Page 353 - Hydrocarbon Exploration and Production Second Edition

340 Constructing a Project Cashflow

Table 14.1 Elements of a project cashflow

Sources Information
Petroleum engineering Reserves
Production forecasts – oil, sales gas
Drilling engineering Drilling and completion costs
Facilities engineering Capital costs
Platform structures
Transportation (e.g. pipelines)
Production facilities (e.g. separators,
compressors, pumps)
Operations and maintenance Operating costs
engineering Maintenance
Workover
Manpower requirement
Human resources Manpower costs
Operators
Technical staff
Support staff
Overheads
Host government Fiscal system
Tax and royalty rate
Royalty payment method (in cash or in kind)
Production sharing agreement
Company status (e.g. newcomer)
Project status (e.g. ring fenced)
Licence terms (duration, final liabilities)
Decommissioning requirements
Corporate planning Forecast oil and gas prices
Discount rates, hurdle rates
Exchange rates
Inflation forecast
Market factors
Political risk, social obligations

It is therefore important when collecting the data from the various sources that
the current range of uncertainty is also requested. In particular, when estimating
operating costs it is desirable for the operations and maintenance engineers to
estimate the cost of these activities based on the particular facilities and equipment
types being proposed in the engineering design. For example, the cost of operating
and maintaining an unmanned remote controlled platform will be significantly
different to a conventional manned facility.
For any one case, say the base case, the project cashflow is constructed by calcula-
ting, on an annual basis, the revenue items (the payments received by the project) and
then subtracting the expenditure items (the payments made by the project: CAPEX,