Page 411 - Hydrocarbon Exploration and Production Second Edition

398 Managing the Surface Facilities

16.2.3. Managing operating expenditure
During the producing life, most of the money spent on the field will be on OPEX.
This includes costs such as
maintenance of equipment offshore and onshore
transport of products and people
salaries of all staff in the company, housing, schooling
rentals of offices and services
payment of contractors
training.
In Section 14.2, Chapter 14, it was suggested that OPEX is estimated at the
development planning stage based on a percentage of cumulative CAPEX (fixed
OPEX) plus a cost per barrel of hydrocarbon production (variable OPEX). This
method has been widely applied, with the percentages and cost per barrel values
based on previous experience in the area. One obvious flaw in this method is that as
oil production declines, so does the estimate of OPEX, which is not the common
experience; as equipment ages it requires more maintenance and breaks down more
frequently.
Figure 16.11 demonstrates that despite the anticipation of an incremental project,
for example gas compression during the decline period, the actual OPEX diverges
significantly from the estimate during the decline period. Underestimates of
50–100% have been common. This difference does not dramatically affect the NPVof
the project economics when discounting back to a reference date at the development
planning stage, because the later expenditure is heavily discounted. However, for a
company managing the project during the decline period, the difference is very real;
the company is faced with actual increases in the expected OPEX of up to 100%.

abandonment ACTUAL
cost

Opex
($)

ESTIMATED

planned
incremental project

Producing lifetime

First
Abandonment
Production
Figure 16.11 Actual vs. estimated OPEX.