoir Appraisal - drilling carried out once oil or gas has been discovered in order to assess the extent of the discovery Development - drilling a known producing formation to begin production Production - the extraction of oil or natural gas Abandonment - to cease work on a well which is non-productive and to plug off the well with cement Equity - share or interest in an oil or gas licence or field Joint venture - formal relationship between an oil company and its partner/s (Petronas / Tullow, Kufpec, Sterling and NOC) NOC - National Oil Company Block - subdivision of sea area for the purpose of licensing exploration/production rights PSC - production sharing contract GSPA - gas sales and purchase agreement POD - plan of development Exploration phase - exploration wells are drilled to determine whether oil or gas is present. Work obligations - the work that parties have committed to Financial obligations - the financial commitment that the parties commit to Contractor - 3rd party companies that provide technical services to the Operator Operator - the company responsible for the exploration, development, and production of an oil or gas licence Farm-out - where a company decides to assign part or all of its commercial interest to another company, sharing some of the costs of exploration in return for a proportion of any income generated in the future Key TermsPHASE 1
PHASE 2 Exploring the block through site and seismic surveys Timeline: 1 - 2 years 1. Assessment of potential impact on the environment when undertaking seismic surveys 3. Site surveys to assess conditions on and below ocean floor 2. Undertake 2D/3D seismic surveys to establish potential presence of oil or gas 4. If possibility of oil or gas (‘prospects’) shown to exist, oil and gas company (‘operator’) moves to exploration drilling phase 5. Companies may consider bringing in other O&G companies (farm-in) at this stage Key activities:
Opportunities and Challenges Opportunities • Some social projects will be started, as well as investment in local facilities (e.g. ports) Challenges • Predominantly environmental: - Increased noise levels can potentially impact marine mammals, such as whales - Some marine species may temporarily migrate away from affected area - Potential short-term impact on fishing in area while seismic survey takes place PHASE 2
Seismic survey - compressed air or sonic waves sent to ocean floor to gauge depth, location and structure of hydrocarbon resources beneath Seismic acquisition vessel - vessel used for conducting offshore seismic operations Offshore seismic operations - general term describing seismic exploration and surveys offshore Source - a device that records seismic data using sound waves Streamer - floating data collection device towed behind vessel Air guns - conduct sound waves to ocean floor using compressed air Hydrophone receivers - receive sound waves reflected back from ocean floor 2D - basic ‘single line’ data recording technique used for rapid survey of large areas of virgin territory 3D - multiple lines of data, giving a 3D image of surface below ocean floor Operator - the member of a joint venture responsible for carrying out operations Farm-in - where a company enters into a joint venture in return for paying a share/all of specific future operations Mmbbls - million barrels Mmboe - million barrels of oil equivalent Key TermsPHASE 2
PHASE 3 Timeline: 1 - 3 years 1. Exploration drilling is preceded by an Environmental Social Impact Assessment 3. Exploration wells are drilled into seabed (by drillship) to determine presence of oil or gas and a working hydrocarbon system 2. An oil spill response plan will be developed and approved by the Government 4. Additional information on seabed and subsea conditions is also gathered 5. Three potential scenarios. See below a. Dry hole - if no oil or gas is found, well is plugged, sealed, and secured b. Non-commercial well – if oil or gas is found but well is not commercial, further exploratory drilling may be undertaken c. Discovery - if well is found to be ‘hydrocarbon-bearing’, it is further tested to determine viability and companies will move to appraisal phase Key activities: Undertaking exploration drilling
Opportunities and Challenges Opportunities • Potential for some local employment • Boost to local economy from spending and supply contracts • Further social investment projects Challenges • Key concern is environmental: preventing leaks and spillages • Possible risk of occupational injury or illness among workforce • Possible local disruption due to drilling rig, supply vessels and transport helicopters PHASE 3
ESIA - a study to ensure that the environmental and social impacts of exploration are assessed and planned for Oil spill response plan - a contingency plan to assist in the effective response to an oil spill, which will include modelling Well - a boring in the Earth that is designed to bring oil and gas to the surface Wildcat - a speculative exploration well drilled in search of new oil or gas reservoirs Spud - the process of beginning to drill a well Rig / Drillship - a ship fitted with drilling apparatus, most often used for exploratory drilling Exploration well - a well drilled to confirm presence of oil or gas Exploration discovery - an exploration well that finds oil or gas Wellbore - a drilled hole or borehole Directional well - a wellbore aimed at a target located away from (as opposed to directly beneath) the surface location of the well Drilling mud - water-based lubrication fluid used when drilling a well Porosity - percentage of space within carbonate rock that can contain fluids Permeability - a characteristic that allows the oil and gas to flow through the rock Log - the results of exploration drilling Key TermsPHASE 3
1. In some circumstances, companies that don’t find oil and gas may look to relinquish their licence(s) or opt not to renew their licence(s) 3. There are three ways in which a licensee can give up acreage: - Surrender part of the licensed area while the licence continues over the remaining area - Relinquish the entire licence - Decide not to renew the exploration licence when the contract expires 2. This can happen at any point during phases 2 and 3 4. Depending on the original licence agreement, the company may have certain obligations to complete e.g. social investments, before it is released from the agreement Key activities: OPTIONAL ACTION Exiting a block
PHASE 4 Timeline: 1 - 3 years 1. Appraisal drilling follows successful exploratory drilling 2. Can involve drilling multiple wells 3. Assesses size of oil or gas discovery and whether it is commercially viable 4. If discovery is deemed commercially viable, the operator can move on to development 5. Social and environmental impact of appraisal drilling is comparable to exploration drilling Key activities: Appraisal drilling
Opportunities and Challenges Opportunities • Further jobs for local people • Increased boost to local economy (oil industry typically creates fewer opportunities than mining, especially when oil industry is offshore) from spending and supply contracts • Continued social investment Challenges • Same issues as in exploratory phase PHASE 4
Appraisal - further work to establish commercial potential of discovery Delineation well - well drilled to determine the size of an oil or gas deposit Well test - a test used to asses a well’s potential by measuring its capacity Hydrocarbon / oil / gas kitchen - an area of the subsurface rock containing hydrocarbons Reservoir - an area of porous rock containing hydrocarbon deposits Field - an area consisting of a single reservoir or multiple reservoirs Structural / strategic trap - a rock reservoir where liquid oil becomes trapped Key TermsPHASE 4
PHASE 5 Timeline: 1 - 3 years 1. A development plan is submitted to relevant national authorities for approval 3. Materials, services and equipment procured and installed 4. Drilling of production wells takes place 5. Tests run to verify that a stable production level can be achieved 6. Production begins Key activities: Development 2. Carry out assessment of all potential risks, including long- term appraisal of environmental and social impact
Opportunities and Challenges Opportunities • Potential short to medium-term jobs for local people • Boost to local, regional and national economy from spending and investment • Establishment of more sophisticated local community development and education programmes Challenges • Low but ongoing risk of impact on local marine life • Potential long-term local disruption due to drilling rig, supply vessels and transport helicopters • On rare occasions, contractors supporting development can cause local issues PHASE 5
Platform - a structure resting on, or attached to, the seabed from which wells are drilled Wellhead - point at which the hydrocarbons exit the seabed / also equipment at the surface used to control flow FPSO - a structure used for Floating Production, Storage and Offloading Gas injection - pumping gas into an oil reservoir to stimulate the crude oil Water flooding - injecting water into oil reservoir to increase pressure and stimulate production Water drive - water present in a reservoir below the oil or gas deposit, driving it to the surface Gas cap drive - gas expanding as well depletes, driving oil to surface Water contact - surface in a reservoir above which gas occurs and below which water occurs Key TermsPHASE 5
1. Phased increase in production until maximum level is reached 3. Regular ongoing reviews of social and environmental performance 2. Production is maintained at maximum level until it begins to decline Timeline: 10 - 30 years PHASE 6 Production Key activities:
Opportunities and Challenges Opportunities • Potential long-term jobs for local people • Long-term benefit to local, regional and national economy from oil revenue and spending • Ongoing local community development and education programmes Challenges • Ensuring that economies remain balanced and increased revenues are used effectively • As production ends, countries need to ensure they plan for life after oil and gas revenues PHASE 6
Plateau level - level of peak production reached by an oil or gas field MMBtu - million British thermal units per day Mmcf - million cubic feet Mmcfd - million cubic feet per day Mmscfd - million standard cubic feet per day Bopd - barrels of oil per day Boepd - barrels of oil equivalent per day Bcf - billion cubic feet Tax and royalty - profits and royalty tax paid on any oil produced GSA - gas sales agreement Key TermsPHASE 6

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Kosmos_Introduction to O&G education deck_EN

  • 1. AN INTRODUCTION TO OIL & GAS
  • 2. Kosmos is a premier international oil and gas exploration and production company, based in Dallas (US): • Experts who are proven oil finders: - Track record of deepwater exploration success - in 2007, Kosmos found the massive Jubilee Field in Ghana’s deep waters • Focused on under-explored offshore frontier / emerging basins with substantial hydrocarbon potential • Fully self-funded to undertake ambitious exploration and appraisal drilling program
  • 3. The Process Breakdown PHASE 6 Production PHASE 2 Exploring the block through site and seismic surveys PHASE 1 Entering a new market PHASE 3 Undertaking exploration drilling PHASE 4 Appraisal drilling PHASE 5 Development
  • 4. 1. Identify potential under-explored or overlooked geological territories 3. Assess geopolitical, operational and financial viability of operating in territory 2. Aquire existing seismic surveys 4. Secure rights to explore area through licenses with host governments Timeline: up to a year PHASE 1 Entering a new market Key activities:
  • 5. Opportunities • Opening a new petroleum basin • Exploring new horizons can result in good commercial terms Challenges • Proving to investors and the stock market that it is worth proceeding • Ensuring that the conditions are mutually beneficial between host nation and company Opportunities and ChallengesPHASE 1
  • 6. Upstream - refers to exploration, production and transport of oil and gas prior to refining Downstream - the refining of crude oil and the processing and purifying of raw natural gas, as well as the marketing and distribution of products derived from crude oil and natural gas. Exploration licence - permits geological and geophysical surveying and drilling of exploratory wells Production licence - confers exclusive rights on the licensee to search and drill for oil or gas Production sharing - agreement between parties to a well and a host country regarding the percentage of production each party will receive Exploration - the search for oil and gas deposits Discovery - confirmation of the presence of a petroleum-bearing reservoir Appraisal - drilling carried out once oil or gas has been discovered in order to assess the extent of the discovery Development - drilling a known producing formation to begin production Production - the extraction of oil or natural gas Abandonment - to cease work on a well which is non-productive and to plug off the well with cement Equity - share or interest in an oil or gas licence or field Joint venture - formal relationship between an oil company and its partner/s (Petronas / Tullow, Kufpec, Sterling and NOC) NOC - National Oil Company Block - subdivision of sea area for the purpose of licensing exploration/production rights PSC - production sharing contract GSPA - gas sales and purchase agreement POD - plan of development Exploration phase - exploration wells are drilled to determine whether oil or gas is present. Work obligations - the work that parties have committed to Financial obligations - the financial commitment that the parties commit to Contractor - 3rd party companies that provide technical services to the Operator Operator - the company responsible for the exploration, development, and production of an oil or gas licence Farm-out - where a company decides to assign part or all of its commercial interest to another company, sharing some of the costs of exploration in return for a proportion of any income generated in the future Key TermsPHASE 1
  • 7. PHASE 2 Exploring the block through site and seismic surveys Timeline: 1 - 2 years 1. Assessment of potential impact on the environment when undertaking seismic surveys 3. Site surveys to assess conditions on and below ocean floor 2. Undertake 2D/3D seismic surveys to establish potential presence of oil or gas 4. If possibility of oil or gas (‘prospects’) shown to exist, oil and gas company (‘operator’) moves to exploration drilling phase 5. Companies may consider bringing in other O&G companies (farm-in) at this stage Key activities:
  • 8. Opportunities and Challenges Opportunities • Some social projects will be started, as well as investment in local facilities (e.g. ports) Challenges • Predominantly environmental: - Increased noise levels can potentially impact marine mammals, such as whales - Some marine species may temporarily migrate away from affected area - Potential short-term impact on fishing in area while seismic survey takes place PHASE 2
  • 9. Seismic survey - compressed air or sonic waves sent to ocean floor to gauge depth, location and structure of hydrocarbon resources beneath Seismic acquisition vessel - vessel used for conducting offshore seismic operations Offshore seismic operations - general term describing seismic exploration and surveys offshore Source - a device that records seismic data using sound waves Streamer - floating data collection device towed behind vessel Air guns - conduct sound waves to ocean floor using compressed air Hydrophone receivers - receive sound waves reflected back from ocean floor 2D - basic ‘single line’ data recording technique used for rapid survey of large areas of virgin territory 3D - multiple lines of data, giving a 3D image of surface below ocean floor Operator - the member of a joint venture responsible for carrying out operations Farm-in - where a company enters into a joint venture in return for paying a share/all of specific future operations Mmbbls - million barrels Mmboe - million barrels of oil equivalent Key TermsPHASE 2
  • 10. PHASE 3 Timeline: 1 - 3 years 1. Exploration drilling is preceded by an Environmental Social Impact Assessment 3. Exploration wells are drilled into seabed (by drillship) to determine presence of oil or gas and a working hydrocarbon system 2. An oil spill response plan will be developed and approved by the Government 4. Additional information on seabed and subsea conditions is also gathered 5. Three potential scenarios. See below a. Dry hole - if no oil or gas is found, well is plugged, sealed, and secured b. Non-commercial well – if oil or gas is found but well is not commercial, further exploratory drilling may be undertaken c. Discovery - if well is found to be ‘hydrocarbon-bearing’, it is further tested to determine viability and companies will move to appraisal phase Key activities: Undertaking exploration drilling
  • 11. Opportunities and Challenges Opportunities • Potential for some local employment • Boost to local economy from spending and supply contracts • Further social investment projects Challenges • Key concern is environmental: preventing leaks and spillages • Possible risk of occupational injury or illness among workforce • Possible local disruption due to drilling rig, supply vessels and transport helicopters PHASE 3
  • 12. ESIA - a study to ensure that the environmental and social impacts of exploration are assessed and planned for Oil spill response plan - a contingency plan to assist in the effective response to an oil spill, which will include modelling Well - a boring in the Earth that is designed to bring oil and gas to the surface Wildcat - a speculative exploration well drilled in search of new oil or gas reservoirs Spud - the process of beginning to drill a well Rig / Drillship - a ship fitted with drilling apparatus, most often used for exploratory drilling Exploration well - a well drilled to confirm presence of oil or gas Exploration discovery - an exploration well that finds oil or gas Wellbore - a drilled hole or borehole Directional well - a wellbore aimed at a target located away from (as opposed to directly beneath) the surface location of the well Drilling mud - water-based lubrication fluid used when drilling a well Porosity - percentage of space within carbonate rock that can contain fluids Permeability - a characteristic that allows the oil and gas to flow through the rock Log - the results of exploration drilling Key TermsPHASE 3
  • 13. 1. In some circumstances, companies that don’t find oil and gas may look to relinquish their licence(s) or opt not to renew their licence(s) 3. There are three ways in which a licensee can give up acreage: - Surrender part of the licensed area while the licence continues over the remaining area - Relinquish the entire licence - Decide not to renew the exploration licence when the contract expires 2. This can happen at any point during phases 2 and 3 4. Depending on the original licence agreement, the company may have certain obligations to complete e.g. social investments, before it is released from the agreement Key activities: OPTIONAL ACTION Exiting a block
  • 14. PHASE 4 Timeline: 1 - 3 years 1. Appraisal drilling follows successful exploratory drilling 2. Can involve drilling multiple wells 3. Assesses size of oil or gas discovery and whether it is commercially viable 4. If discovery is deemed commercially viable, the operator can move on to development 5. Social and environmental impact of appraisal drilling is comparable to exploration drilling Key activities: Appraisal drilling
  • 15. Opportunities and Challenges Opportunities • Further jobs for local people • Increased boost to local economy (oil industry typically creates fewer opportunities than mining, especially when oil industry is offshore) from spending and supply contracts • Continued social investment Challenges • Same issues as in exploratory phase PHASE 4
  • 16. Appraisal - further work to establish commercial potential of discovery Delineation well - well drilled to determine the size of an oil or gas deposit Well test - a test used to asses a well’s potential by measuring its capacity Hydrocarbon / oil / gas kitchen - an area of the subsurface rock containing hydrocarbons Reservoir - an area of porous rock containing hydrocarbon deposits Field - an area consisting of a single reservoir or multiple reservoirs Structural / strategic trap - a rock reservoir where liquid oil becomes trapped Key TermsPHASE 4
  • 17. PHASE 5 Timeline: 1 - 3 years 1. A development plan is submitted to relevant national authorities for approval 3. Materials, services and equipment procured and installed 4. Drilling of production wells takes place 5. Tests run to verify that a stable production level can be achieved 6. Production begins Key activities: Development 2. Carry out assessment of all potential risks, including long- term appraisal of environmental and social impact
  • 18. Opportunities and Challenges Opportunities • Potential short to medium-term jobs for local people • Boost to local, regional and national economy from spending and investment • Establishment of more sophisticated local community development and education programmes Challenges • Low but ongoing risk of impact on local marine life • Potential long-term local disruption due to drilling rig, supply vessels and transport helicopters • On rare occasions, contractors supporting development can cause local issues PHASE 5
  • 19. Platform - a structure resting on, or attached to, the seabed from which wells are drilled Wellhead - point at which the hydrocarbons exit the seabed / also equipment at the surface used to control flow FPSO - a structure used for Floating Production, Storage and Offloading Gas injection - pumping gas into an oil reservoir to stimulate the crude oil Water flooding - injecting water into oil reservoir to increase pressure and stimulate production Water drive - water present in a reservoir below the oil or gas deposit, driving it to the surface Gas cap drive - gas expanding as well depletes, driving oil to surface Water contact - surface in a reservoir above which gas occurs and below which water occurs Key TermsPHASE 5
  • 20. 1. Phased increase in production until maximum level is reached 3. Regular ongoing reviews of social and environmental performance 2. Production is maintained at maximum level until it begins to decline Timeline: 10 - 30 years PHASE 6 Production Key activities:
  • 21. Opportunities and Challenges Opportunities • Potential long-term jobs for local people • Long-term benefit to local, regional and national economy from oil revenue and spending • Ongoing local community development and education programmes Challenges • Ensuring that economies remain balanced and increased revenues are used effectively • As production ends, countries need to ensure they plan for life after oil and gas revenues PHASE 6
  • 22. Plateau level - level of peak production reached by an oil or gas field MMBtu - million British thermal units per day Mmcf - million cubic feet Mmcfd - million cubic feet per day Mmscfd - million standard cubic feet per day Bopd - barrels of oil per day Boepd - barrels of oil equivalent per day Bcf - billion cubic feet Tax and royalty - profits and royalty tax paid on any oil produced GSA - gas sales agreement Key TermsPHASE 6