The Analysis of Petroleum Development Projects

Two main aspects need to be considered when analysing a potential petroleum development project. Firstly, an estimate of the recoverable reserves must be made, and in many instances, these reserves must serve as collateral to finance development if outside capital is required. Secondly, the likely production profile and cash flow has to be established, and this cash flow then must meet debt service require- ments and in addition generate the required profits. In making these crucial deter- minations, the impact on the project of a wide variety of risks has to be analysed. A computer model, which represents the project in its entirety, is a great aid in determining project viability. Such a model requires imput from geologists, engineers and economists, and interpretation of the model must also be a joint effort. Communications, and inter react ion amongst individuals and disciplines is essential if the best answers are to be obtained