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Economic efficiency assessment of geophysical site survey for offshore oil and gas facilities
development
D. Lalomov* (Fertoing LTD), D. Baidikov (Fertoing LTD), D. Korshunov (Geodevice LTD),
G. Kovalenko (Peter the Great Saint Petersburg Polytechnic University)
Introduction
Implementation of investment construction projects on the shelf is a business with a high level
of risk, due to geohazards, which are a potential source of harm to offshore oil and gas facilities. With
a certain combination of probability and harm, potential geohazards turn into risks and should be
considered not only in the framework of geophysical site survey, but also from the point of view of
project risk management. Due to this purpose the results of engineering-geophysical site survey are
reviewed from the point of geohazard risk management for offshore oil and gas facilities construction.
Based on the actual methodology for quantitate risk analysis using the risk-approach, the economic
efficient of geophysical site survey is assessed. It is an important criterion for customer informed
investment decisions.
Methods
We review a standard geophysical site survey for jack-up drilling rig construction, which will
be located on the site within the boundaries 3 by 3 km and characterized by high geohazard uncertainty.
The geohazard identification was carried out using a standard set of geophysical surveys methods,
which included multi‐beam echo sounder, side‐scan sonar and magnetometer for seafloor mapping and
sub-bottom profiler, ultra‐ultra-high and ultra‐high resolution seismic for sub‐seafloor mapping.
Five types of geohazards were identified: paleo channel system; shallow gas in different
intervals (figure 1 a); faults (figure 1 b) and man-made features (figure 1 c). The example of ultra‐high
resolution seismic cross section with paleo channels and shallow gas charge interval performed on the
figure 1.
а)
b)
c)
Figure 1. The examples of paleo channel system and shallow gas (a); faults (b)
and man-made features (c)
The risk probability of each geohazard is calculated based on the percentage ratio of the area
located within the contour of the geohazard to the total site survey area (9 km2) using geohazard maps
(figure 2). Moreover, the probability of shallow gas risk was corrected using likelihood classification
of shallow gas seismic features (Guidelines …, 2015). The probability of contact jack-up drilling rig
with a point-like man-made features is determined by the percentage ratio of the area of the circle with
a radius equal to the largest diagonal size of the facility to the total site survey area.
«Морские технологии 2021» — Геленджик, Россия, 26 - 30 апреля 2021 г.
Figure 2. Geohazard maps: paleo channel system and man-made features (a); faults (b); shallow gas
in 0 – 30 m interval (c); shallow gas in 30 – 140 m interval (d)
Thus, the probability to knock against a paleo channel system within the site is likely, shallow
gas is occasional, faults is seldom, and man-made features is remote (table 1).
Table 1. Geohazard probability
Geohazard
Area, km2
Probability, %
Man-made features
0.27
3.0
Paleo channel system
3.65
40.5
Shallow gas
2.22
24.6
in 0 – 30 m interval
Shallow gas
in 30 – 140 m interval
2.78
30.8/23.1
(before correction/after correction)*
Faults
1.50
16.6
*Correction based on likelihood classification of shallow gas seismic
features
«Морские технологии 2021» — Геленджик, Россия, 26 - 30 апреля 2021 г.
The value of the damage is taken in accordance with the risk matrix for the global practice of
offshore drilling (Pritchard, 2010), where the minimum damage corresponds to the downtime of the
platform, and the maximum to its complete loss (figure 3).
Paleo channel
system
Likely
>40%
Probability
Occasional
20-40%
Shallow gas
Shallow gas
(0-30)
(30-140)
Seldom
10-20%
Faults
Unlikely
5-10%
Man-made
features
Remote
<5%
Rare
<1%
Incidental
Half day lost
($100K)
Minor
Moderate
Major
Severe
Catastrophic
Day lost
($100K-$250K)
Loss of hole
section
($250K-$1M)
Loss of more than
1 hole section
($1M-$5M)
Loss of well
($2M-$20M)
Loss of rig
(>$20M)
Harm
Figure 3. Risk assessment matrix for offshore drilling industry based on (Pritchard, 2010)
The initial data for risk calculations are presented in the table 2. The cost of drilling 1 m on
the shelf, depending on the region, ranges from $ 3.4 to $ 12.5 thousand (Tetelmin, 2009), which
corresponds to the cost of $ 3.4 to $ 12.5 million (an average of $ 7.95 million) for the construction of
a 1000 m well interval , which is in the area of responsibility of geophysical site survey (Guidelines ...,
2015).
Table 2. The initial data for risk calculations
Geohazard
Probability, %
Man-made features
Paleo channel system
Shallow gas
in 0 – 30 m interval
Shallow gas
in 30 – 140 m interval
Faults
Project cost, M $
Harm, M $
mid.
0.625
0.175
3.0
40.5
min.
0.25
0.1
max.
1
0.25
24.6
1
2.625
5
23.1
2
11
20
16.6
1
min. 3.4
3
mid. 7.95
5
max. 12.5
Results
The economic calculations are based on a quantitative risk analysis used within the framework
of actual requirements for risk management of innovative projects (Kovalenko, 2011). As a tool for
performing risk calculations, the Risky Project Professional software package (Risky project ..., 2012)
was used, which is based on logical and probabilistic modeling using the Monte Carlo method
(Metropolis, 1949).
«Морские технологии 2021» — Геленджик, Россия, 26 - 30 апреля 2021 г.
Max. harm
Mid. harm
25
Min. harm
No harm
Frequency
20
15
40
35
Confidence
interval
P10%
P90%
14
P67%
30
12
25
20
10
3.47 mln. $
15
10
8
5
0
0
10
6
20 40 60 80 100
Cumulative probability, %
4
5
Probability, %
30
Сost value at risk (VaR), mln. $
The results of risk calculations performed for scenarios with and without risk in the form of
diagrams of the distribution of costs according to cost value at risk (VaR) (figure 4). The number of
tests in the process of stochastic modeling for each of the scenarios was 216.
2
0
0
0
5
10
15
20
Cost, mln. $
25
30
35
40
Figure 4. The results of calculating the impact of risks on the total cost of the project: cost allocation
diagram (a); cost value at risk (VaR) chart (b)
The average value of the total probability of the distribution of costs in the confidence interval
of 10 to 90% shows that the construction cost at risk (scenario with average losses) with a probability
of 67% will not exceed $ 11.42 million. Therefore, the difference between the project cost, taking into
account and excluding risks will amount to $ 3.47 million (figure 5).
25
Probability, %
3.47
mln. $
Frequency
20
10
12
8
10
6
4
0
10
14
P90%
P67%
8
2
15
Confidence
interval
P10%
12
S1 = S2
0
5
10
15
20
Cost, mln. $
6
25
4
Mid. harm
No harm
5
Probability, %
30
2
0
0
0
5
10
15
20
25
Cost, mln. $
30
35
40
Figure 5. Comparison of histograms of cost distribution for scenarios with and without risk (a). An
example of determining the average value of the cumulative probability for a confidence level from
10 to 90% (b)
«Морские технологии 2021» — Геленджик, Россия, 26 - 30 апреля 2021 г.
In a static assessment, the economic return on investment is determined by ROI (return on investment)
(Samuelson, 2010):
Р
𝑅𝑂𝐼 = 𝐼 ∙ 100%,
(1)
where P – is the economic effect; I – investments.
The economic effect P in our case determines the expected monetary result EMV (Expected monetary
value), which is obtained based on the risk approach in accordance with (Bush, 1998):
𝐸𝑀𝑉 = (benefit ∙ 𝑆𝑃) − [risk capital ∙ (1 − 𝑆𝑃)],
(2)
where the «benefit» – is the cost of risks, which can be reduced by performing geophysical surveys ($
3.47 million.); «risk capital» – the cost of geophysical surveys ($ 0.6 million) that will be performed in
vain if the risks are not realized; SP – level of probability for which risks were assessed (67%). Based
on the calculation, we get an EMV of $ 2.39 million, which is at a cost of geophysical exploration of $
0.6 million provides their ROI 244%.
Conclusions
We considered geophysical site survey as a tool for identifying geohazards in terms of
standard project risk management procedures. Based on the risk approach, we showed the possibility
of assessing the economic efficiency of geophysical surveys, which is probabilistic and can be justified
and presented in the form of real cost indicators. Therefore, the mutually beneficial use of efficient risk
management approaches may underlie the teamwork of constructor and site survey provider.
References
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«Морские технологии 2021» — Геленджик, Россия, 26 - 30 апреля 2021 г.