1
MINISTRY OF EDUCATION AND SCIENCE, RUSSIAN FEDERATION
FEDERAL STATE AUTONOMOUS ORGANIZATION OF HIGHER EDUCATION
«NOVOSIBIRSK NATIONAL RESEARCH STATE UNIVERSITY»
(NOVOSIBIRSK STATE UNIVERSITY, NSU)
Faculty of Economics
Chair of political economy of Economic Department NSU
Direction of Training: 38.04.02 Management
Master Educational program: Oil and Gas Management
GRADUATE QUALIFICATION PAPER
MASTER'S DISSERTATION
James Mohammad Mallah
Economic motivation of investment in Oil and Gas projects with Product sharing
agreement (on example of Sierra Leone oil shelf)
«Admitted to defense»
The head of the chair:
Economics, Prof.
Scientific Supervisor,
Dr. of Economics, Prof.
PhD, Assoc. Mamakhatov T.M.
Mkrtchyan G. /…………..
«……»………………2017
«……»………………2017
Date of defense: «……»………………2017
Novosibirsk, 2017
2
TABLE OF CONTENTS
Abstract…………………………………………………………………………………………...3
INTRODUCTION………………………………………………………………………………...4
CHAPTER 1. PROSPECT OF DEVELOPING CONTINENTAL SHELF OIL FIELD IN
SIERRA LEONE…………………………………………………………………………..……..6
1.1 Analysis of the economic situation in Sierra Leone…………………………………………..6
1.2 The definition of Continental shelf and offshore deposit……………………………………..9
1.3 Features of developing continental shelf Oil field in Sierra Leone………………………….13
CHAPTER 2. ECONOMIC MODEL OF ESTIMATION OF ECONOMIC EFFICIENCY OF
TRANSPORTATION OF OIL SHELF HYDROCARBONS…………………...……….……..16
2.1
Foreign
Experience
and
literature
review
of
evaluation
of
Oil
and
Gas
resources………...………………………………………………………………………….……16
2.2 Determination of available taxation regimes for development of hydrocarbon resources of the
continental shelf…………………………………………………………………………….……18
2.3 Features and ways of perfection of evaluation of Oil reserves and recourses of continental
shelf………………………………………………………………………………………………22
CHAPTER 3 .ECONOMIC EVALUATION OF HYDROCARBON TRANSPORTATION IN
THE
DEVELOPMENT
OF
SITE
ON
THE
WEST
AFRICAN
SHELF…………………………………………………………………………………...………35
3.1 General Characteristics ……………………………………………………………………...35
3.2 Algorithm for choosing transportation schemes for the development of hydrocarbon
resources on the continental shelf…………………………………………………..……………38
3.3 Estimating the cost transporting hydrocarbon in the structure of capital and operating cost
landplot………………………………………………………………………………………......46
CONCLUSION……………………………………………………………………………........60
REFERENCES…………………………………………………………………………………62
3
Abstract
Sierra Leone is a small country in West Africa with a lot of problems associated with natural
resources. The country has launched it policy reform process and approached the international
community to assist in the design of a new petroleum policy for the country. The Oil exploration
off the Sierra Leonean coast had already been carried out in the early 1980s. After Mobil and
Amoco had abandoned their wells in 1982 and 1984 respectively, exploration in Sierra Leone’s
waters was only restarted with the collection of seismic data in 2000/01 by TGS-NOPEC.
The prospective area was originally divided into 7 Blocks which were subsequently awarded in
two bid rounds. The purpose of this research is to improve the methodology for the economic
evaluation and selection of a hydrocarbon transportation scheme for the implementation of
projects for the development of oil resources on the Sierra Leone’s continental shelf with
attraction of foreign companies to invest in the form of PSA. According to the aim of the
research the following objectives are assigned;
1.
Consider the development of offshore fields of Sierra Leone under the Agreement
on division of production with a foreign company;
2.
To systematize possible options for transportation of hydrocarbons from the
continental shelf and on their basis to develop an algorithm for selecting the transportation
scheme depending on the key parameters;
3.
Develop an economic model that allows evaluating the economic efficiency of
hydrocarbon transportation from the Sierra Leone continental shelf.
4.
Conduct an economic assessment of transportation of hydrocarbons from the
Sierra Leone shelf taking into account various transportation schemes by economic evaluation
model.
5.
Development of managerial decisions based on the results.
The research methodology is based on the economic evaluation of Oil field development
taking into account various aspect of investment analysis, ranging from Industrial, Technical and
Financial, environmental, institutional and social economic evaluations using indicators such as
Present values, internal rate of returns, ratio of discount benefit to discount cost and payback
period of capital investment.
This methodology also proposed algorithm for selecting the hydrocarbon transport scheme for
projects for their extraction in conditions of limited initial information using a range of unit
transportation costs from Sierra Leone continental shelf .The Estimation of economic efficiency
of transportation of shelf oil in the form of an economic model allowing to justify the
implementation of a specific project with a choice of transportation scheme is formalized
The analysis of the many literature on the Oil and Gas sector in Sierra Leone has been
investigated by notable Petroleum companies in the world. Literatures are produced by foreign
experiences, Africa Petroleum, lukoil, Association of journalist on mining and Extractives,
Oxford Institute for energy studies etc.
The subject is theoretical foundations and methodology of economic evaluation of
prospective offshore oil areas on the continental shelf in Sierra Leone and factors that influence
the investment attractiveness of the African oil and gas projects
The object is the Oil field located on the continental shelf of Sierra Leone. The final result of
this research will be based on the Analysis of the proposed model and algorithm and the
development of managerial decisions based on the results
4
INTRODUCTION
Sierra Leone is bordered by Guinea to the north, Liberia to the southeast and the Atlantic
Ocean to the west and southwest. Following years of conflict and the discovery of the Jubilee
field off the coast of Ghana, oil contractors have been quick to enter Sierra Leone to explore the
country’s oil and gas potential. The country’s oil was first discovered by Anadarko in 2009
(Venus), another discovery followed in 2010 (Mercury). In 2012 Tullow found Oil in the same
block shared with Anadarko and Reposol. So far Oil and Gas activities is currently or situated in
it exploration phrase offshore. It is important to note that this discovery has not resulted into a
realistic commercial production.
In 2011, the Environment Protection Agency of Sierra Leone (EPA-SL) in collaboration
with the Petroleum Directorate Sierra-Leone released the Strategic Environmental Assessment
(SEA) of potential hydrocarbon development in the country. The report highlighted that Sierra
Leone stands to generate more than $100 million annually once oil production gets underway, a
significant boost to domestic revenues.
For involving in the development necessary to assess the economic attractiveness and
usefulness of involving reserves in the design, i.e. you must correlate the benefits and costs,
assess the effectiveness of the implementation of the resource potential of development projects.
The aim of this work the improving of methodology for the economic evaluation and
selection of a hydrocarbon transportation scheme for the implementation of projects for the
development of oil resources on the Sierra Leone’s continental shelf with attraction of foreign
companies to invest in the form of PSAs.
The object of research is the Sierra Leone oil field located on the continental shelf of
the Atlantic Ocean, in West Africa.
The subject of research is theoretical foundations and methodology of economic
evaluation of prospective offshore oil areas on the continental shelf in Sierra Leone and factors
that influence the investment attractiveness of the African oil and gas projects.
To achieve the goal the following tasks were formulated:
6.
Consider the development of offshore fields of Sierra Leone under the Agreement
on division of production with a foreign company;
5
7.
To systematize possible options for transportation of hydrocarbons from the
continental shelf and on their basis to develop an algorithm for selecting the transportation
scheme depending on the key parameters;
8.
Develop a economic model that allows to evaluate the economic efficiency of
hydrocarbon transportation from the Sierra Leone continental shelf.
9.
Conduct an economic assessment of transportation of hydrocarbons from the
Sierra Leone shelf taking into account various transportation schemes by economic evaluation
model.
10.
Development of managerial decisions based on the results.
The scientific novelty of the study is as follows:
1.
A methodical approach was developed in other to improve the development of
sectors of the Sierra Leone continental shelf, bearing into account the complexity of
development of sites depending on natural, technical, resource and socio-economic factors.
2.
An Algorithm is proposed for selecting the hydrocarbon transport scheme for
projects for their extraction in conditions of limited initial information using a range of unit
transportation costs from Sierra Leone continental shelf.
3.
The Estimation of economic efficiency of transportation of shelf oil in the form of
a economic model allowing to justify the implementation of a specific project with a choice of
transportation scheme is formalized.
4.
The Organizational scheme of transportation of oil resources from the continental
shelf of Sierra Leone is substantiated on the basis of economic calculations performed, which
makes it possible to involve considerable hydrocarbon resources into economic development by
investment attractive of foreign companies in the form of PSA.
5.
Management solutions have been developed for the effective economic
development of the Sierra Leone economy based on the development of oil and gas offshore oil
production projects under PSA projects.
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CHAPTER 1. PROSPECTS OF DEVELOPING CONTINENTAL SHELF OIL
FIELDS IN SIERRA-LEONE
1.1. The analysis of economic situation of Sierra Leone
Sierra Leone has one of the least developed economies with a GDP of approximately 1.9
billion USD in 2009. It economy is gradually recovering since the end of the civil war in 2002
with a GDP growth rate estimated between 4 and 7%. In 2008 its GDP in PPP ranked between
147th (World Bank) and 153rd (CIA) largest in the world. In 2015 GDP of Sierra-Leone was
4,475 billion USD.
Sierra Leone's economic development has always been hindered by an overdependence
on mineral exploitation. Successive governments and the population as a whole have always
believed that "diamonds and gold" are sufficient generators of foreign currency earnings and lure
for investment.
This has lead to the inattention of large scale agriculture of commodity products,
industrial development and sustainable investments by the state. The country’s economy could
thus be described as one which is "exploitative" - a rentier state - and based upon the extraction
of unsustainable means or non-reusable assets.
Two-thirds of the population of Sierra Leone are directly involved in subsistence or local
agriculture. Agriculture accounted for about 58 % national Gross Domestic Product (GDP) in
the year of 2007.
6000.0
4958.85005.7
5000.0
4474.7
3853.4
4000.0
2985.6
2616.6
3000.0
2000.0
1627.9
1100.7
1000.0
322.0 359.4 434.4
679.3
856.9
649.6
870.8
635.9
0.0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015
Figure 1.1. GDP of Sierra-Leone, millions USD, 1960-2015
Source: http://data.worldbank.org/
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Mining
The country is abundantly rich in minerals and has highly depends on the extractive or
endowed industry (mining sector in general, and diamonds in particular,) for its economic
growth base. During the periods of the 1970s and early 1980s, economic growth rate slackened
because of a drop in the mining sector. There have been financially disadvantageous exchange
rates and budget deficits which has led to sizable balance-of-payments deficits and inflation.
Certain policy responses to external factors as well as implementations of aid projects and
maintenance have led to a general decline in economic activity and a serious degradation of
economic infrastructures. Sierra Leone's short-term prospects depend upon continued adherence
to International Monetary Fund programs and continued external assistance.
Trade
A Sierra Leone principal foreign exchange earnings comes directly from the mechanism
of foreign exchange earnings. The country remains one of the world major producers of gemquality diamonds. The country has historically struggle despite the abundance of available
resources. It has struggle to manage it exploration and export due to it long civil war and
corruption during the latest and early 90s. Annual production estimates range between $70–$250
million; however, only a fraction of that passes through formal export channels (1999: $1.2
million; 2000: $16 million; 2001: projections $25 million). The balance is smuggled out and has
been used to finance rebel activities in the region, money laundering, arms purchases, and
financing of other illicit activities, leading some to characterize Sierra Leone's diamonds as a
"conflict resource."
Recent times there has been tremendous efforts on the part of the different government to
enhance the management of the export trade have met with some success. In October 2000, a
new UN-approved export certification system for exporting diamonds from Sierra Leone was put
into place that led to a dramatic increase in legal exports. In 2001, the Government reinstated a
mining community development fund, which returns a portion of diamond export taxes to
diamond mining communities. The fund was created to raise local communities' stake in the
legal diamond trade.
Investments
With it flashy and amazing natural resources the country has one of the world's largest
deposits of rutile, a titanium ore used as paint pigment and welding rod coatings. “Sierra Rutile
limited ” an American company began commercial mining operations near Bonthe District,
Southern Sierra Leone in the beginning of the 1979. The company becomes the largest nonpetroleum U.S. investment in West Africa. The export of 88,000 tons realized $75 million for the
country in 1990.
8
Both Sierra Rutile and the Government of Sierra Leone has benefited and enjoyed a long
standing relationship with the American company and concluded a new agreement on the terms
of the company's concession in Sierra Leone in 1990. Rutile and bauxite mining operations were
suspended when the mining sites were invaded in 1995. The company reactivated it contract
again after the rebel war was over
Since independence in 1961, the Government of Sierra Leone has encouraged foreign
investment, although the business climate suffers from uncertainty and a shortage of foreign
exchange because of civil conflicts. Investors are protected by an agreement that allows for
arbitration under the 1965 World Bank Convention. Legislation provides for transfer of interest,
dividends, and capital.
Sierra Leone is
a member State of Economic Community of West African States
(ECOWAS). With Liberia Guinea and Ivory Coast, it formed the Mano River Union (MRU)
customs union, primarily designed to implement development projects and promote regional
economic integration.
In recent times the MRU has been very active because of solutions to domestic problems
and internal and cross-border conflicts of all four countries. The future of the MRU has been
clearly spelt out and it members are working hard to re-instate any fall out from these internal
and region problems that may emerge.
Sierra Leone is a member of the WTO.
Demographics
In 2013 Sierra Leone has an officially projected population of 6,190,280 and a growth
rate of 2,2% a year. The country's population is mostly young, with an estimated 41,7% under
15, and rural, with an estimated 62% of people living outside the cities. As a result of migration
to cities, the population is becoming more urban with an estimated rate of urbanization growth of
2.9% a year.
9
7.0
6.3 6.5
6.0 6.2
5.9
5.8
6.0
5.1
5.0
3.9 3.8 4.1
4.0
3.0
3.5
2.2 2.3
2.5
2.8
3.1
2.0
1.0
0.0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015
Figure 1.2. Population of Sierra-Leone, millions person, 1960-2015
Source: http://data.worldbank.org/
900.0
802.5 792.6
800.0
693.4
700.0
637.7
600.0
505.3
500.0
453.0
356.6
400.0
300.0
200.0
245.6
172.8
147.6 154.0
321.0
247.2
226.9
165.3
156.6
100.0
0.0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015
Figure 1.3. GDP per capita of Sierra-Leone, USD, 1960-2015
Source: http://data.worldbank.org/
1.2.The definition of continental shelf and offshore oil deposits
The continental shelf is an underwater landmass which extends from a continent,
resulting in an area of relatively shallow water known as a shelf sea. Much of the shelves were
exposed during glacial periods and interglacial periods.
Major attention to the continental shelf and within its depths resources appeared
relatively recently. Prior to the beginning of the twentieth century. Each coastal State extends its
10
sovereignty over the seabed at a distance of three miles from shore. The emergence and
development of the oil industry has led to the interest of oil companies to gain control over
hydrocarbon resources, which lies under the bottom of the waters outside the three-mile zone.
The first request for extension of the state's influence on coastal waters was made in the
US in 1945. The US president announced that the natural resources on the continental shelf
adjacent to the shores of the United States, owned by US. Under the continental shelf assumed
flooded land, adjacent to the shore and covered with water to a depth of no more than 200 meter.
The first definition of the term "continental shelf" was published by the American
geologist FP Shepard in 1949. He proposed to consider the shallow shelf platforms that surround
the continents and have a sharp bend of the transverse profile. This inflection ("shelf edge")
divides the continental shelf and continental slope (Fig. 1.4). The continental shelf is an
underwater landmass which extends from a continent, resulting in an area of relatively shallow
water known as a shelf sea. Much of the shelves were exposed during glacial periods and
interglacial period. The continental margin, between the continental shelf and the abyssal plain,
comprises a steep continental slope followed by the flatter continental rise. Sediment from the
continent above cascades down the slope and accumulates as a pile of sediment at the base of the
slope, called the continental rise. Extending as far as 500 km (310 mi) from the slope, it consists
of thick sediments deposited by turbidity currents from the shelf and slope. The continental rise's
gradient is intermediate between the slope and the shelf, on the order of 0.5–1°.[13]
To create an international legal framework for the control of shelf natural resources in the
early 1950s. The United Nations began to develop international instruments that would form the
legal basis for the sovereign rights of coastal States over the continental shelf for exploration and
exploitation of its natural resources.
In 1956, the UN has developed a legal concept, according to which the coastal State may
lay claim to the region of the shelf, which is adjacent to its shores, or is located outside of its
territorial sea. The definition specifies a 200- meter depth criterion as the first shelf limit. At this
depth, as a rule, in a geological sense, the continental shelf ends and begins the continental slope
ends abruptly to great depths.
11
Figure 1.4 The geological concept of the continental shelf
The main international legal acts regulating the use of mineral resources on the
continental shelf are two universal international treaties. This is the "Geneva Convention on the
Continental Shelf" 1958 and the "United Nations Convention on the Law of the Sea" in 1982
(Table 1.1.).
"The Geneva Convention on the Continental Shelf,” adopted in 1958, brings together the
geological and legal concept to the definition of the shelf. In accordance with this convention, it
refers to the shelf surface and subsoil of the seabed in areas adjacent to the coast of the continent
or the island's territorial waters but outside the area to a depth of 200 meters or beyond this limit
up to the place, to the depth of which allows the development of natural resources. The
disadvantage of this convention is that the outer limit of the continental shelf is not exactly
given. The Convention established the principle of inalienable rights of the coastal State over its
continental shelf: "If the state itself does not use a shelf, without its consent it cannot do any
other state.
The Convention specifies several ways to settle disputes relating to the establishment of
the continental shelf between the two neighboring states: the median line (if the coasts of two
States are arranged opposite each other), the principle of equidistance from the nearest coastal
point (if two adjoining states coast) and other bilateral agreements suiting both sides.
Table 1.1
The periodization of the development of approaches to the definition of the continental shelf
Stage Year Source
Innovations
Summary
Geologic
The shelf as a natural submarine extension of the
1
1949
USA
conception mainland
The shelf is adjacent to the shores of the state the
seabed over which the State has the sovereign right to
Legal
extract natural resources
2
1956
UN
conception
The outer boundary of the continental shelf is not
unique:
12
3
4
1958
1982
UN
UN
«Geneva
convention
on the
Continental
Shelf»
«Law of the
Sea
Convention»
"... Considered to shelf waters of a depth of 200 m or
over 200 m if the technology allows the extraction of
natural resources ..."
Combining geological and legal concepts
Three ways to establishment of the outer continental
shelf boundaries between neighboring States
The one-time signing of 86 States
The outer limit of the shelf is fixed at a distance of 200
miles from the territorial sea
Countries have the opportunity to expand the external
border of the continental shelf from 200 to 350 miles
The one-time signing of 60 States
Source: compiled by the author
The exact outer limit of the continental shelf was installed in the "United Nations
Convention on the Law of the Sea", adopted in 1982, the Convention has recorded the external
border of the continental shelf within 200 nautical miles from the territorial sea . If the
continental margin extends beyond 200 nautical miles, the coastal state has the ability (through
an appeal to the UN) to increase the space of the continental shelf beyond the current 200
nautical miles. However, the Convention limits the claims of the coastal State in remote
maximum of 350 nautical miles or 100 miles from isobath (lines of equal depth) 2500 m. These
provisions of the Convention on the outer boundary of the continental shelf shall not apply when
considering the delimitation of the continental shelf between States with opposite or adjacent
coasts . In this case, the delimitation of the continental shelf is based on bilateral agreements.
Consider the basic geological differences and legal concepts of the continental shelf.
According to the geological concept, the definition of the continental shelf based on the
geological characteristics of the bottom. Thus, the shelf is recognized lined area of the
continental margin adjacent to the land and is characterized by the general geological structure
with it. The boundaries of the continental shelf are Beach / Ocean and the sharp bend of the
seabed surface (shelf edge).
The average depth of the curve of typically 100-200 m, but in some cases can be up to
500-1 000 m. The continental slope extends from the outer continental shelf edge to the foot
(most of the sea / ocean floor), where the depth is 2 000-3 000 m. The continental slope is quite
large compared to the slopes of the shelf and the bed of the ocean - to 20-40 °. According to the
legal concept of the continental shelf includes, besides the geological shelf also those coastal
areas of the seabed where the continental shelf in the geological sense there (but not beyond 200
miles from the territorial sea), as well as the seabed outside the geological continental shelf (but
not beyond 200 miles from the territorial sea). Besides, if from a geological point of view, the
shelf begins from the seacoast, with the law - from the outer limit of the territorial sea, as the
13
territorial sea, the seabed and subsoil thereof, are part of the national territory of the coastal
State. The outer limit of the continental shelf, in accordance with the legal concept, is fixed at a
distance of 200 miles from the territorial sea and the outer limit of the geological continental
shelf can be both closer and farther than that distance.
One of the most controversial legal issues of using the waters and seabed in modern
international practice is to establish the boundaries of the continental shelf between neighboring
States.
The Geneva Convention of 1958 and the UN Convention on the Law of the Sea in 1982
stated three approaches to defining the outer limits of the continental shelf to the neighboring
states. Where the coasts of two States are opposite to each other, the shelf boundary is the
median line every point of which is equidistant from the nearest points on the baselines from
which the breadth of the territorial measured seas. Where the coasts of two States are adjacent,
the boundary is defined by the principle of equidistance from the nearest points on the baselines
from which the breadth of the territorial sea is measured. The third approach involves any
bilateral agreement, acceptable to both countries.
The relatively accessible continental shelf is the best understood part of the ocean floor.
Most commercial exploitation from the sea, such as metallic-ore, non-metallic ore, and
hydrocarbon extraction, takes place on the continental shelf. Sovereign rights over their
continental shelves up to a depth of 200 meters or to a distance where the depth of waters
admitted of resource exploitation were claimed by the marine nations that signed the Convention
on the Continental Shelf drawn up by the UN's International Law Commission in 1958. This was
partly superseded by the 1982 United Nations Convention on the Law of the Sea, which created
the 200 nautical mile exclusive economic zone and extended continental shelf rights for states
with physical continental shelves that extend beyond that distance.
The legal definition of a continental shelf differs significantly from the geological
definition. UNCLOS states that the shelf extends to the limit of the continental margin, but no
less than 200 nautical miles from the baseline. Thus inhabited volcanic islands such as the
Canaries, which have no actual continental shelf, nonetheless have a legal continental shelf,
whereas uninhabitable islands have no shelf.
1.3.Features of developing continental shelf oil fields in Sierra-Leone
Sierra Leone had a neighboring offshore region with Liberia and had only few
exploration wells drilled on the continental shelf. Exploration focused on the classical Apian –
Albian titled block play that produces in the Baobab, Espoir, Lion and Tano fields of Ghana and
Ivory coast.
14
The deep-water areas of this steep morphological margin are undrilled, and the details of
its history remain largely unknown. . The main play in the slope is Upper Cretaceous turbidites,
consisting primarily of amalgamated channel-levee complexes, pinching-out towards the steep
continental slope in stratigraphic traps. Post-rift Albian and Cenomanian-Turonian shale’s
constitute the main potential source rocks of the deep-water part of the margin. The structure of
the margin is the result of Early Cretaceous low-angle extensional tectonics, and gravitational
extension and related toe-thrusting associated with Late Cretaceous to Tertiary uplift on the
shelf. Petroleum systems modeling of this margin is a major challenge due to many unknowns,
including:
1)
The complex structural evolution related to the role of transform and extensional
faults during the Tertiary,
2)
The location of the continent-ocean boundary(Sierra Leone and Liberia) and its
implications for heat-flow through time, and
3)
The dating of the deep-water stratigraphy section due to the lack of deep-water.
Offshore oil was discovered in several locations in 2009 and 2010, but commercial
exploitation of these reserves is likely to be several years away. However, several multinationals
already have exploration permits – Talisman, Lukoil, Anadarko, and European Hydrocarbon –
and these are already starting to bring in revenue to the government. More exploration block
permits are expected to be awarded soon.
The Republic of Sierra Leone has a significant potential of hydrocarbon resources at shelf
of Atlantic Ocean within oil and gas area of Sierra Leone and Liberia. The presence of the
resources were confirmed by the results of drilling of the first hole in 2009 and by the further
works at country's shelf. Hydrocarbon potential of West African shelf is estimated at 432
millions of tons of oil and 488 billion cubic metres of gas. A probable volume of oil is 216
millions of tons, 244 billions of cubic metres of gas.
The peculiarity of this object of estimation is in the presence of oversized depths of
waters and it requires mobile drilling tools of a half immersed type for developing of the area.
"The Tributaries of hydrocarbons" within the limits of the projects like Mercury, Venus,
Anadarko were discovered at the depth of 1, 7 - 3, 1 thousands of meters.
15
Figure 1.5 Sierra-Leone oil deposits on continental shelf
Source: compiled by the author
Another peculiarity of the area is a far remoteness of an authorized part of coastal line.
The furthest point of area is located at 250 kilometers from the land. Due to the high depths and
far distances from the coast transportation of extracted hydrocarbons to the coastal base is better
to do by tankers not by sea pipelines.
Existing values of reserves and resources of hydrocarbon areas of West African shelf
allow to fulfil extraction of oil at the level of 11 millions of tons and gas till 9 billions of cubic
metres.
According to the results of exploratory works at West African shelf it's expected to
discover one oil zone with year extraction of 5 millions of tons and other two with extraction of
oil at 4 and 2-3 millions of tons yearly. Also it's expected to discover two gas areas with
extraction at the level of 6 and 3-4 billions of cubic metres yearly.
It's expected to transfer the extracted oil and gas substance via half immersed pipelines to
a nearby ship for storing and shipment. Transportation of hydrocarbon mixture that includes both
gas and liquid hydrocarbons, from drilling platforms to a ship for storage and shipment requires
its nearby location to an extracting area. A process of preparation includes the following steps:
separation of liquid and gas hydrocarbons, dehydration, and extraction of salt and mechanical
admixtures.
16
After separation and initial preparation, oil will transferred to the storage where oil will
be tested in a sense of quality according to the export type "SL Light". And next, oil will be
transferred to portable terminal for loading in tankers. Separated from liquid hydrocarbons and
dried gas will be processed by further compression and liquefaction to be shipped to sale market.
The current way of extraction and shipment of hydrocarbons at deep shelfs shows that it's better
to place infrastructure for extraction, storing and shipment close to the exploration area.
The main problem of hydrocarbon transportation to the coast is in an absence of tested
technologies for building oil and gas pipelines at the level of 1,5-3,0 thousands of meters where
is expected a discovery of hydrocarbons. Therefore a possibility of building of sea pipelines from
a special ship for storing and shipment oil to coastal infrastructure is absent. In this case, there
are two schemes of transportation liquid and gas hydrocarbons.
CHAPTER 2. ECONOMIC MODEL OF ESTIMATION OF ECONOMIC EFFICIENCY
OF TRANSPORTATION OF OIL SHELF HYDROCARBONS
2.1. Foreign experience and literature review of evaluation of oil and gas resources
Questions of geological and economic evaluation of natural resources and, in particular,
evaluation of hydrocarbon deposits, started to appear in 20s century and are not questions are not
still permitted to the end.
Currently, the main methodological principle of economic evaluation of production and
transportation of minerals is the representation of natural resources as an investment object, so
the further development of methods of evaluation of mineral resources continues towards the
development of methods for evaluating the effectiveness of investments. A common method of
economic evaluation of oil and gas facilities in the modern subsoil is not yet developed.
Western industry methodology for assessing hydrocarbon resources are developed in
large oil and gas companies and are complex software systems, using a large number of the
original, both geological and economic information. Typically, these software systems are not in
the public domain.
According to analysis of approaches of different agencies and institutes, were made the
classification of these approaches according to the origin and destination methods (Figure 2.1).
17
Figure 2.1 - Foreign experience of economic evaluation [16, 19]
Among the foreign universal methods most common in the world is the World Bank's
methodology of economic evaluation of investment projects. A feature of the investment
activities of the World Bank is a detailed assessment of investment projects, which requires
taking into account the various aspects of the analysis, including marketing, technical,
institutional, social, environmental, financial and economic. The main indicators in the
methodology of the World Bank is the net present value (analogue net present value), internal
rate of return (IRR analogue), the ratio of discounted benefits to the discounted costs and
payback period of capital investment (the number of years required to recover the investment by
the net benefits project).
Another common method of evaluation of investment projects for a long time developing
according to the UN. This is the "Guidelines for the preparation of industrial feasibility studies."
The most well-known foreign software complexes are SCA (Subsurface Consultants &
Associates), Schlumberger, ExxonMobil, EPA (Environmental Protection Agency), Landmark
Graphics, Ernst & Young, and others.
At the present time the basic methodological principles of economic evaluation of
production and transportation of mineral resources is a representation of a natural resource as an
investment object, so the further development of methods for evaluating mineral continues in the
direction of evaluating the effectiveness of investment methods.
18
The most popular foreign methods are the World Bank's methodology, UNIDO and the
European Union. These methods establish basic principles for the evaluation of investment
projects, as well as establish performance indicators of investment projects. The foreign
methodology for assessing the hydrocarbon resources are developed in major oil and gas
companies and are complex software systems that use a large amount of the original as the
geological and economic information.
Therefore, the economic calculation made by various organizations and in each case the
work artist uses the technique that makes it difficult to check the authenticity and accuracy of the
calculation.
Economic evaluation of reserves and mineral resources should be carried out at each
stage of the development of the mineral complex in order to increase the validity of the decisionmaking and the formation of an integrated development strategy, starting with an assessment of
the effectiveness of the functioning of the sector as a whole to select priority directions of its
development. The most elaborated remains the direction of the stock assessment, but the official
method of economic resources assessment is completely absent, and her conduct is based on the
methodological recommendations of industry and academic institutions.
Foreign authors dealing with this issue are C. Randell, R. Fullenbaum [15], K. Gkonis, S.
Halskau, J. Hamilton, P. Hopkins, J. Kennedy.
The following scientists were engaged in research on the transportation of oil and natural
gas through pipelines: Aliev [3], Yu.P. Batalin [11], P.P. Borodavkin [19], N.A. Waldman [25],
A.B. Vasilenko
[28],
G.G. Vasilev
[29],
Yu.D. Zemenkov
[5],
V.M. Kulichev
[9],
A.M. Mastepanov [11], V.A. Suleimanov [13], V.V. Tetelmin [16], V.D. Chernyaev [21],
A.M. Shammazov [21].
Studies of the transportation of oil and natural gas by sea were carried out by the
following scientists: E.K. Glukhareva [44], S.E. Kalashnikov [6], V.I. Kolesnikov [7], S.
Mackintosh [15], E.V.Markushin [17], E.M. Movsumzadeh [12], V.K. Novikov [14],
M.P. Petrov [15], O.Yu. Tolochkin [18], A.M. Fadeev [14], Yu.A. Kharchenko [20],
S.A. Shumovsky [21].
2.2. Determination of available taxation regimes for development of hydrocarbon
resources of the continental shelf
The PSA tax regime first appeared in Indonesia in the 1960s, after which it became
widespread in countries of Asia, Africa, and Latin America. The main reasons for the emergence
and spread of this taxation regime was the desire of developing countries to attract foreign
companies to develop their natural resources (including hydrocarbon fields). In the conditions of
19
unstable political, economic, tax systems in these countries, individual agreements between the
state and a foreign investor for a particular field proved to be the best option for the rapid
development of hydrocarbon deposits.
Table 2.1
Benefits of PSAs for the state and investor
Advantages for the state
Advantages for the investor
Getting stable and predictable income protected Simplification of taxation due to the need to pay
from volatility in world prices for hydrocarbons
less taxes
The possibility of organizing a special taxation
Redistribution of the tax burden for the postfor each field, taking into account its unique
paid period of the project
characteristics
The payment of taxes is made "from the project"
and not "from the company", which increases the
Reduced the amount of tax payments
transparency of cash flows in the development of
a particular field
The acquisition by the investor the necessary Ensuring sustained long-term economic
technological equipment of the country origin in conditions, activities in connection with the
the amount of not less than 70% of the total cost principle of priority of the agreement before the
of the purchased equipment
possible changes in the country's legislation
Provision of Russian companies (contractors,
suppliers, carriers) pre-emptive right to More user-friendly contract (rather than
participate in the work of the PSA, and the administrative) form of negotiation with the
transfer of expertise and technologies to Russian state authorities
companies
Attracting investors workers - citizens of Russia,
The opportunity to participate in shaping the
the number of which shall be not less than 80%
economic (fiscal) conditions of the agreement
of members of all the involved employees
Source: Compiled by the author of the data [34,59,103,162]
Calculations of taxes paid in the author's techno-economic model are carried out
according to the above tax benefits from the following formulas.
PSA
The Production Sharing Agreement requires a fundamentally different approach to the
taxation system.For field development on the basis of an agreement on the investor section of the
product is exempt from certain federal, state and local taxes and duties (except income tax,
royalties, compulsory social security). Instead of paying some taxes investor transfers to the state
of the output. In Sierra Leone there is yet a fundamental legislation to PSA.In Russia for
example there are two ways of production sharing (received as a result of mining and mineral
processing) - a traditional and straight.
When Traditional the PSA (Fig. 2.1) of the manufactured products (compensating
products) is transmitted to the property investor to recover its capital investment, operating costs,
as well as taxes and fees that are attributable to the cost. Ratio compensation production should
not exceed 90% of the total production for offshore. If this amount of product (90%) is not
20
enough to compensate the investor reimbursable expenses, the uncovered costs of the investor
will be reimbursed to him next year. The remaining products are divided into products,
equivalent to the amount of tax on the extraction of minerals, and profitable products, are
distributed between the state and investors. Note that the tax on extraction of mineral resources
and the investor pays the premiums from the beginning of the project.
Figure 2.2 - Scheme of production sharing in the traditional PSA
In accordance with the production sharing agreement the investor recognizes income cost
profit production belonging to the investor, as well as its non-operating income. Cost profit
production is defined as the product of the volume of profitable products and prices of products,
established by the agreement (with the exception of oil prices).
Once the investor reimbursed the total capital investment in the project section begins
profitable products, as well as the investor starts collecting taxes. The structure of taxes which
are levied on the investor after the start of production sharing, the following taxes are included:
- the income tax;
- value added tax (in the case of export of goods from Russia to the whole amount of the
accrued value added tax refundable);
- Customs duties (in the case of exports from offshore fields in the Kara Sea hydrocarbon
operates a zero export duty up to 2042);
- other taxes and charges (charges for the use of natural resources, the fee for a negative
impact on the environment, water tax, state tax, land tax, excise tax, with the exception of excise
tax on excisable mineral raw materials).
Under this option, the agreement the investor does not pay the property taxes on their
fixed assets used for the intended activities of the agreement and the transport tax from their
21
vehicles used for the intended activities of the agreement. Under the agreement, the amount of
taxes mentioned above, except for income tax organizations and the tax on extraction of mineral
resources should be further offset by the investor as part of reimbursable expenses.
Categories of products can be made both in physical terms and in terms of money. The
state's share and investor profit production fixed in the agreement.
Currently, all projects entered into under the terms of the Production Sharing Agreement
( "Sakhalin-1", "Sakhalin-2" and the Kharyaga), work on the version of the traditional method of
production section.
A production sharing method the Direct (Fig. 2.3) is no calculation of compensatory
production, as well as the investor does not pay income tax. In this embodiment, the proportion
of production division are calculated depending on the geological and economic and valuation of
subsurface area, as well as indicators of the feasibility study agreement. In the direct process
section should not exceed the investor's share of 68% of total production.
Figure 2.3 - Scheme of production sharing in direct PSA
In direct investor section of the product pays the following taxes and fees:
- insurance premiums;
- value added tax (in the case of export of goods from Russia to the whole amount of the
accrued value added tax refundable);
- Customs duties (in the case of exports from offshore fields in the Kara Sea hydrocarbon
operates a zero export duty up to 2042);
- other taxes and charges (charges for negative impact on the environment, the state fee).
Since the compensatory products are released, then the output section starts immediately
after the start of commercial production of hydrocarbons. The share of the investor and the state's
share in the total crude production fixed in the agreement. Also increase the state's share in the
total produced products can be fixed in agreement with the achievement of certain values of the
22
main financial indicators of the investor. In direct production-sharing, as opposed to the
traditional, it does not provide for a refund of taxes paid.
Comparative characteristics of the current tax system and production sharing agreement
(traditional and direct form) are presented in Table. 2.2.
Table 2.2
Taxation of various organizational-legal forms of development of offshore fields in West Africa
traditional
The current tax
Tax
Direct PSA
PSA
system
production sharing
+
+
Determination of the compensation
+
products
Severance tax
+
+
Tax on profits
+
+
insurance premiums
+
+
+
Royalties
+
+
+
Customs duties
+
+
+
Value added tax
compensated compensated
compensated
Payments for negative impact on the
compensated
+
+
environment
Government duty
compensated
+
+
Water tax
compensated
+
Land tax
compensated
+
Excise
compensated
+
Regional and local taxes
+
Transport tax
Property tax
Source: compiled by the author of [138,198,200,197,223]
2.3. Features and ways of perfection of evaluation of oil reserves and recourses of
continental shelf
The first step is the allocation of the factors that determine the complexity of the
development of the shelf, each shelf section, as well as the definition of numerical indicators
characterizing these factors.
Total accounted for more than 20 factors divided into six groups:
1.
Climate (low or high temperature, strong wind, rough sea);
2.
Transport (available hydrocarbon transportation scheme, remoteness from
markets, distance from the procurement database, the level of development of coastal transport
infrastructure);
23
3.
Geological (the level of knowledge of the shelf, uneven bottom topography, water
depth, the emission of methane gas composition, high reservoir pressure, bottom-dwelling
deposits of free gas , seismic activity );
4.
Environmental (difficulty oil spill, the impact of the oil spill on the ecosystem ,
the presence of nuclear waste burial in the sea floor );
5.
Resource ( density of resources on the shelf space , the quality of oil );
6.
Technology (need to purchase technology for the development of Sierra Leone
continental shelf hydrocarbon resources [13].
Economic evaluation of the efficiency of the transportation of offshore hydrocarbons for
a particular project is difficult to obtain without a comprehensive analysis of offshore project,
including analysis of geological, technological and economic factors. For this purpose, we
designed techno-economic model, which allows simulating the transportation (informed way of
hydrocarbon transportation), technology (informed choice of technology for drilling and
arrangement), geological aspects (grounded potential volumes of hydrocarbon production) has
been developed and economic processes (and cost modeling revenues, the choice of taxation
regime).
Driving economic model evaluating the economic efficiency of offshore oil consists of
three units: production and economic, technical, economic and financial and economic (Figure
2.2).
• Production forecast
• Forecast of oil prices
Industrial and • Revenue
economic
bloc
• Capital investments
• Operating expences
Technical and • Taxes
economic
bloc
• Basic financial indicators: Gross profit, Income tax, Net profit
Financial and • Derivatives financial indicators: NPV, IRR, PP, PI
economic
indicators
Figure 2.4- model of economic evaluation
Source: base model of economic and geological evaluation by IPGG SBRAS
Industrial and economic bloc:
24
Running forecast inventories based on available data on the initial total resources of the
shelf area. An evaluation of the area and other parameters of the most potentially large deposit as
the main object of prospecting, exploration and production.
Held modeling of field development under the condition of maximizing the volume of
hydrocarbon production in the conditions of limited resource base, placement of production
wells, the initial production rate forecast and the forecast fall.
Forecast of production of hydrocarbons comprising the step of increasing the volume of
production, stable production stage and the stage of falling production volumes. Maximum
Production on the "shelf" is for oil - 4-6%, gas - 2.5-3.5% of the initial endowments. The
period of increasing production volume is 3-5 years, "shelf" lasts about 4-7 years, medium term
development area - 25-35 years.
Technical and economic bloc:
Held choice of technologies for the production and transportation of hydrocarbons based
on the algorithm of choice of hydrocarbon transportation scheme and prepared classification of
drilling technology. Next, you forecast capital and operating costs of development of the
continental shelf area on the basis of economically justified the cost ratios. Scroll to the
following sections: capital investments and operational costs.
In the "Capital investments" carried out payment of expenses for exploration, drilling and
the formation of mining and transport infrastructure.
Capital investments:
Ct = Clic+CGE+Сdr+Сinfr+Сtr+Сref
where Clic - Intangible assets; CGE - Geologic exploration; Сdr - Well drilling; Сinfr - Field
infrastructure development; Сtr - External transport; Cref - Refinery infrastructure.
The transport infrastructure consists of special vessels for storage and shipment of oil
floating plants to produce liquefied natural gas (LNG), shuttle tankers for the transportation of
oil and compressed gas at short distances, linear oil tankers and LNG tankers for the
transportation of hydrocarbons to long distance onshore terminal for receiving oil-shuttle
tankers, onshore storage of oil, onshore terminal for the preparation and shipment of oil per
linear oil tankers, onshore terminal for receiving compressed gas-shuttle tankers, coastal LNG
plant, the onshore terminal for shipping LNG in the LNG tankers. In the mining infrastructure
includes mobile offshore drilling units (submersible, semi-submersible, jack-up rigs, drilling
ships), subsea production systems, oil and gas platforms, icebreakers , supply vessels , tugs ,
multipurpose vessels , rescue vessels .
25
Formation costs of transport and production infrastructure are calculated as the sum of the
above items at cost. In the "Operating expenses" is held calculation of operating costs on the
basis of specific regulations. In general, the calculation of operating costs described by the
formula.
Operating expenses may be divided into:

semi-permanent, which depend on quantity of fixed capital, involved in the
production:
o
basic wage of production workers,
o
deductions from wages,
o
cost of maintenance and operation of equipment,
o
depreciation,
o
general production expenses.

semi-variable, which are determined by the volume of produced products:
o
energy costs on mechanized production of liquid,
o
expenses on artificial effects on a layer,
o
collection and transportation of oil liquid,
o
costs of technological preparation of oil,
o
natural resources production tax,
o
other production costs.
where Оsemi-var – semi-variable costs;
Оsemi-perm – semi-permanent costs;
Tax payments include:
where T - taxes without income tax and natural resources production tax, PT - property
tax, OT - other taxes and charges.
Financial and economic bloc:
The calculations are carried out in two stages of financial and economic block. In the first
stage, the calculation of revenues and pay taxes according to the tax regime. In calculating the
amount of taxes paid was considered an option -soglashenie taxation on production sharing
agreement (PSA) . Revenue is calculated as the product of the volume set on the selling price of
hydrocarbons After the calculation is carried out the system of indicators reflecting the
commercial and fiscal efficiency of development of the continental shelf areas. The main
indicators are the net income of the investor and the total amount of tax received by the state.
Also, the group calculated the investment attractiveness indicators, such as net present value,
internal rate of return, profitability index, and payback period.
26
Justification of the choice of parameters of economic model
Economic evaluation of the efficiency of the transportation of offshore hydrocarbons for
a particular project is difficult to obtain without a comprehensive analysis of offshore project,
including analysis of geological, technological, economic and financial factors. To do this, we
developed a technical-economic model, which allows series to simulate the geological (grounded
potential production volume), technological (informed choice technology for drilling and
construction), transportation (informed choice hydrocarbon transportation scheme) and economic
processes (modeling of costs and revenues, selection taxation regime), and consider the
possibility of choosing between several options for transporting and taxation regimes.
1 . The commodity bloc performed forecast inventories based on available data on the
initial total resources of the shelf area. An evaluation of the area and other parameters of the
most potentially large deposit as the main object of prospecting, exploration and production. At
this point the author based on a technique reserves forecast IPGG RAS.
2.
The geological-field
block is
conducted
simulation
development Place
of
Birth provided maximizing the production of hydrocarbons under conditions of limited resource
base, placing production wells, production rate of the initial forecast and the forecast of its fall.
For hydrocarbon production volume forecasting model is used, comprising the step of
increasing hydrocarbon production, stable production step and extraction step drop. The
maximum level of production to "shelf" for amounts of oil - 6.4%, for a gas - 2.5-3.5% of the
initial stock. Increasing production period is 3-5 years; "shelf" lasts about 4-7 years, medium
term development of the site - 25-35 years.
The annual production volume is determined by successive multiplication and integration of
injected annually producing wells and the size of hydrocarbons produced in a given
year. Additional equations determined initial production rate of the production well, the speed
drop during operation, the amount administered annually producing wells and total wells.
3. The technical and economic bloc held a forecast capital and operating costs of offshore
development on the basis of economically justified the cost ratios. Highlighted in the following
sections: capital investments and operational costs. Each section includes including the
transportation component costs.
In the section "Capital investments" carried out the valuation of the necessary exploration
work, drilling of wells and the costs on the formation of mining and transport infrastructure.
investment calculation is as follows:
𝐾𝑉 = 𝐺𝑅𝑅 + 𝐵𝑈𝑅 + 𝐼𝑁𝑉𝑑 + 𝐼𝑁𝑉𝑡 ,
27
Where
𝐾𝑉 - The total capital investment;
GRR-Cost of Exploration
𝐼𝑁𝑉𝑑 - The cost of mining infrastructure;
𝐼𝑁𝑉𝑡 - On transport infrastructure costs;
𝐼𝑁𝑉𝑡 - Costs for geological exploration;
𝐵𝑈𝑅 - The costs for the drilling of production wells.
Designed author hydrocarbon transportation scheme selection algorithm to determine
available transport scheme for a particular shelf portion. This is necessary for the subsequent
determination of the transport infrastructure.
The transport infrastructure includes vessels for storage and shipment of crude oil,
floating LNG plants shuttle tankers for transportation of crude oil and the compressed gas for a
short distance, the linear oil tankers, LNG tankers for transportation of hydrocarbons over long
distances, onshore terminal for oil receiving from tankers -chelnokov, onshore storage of oil
onshore terminal for the preparation and shipment of oil onshore terminal for receiving
compressed gas, coastal LNG plant onshore terminal for LNG. Accordingly, on transport
infrastructure costs are calculated as the sum of the cost of the above-mentioned court, platforms
and structures.
In the mining infrastructure includes mobile offshore drilling rigs, oil and gas platforms,
icebreakers, supply vessels, tugs, multipurpose vessels, rescue vessels. Accordingly, the cost of
mining infrastructure is calculated as the sum of the cost of the above-mentioned vessels and
platforms.
Selection and justification of the mining infrastructure facilities is challenging due to the
large variety of different fixed platforms and mobile offshore drilling units. In this regard, a
study was conducted, which resulted in the classification and periodization of technology for
offshore production of hydrocarbons.
Initially, drilling at the bottom of water bodies should be carried out using a land rig ,
placed on wooden platforms, connected with the shore wooden trestle. Already in 1897 in the
United States was drilled in the bottom of the channel of Santa Barbara (CA). In the Russian
Empire, the first drilling on the seabed was carried out in 1900 in the Caspian Sea near the small
stone islands. In 1920-ies. It is used not wood but metal trestle and piles [241].
After several decades in connection with the removal of reclaimed offshore from the
coast there was a need to move from the concept of the overpass to the fixed platform
concept. The first steel stationary platform was built in the US in 1932. 800 m from the coast of
28
California. Its size is 20h30h8 m. The platform is designed to accommodate the land rig. In the
USSR, the development of offshore fields with metal platforms in the Caspian Sea began in 1934
The first major offshore production region in the world has become the Gulf of Mexico,
the United States due to high scientific and industrial potential in the mid-twentieth century and a
short-term priority of the Soviet Union and European countries on the post-war restoration of the
destroyed industry and infrastructure.
The first drilling on the continental shelf off the coast of the zone of visibility occurred in
1947 in the Gulf of Mexico, 18 km from the coast at a depth of 5 meters. The drilling was carried
out with a wooden platform Kerr-McGee. Near the platform it was to ensure the ship - barge,
previously used in World War II. Supply vessel size 80h16 m intended to house auxiliary drilling
equipment [241].
Simultaneously with the construction of fixed platforms is the development of
technology of mobile offshore drilling units (MMBU).
MMBU is the first submersible barge Breton 20. It was installed in the Gulf of Mexico
and worked in 1949-1962 gg. Barge drilling advantageously carried out in a safe shallow bays (7
m deep). On both sides of the barge Breton 20 placed pontoons attached ship additional stability
[239].
Barge Breton 20 belongs to a class of submersible drilling rigs (MODU). This class of
systems is a platform with two placed on each other housings. The upper housing arranged crew
accommodation and all the equipment necessary for the drilling, the lower portion is filled with
air (that construction provides buoyancy when moving) and, after arrival at the destination space
air discharged from the lower casing, and drilling platform sinks to the bottom. Currently, less
than 10 PBU operated in the world.
The main advantages of PBU Breton 20 before preceding her project Kerr-McGee is a
low cost time to prepare for drilling (no need to build a fixed platform) and high mobility (the
ability to move to another location after the completion of drilling).
After five years, the company «Ocean Drilling and Exploration Co.» built PBU
Mr. Charlie, the main advantage of which was to increase the marginal waters of the depth at
which it is possible to carry out drilling, from 7 to 13 m. This FDR worked in 1954-1986 gg.
Currently, the depth of the drilling performance with advanced RAS does not exceed 50
m.
Simultaneously with the development of offshore Gulf of Mexico in the United States
took place development of the Pacific shelf. Shelf California is deeper than the Gulf of Mexico,
which does not use RAS, similar to those used in the Gulf of Mexico. Therefore, in the 19451955. Offshore Peninsula California drilling conducted drilling barges (BB). Usually, these
29
barges were previously used in World War II. The BB was not blowout equipment, they are not
allowed to install the pipe in the well. They could only drill in the intended place, when the layer
of oil or gas drilling was stopped and the cement plug was set. In addition, the WB strongly
swung at sea state, making it difficult for the crew to work. Following the liberalization of the oil
and gas legislation in the US (1955) and issue to hire private companies to offshore oil and gas
bearing areas of California, the requirements for the works carried out on the shelf have
increased substantially. Since then, the management of well production and installation of pipes
in the well became effective, which, respectively, require new technologies. The first BB, using
an underwater well control , was the vessel Western Explorer. It is the first well drilled in the
bottom of the channel of Santa Barbara in 1955. The vessel was decommissioned in 1972 [241].
Along with the advent of AR in the Gulf of Mexico and the big blind on the US Pacific
Offshore has developed another technology - jack-up drilling rig (SBU). The design included
three, four or five supports with "shoes", which during transport is usually pressed to the bottom
of the SBU. At the appointed place of support and crushing takes place in the bottom of the
waters, then it rises on a platform above the sea level. Further well drilling takes place with a
fixed stable platform. Standing on the supports is a safer mode of operation, since in this case,
the body does not touch the water surface. First SBU Gus 1 was built in 1954 G. & installed in
deep water area of 33 m [240]. The sea depth, which can operate modern jack up rig supports
and limited length does not exceed 150 m.
By the mid-1960s. SBU more and more displaced FDR due to the fact that the SBU could
work at greater depths than the biggest PBU (maximum depth 50 m), and were also more stable
under harsh weather conditions.
In the late 1970's - early 1980's. appeared SBU with an additional platform. As a result of
the removal of additional platforms beyond the platform (which housed the drilling rig), was
released place on the main platform. During transport, additional playground is located on the
platform, and after fixing the platform above the point where additional drilling platform located
near the platform. The first of the SBU with an additional platform to work at a depth of 50-100
m. At the end of the 1990s. SBU platform can drill to depths of over 130 meters, had a perfect
drilling equipment.
Another improvement of the original concept was the concept of the SBU Security
Service and the supply vessel (CO). On the main platform is located only a basic set of drilling
equipment consisting of drilling platforms, lifting equipment, BOP and equipment for cleaning
drilling mud. All other equipment - the mud tank, the mud pump, electrical generators, pipe,
cement storage, fuel, drilling water and flat - CO is near the platform.Thus, the space
requirements and capacity of the base platform are reduced. This concept has significantly
30
improved the profitability of offshore drilling by the use of drilling rigs are small. But in
conditions of strong winds there is danger of breaking mooring ropes connecting the platform to
the SB. Such cases often occurred in the northern Gulf of Mexico.
At the beginning of the 1960s. to the existing three classes MMBU (PBU, BB SBU)
added a fourth - the semi-submersible drilling unit (MODU). MODU combine the advantages of
submerged structures and the ability to carry out drilling at greater depths than other MMBU
classes. MODU design includes supports that provide buoyancy of the platform and provides a
great weight to maintain the vertical position. During the movement of the rig pumping occurs
and pumping air from the lower case (when the air is discharged, semi-submersible rig
pritaplivaetsya only partially, without reaching with the seabed and remains afloat). During the
drilling operation is carried out with water filling the lower housing, whereby the necessary
stability is achieved. To keep the armature position over the well are used in weight from 10 to
20 m, and the active steering system [241].
First the rig was calculated to a depth of 100 m. In the 1970s. were built more complex
the rig, capable of operating at depths of 200-300 m. Built at the time the rig was so successful
that most of them were multiple modernization in order to increase the limit depth and the load
deck. For example, built in the 1970s. The rig Ocean Victory was later modernized and its
maximum depth has increased from 300 m to 1500 m. The upgraded the rig Ocean Victory is
drilling on the shelf of Malaysia in the early 2000s.
In 1970-1980-ies. operating displacement SSFDR increased from 18 thousand. to 40
thousand. t. Further with each decade characteristics SSFDR improved, resulting in maximum
depth for the rig is currently more than 1800 m. Representative modern MODU is Deep-water
Nautilus (displacement 50 thousand. t) . Currently, the rig is the most common class MMBU.
Fifth class are MMBU drilling vessels (BS) with a dynamic positioning system, which
allows keeping the location of the wellbore to a greater extent by the steering device and
propellers than using anchors systems (like the rig). The first BS Glomar Challenger was built in
the mid-1960s. by Global Marine, but it is not intended for the oil and gas exploration, and for
taking soil samples from the bottom of the deep-water areas around the world.
BS advantage is that they do not require a tow to site. They are designed specifically for
the drilling of wells in deep water, though, and have not so good stability as the rig. Currently,
the active management of the drilling vessel is realized with help of GPS-devices. On the lower
hull are arranged electric motors that provide the movement of the ship in any direction. The drill
shaft passes through the hull of the vessel, extending downwards. On the deck are located power
plants and technical equipment. Oil extracted, purified and then stored in a tank body, then it is
charged into shuttle tankers [241].
31
Drilling vessel with a dynamic positioning system widely used in the late 1970s. BS Ben
Ocean Lancer, built by «IHC Holland Dutch», could be drilled at depths of 700-1000 m, had a
more perfect system of retention location.
In the 1990s and 2000s. appeared BS with dynamic positioning system, capable of
operating at depths over 3300 m. They are 2-3 times more than the first BS, they are better
systems retaining position and two rigs. Having two rigs allows to perform simultaneously two
different operations, such as drilling pipes and descent. These BSs are very expensive in
construction and maintenance, but they can recover their costs due to high efficiency. For certain
situations, such as multiple drilling bottom waters, shallow wells in the deep bottom of these
vessels are considered as an alternative to standard vessels / platforms with a single rig.
Since the mid-2000s. technology has spread subsea production systems (MPC),
suggesting transporting hydrocarbons produced from offshore well to onshore conduit on marine
vessels without the use of / platforms [30,60].
Thus, in the development of technologies for oil and natural gas extraction six stages can
be distinguished on the continental shelf:
In the first phase (1900-1939 gg.) Were used stationary wooden and steel platform
located off the coast. They were placed land rigs. Water depth does not exceed a few meters.
In the second phase (1945-1960 gg.) Were MMBU capable drill being directly on the
bottom of the water area, or from the ship. Drilling was performed at depths of several meters
(MODU BB) to 30 m (SBU).
In the third phase (1961-1970 gg.) Fitting of the semi-submersible drill could state. This
group consisted of the first units of the rig, the maximum drilling depth of which reaches 100150 m.
In the fourth stage (1971-1980 gg.) Were used and the rig SBU with improved
characteristics. Maximum drilling depth SBU increased to 100 m, and the rig -. 300 m increase
in depth is made possible by a more complicated anchor the rig and subsea equipment and
improve the supporting structures of the SBU.
At the fifth stage (1981-1990 gg.) Were used and the rig BS (dynamic positioning
system), calculated to a depth of 1000 m and more difficult climatic conditions.
In a sixth step (1991-2014 gg.) Using the rig designed to a depth of 1800 m and severe
weather conditions in the production area as well as BS (dynamic positioning system) capable of
drilling in depths over 3300 m. Also it received spread technology of underwater production
systems.
32
Thus, the development of offshore production technologies allowed to increase the
maximum depth of production with a few meters in the 1900s. up to 300 m in 1970. and up to
3300 meters in the 2010s. (Table. 2.3)
Table 2.3
The periodization of offshore production technology from 1900 to 2014.
Period
years
The most commonly used technologies
Regions testing
The
maximum
depth, m
1
19001939
Wood, steel platform
Gulf of Mexico
and the Caspian
Sea
5
drilling barge
2
Submersible drilling rigs
Jack-up rig
Gulf of Mexico
Jack-up rig
19613
1970
Semi-submersible drilling rigs
Jackup rig with add. playground
19714
Semi-submersible drilling rigs 2
1980
North Sea
generations
Jack-up rig to support vessel
Semi-submersible drilling rigs for 3
19815
generations
1990
Drilling vessels with dynamic
positioning system
Gulf of Mexico
Jack-up rig
Semi-submersible drilling rigs 4 and 5
generations
19916th
2014
Drilling vessels with dynamic
positioning system
Subsea production systems
North Sea
Source: Compiled by the author of the data [60,209,239,240,241]
19451960
10
13
thirty
50
100
100
300
130
1000
1000
150
1800
3 300
500
Calculation of the cost of exploration work on the formula:
𝐺𝑅𝑅 = 𝑁𝑠𝑠 х 𝑆𝑆 + 𝑂𝐵2𝑑 х 𝑃𝐿2𝑑 + 𝑂𝐵3𝑑 х 𝑃𝐿3𝑑 + 𝑁𝑝 х 𝐺𝐿𝑝 х 𝑆𝑇𝑝 + 𝑁𝑟 х 𝐺𝐿𝑟 х 𝑆𝑇𝑟 ,
(2.8)
where GRR-the costs for exploration or expenses for geological Exploration;
𝑁𝑠𝑠 −the number of required seismic vessels;
t 𝑆𝑆 −he cost of the seismic vessel;
𝑂𝐵2𝑑 −the volume of 2D seismic survey;
𝑃𝐿2𝑑 −The unit cost of the 2D seismic survey;
𝑂𝐵3𝑑 −the volume of 3D seismic surveys;
33
𝑃𝐿3𝑑 −The unit cost of the 3D seismic survey;
𝑁𝑝 − the number of exploratory wells;
𝐺𝐿𝑝 −depth exploration well;
𝑆𝑇𝑝 −the specific cost of drilling one meter exploration well;
𝑁𝑟 −number of exploration wells;
𝐺𝐿𝑟 −depth exploration wells;
𝑆𝑇𝑟 −the specific cost of drilling one meter exploration well.
The number of production wells required for each year was calculated based on the
predicted volume of hydrocarbons and the average daily production rate of the well, which is for
oil wells of 80 tons for gas wells - 300 thousand cubic meters.. m. In determining the unit cost of
drilling of production wells considered assessment of OJSC "NK" Rosneft ". Specific drilling
cost extractive gas well is 800 thousand. Rub. 1 m, producing oil wells - 750 thousand rubles.. 1
m.
Calculation of costs in drilling carried out according to the following formula:
𝐵𝑈𝑅 = ∑2𝑖=1
𝑄𝑖
𝐷𝑖∗365
х 𝐺𝐿𝑖 х 𝑆𝑇𝑖 + 𝑁𝑏𝑢 х 𝑆𝑏𝑢 ,
,
(2.9)
where BUR-investment in the drilling of production wells;
𝑖 = 1 … 2 −kind of extracted hydrocarbons;
𝑄𝑖 −the total hydrocarbon production species i;
𝐷𝑖 −flow rate of one production well hydrocarbon species i;
𝐺𝐿𝑖 − depth mining hydrocarbon borehole species i;
𝑆𝑇𝑖 The unit cost of drilling one meter of the production well hydrocarbon species i;
𝑁𝑏𝑢 − Parts Required number of mobile offshore drilling units;
𝑆𝑏𝑢 − the cost of a mobile offshore drilling unit.
In the section "Operating costs" is held calculation of operating costs on the basis of
specific regulations.
Operating costs of development areas in the Russian Arctic continental shelf include
material costs (100 rbl. For 1 tce), staff salaries (150 thousand. Rub. Per month), insurance
premiums (30%), insurance against accidents manufacturing (7.4%), the cost of repair of
equipment (500 million rubles. 1 platform per year), depreciation (20 years old) on mineral
extraction tax (depending on the tax regime), regular payments for subsoil use (20 thousand. rub.
for 1 thousand sq. km.), the cost of pro odstvo and shipment (3,6 rub. 1 cu. meters of gas), the
shipping
costs
(0.1
th.
rub.
per
1
In general, the calculation of the operational costs by the formula:
ton
of
oil)
[140].
34
𝐸𝑍 = 𝑀𝑍 х 𝑄 + (12 х 𝑍𝑃 х 𝑁𝑐ℎ х 𝑁𝑝𝑙 ) х (1 + 𝑆𝑠𝑡 + 𝑆𝑛 ) + 𝑅𝐸 + 𝑁𝐷𝑃𝐼 + 𝐴𝑀 + 𝑅𝑃𝐿
2
+ ∑(𝑁𝐴𝐿𝑖 + 𝑇𝑅𝑖 )
𝑖=1
(2.10)
Where EZ- operating costs;
Q- total amount of hydrocarbon production in tce .;
MZ- material costs for 1 ton of fuel equivalent .;
ZP- wage costs for 1 person per month;
𝑁𝑐ℎ - the number of people working on the same production platform;
𝑁𝑝𝑙 - the number of production platforms;
𝑆𝑠𝑡 - the rate of insurance contributions;
𝑆𝑛 - insurance rate from industrial accidents;
𝑅𝐸 -repair costs (equipment for mining and transport infrastructure);
𝑁𝐷𝑃𝐼 -the tax on extraction of mineral resources;
𝐴𝑀-depreciation;
𝑅𝑃𝐿-regular payments for subsoil use;
𝑁𝐴𝐿𝑖 - cost of preparation for shipment and shipment of hydrocarbon type i;
𝑇𝑅𝑖 - the cost of transportation of hydrocarbon type i;
𝑖 = 1. . .2 - Kind of produced hydrocarbons.
The ratio of specific operational costs of transportation 1 cu. m as LNG gas at a distance
from the sea to Kara Japan amount 1.5 rub. per 1 cu. m gas transportation 1 ton of oil 1.2
thousand. rub.
The operating costs of transportation of hydrocarbons marine way are the product of the
standard
for
hydrocarbon
transportation
volume
production
method.
The operating costs of transportation of hydrocarbons calculated as follows:
𝑇𝑅 = ∑2𝑖=1 𝑄𝑖 х 𝑈𝐷𝑇𝑖 х 𝑅𝑅𝑖 ,
,
Where – TR-Shipping costs of hydrocarbons;
𝑄𝑖 - the volume of the transported hydrocarbon species i;
𝑈𝐷𝑇𝑖 −- the unit cost of seaborne transportation of hydrocarbons species i;
𝑅𝑅𝑖 −- transportation of hydrocarbons distance species i;
𝑖 = 1. . .2 - kind of produced hydrocarbons.
(2.11)
35
4. The financial and economic unit calculations are carried out in two stages. In the first
stage, the calculation of revenues and pay taxes according to the tax regime. In calculating the
value of taxes paid by two variants of taxation was considered - the current taxation system (Tax
Code) and production sharing agreement.
Revenue is calculated as the product of the volume set on the selling price of
hydrocarbons. The whole volume of extracted hydrocarbons to be exported to Asian markets,
including Japan. In accordance with current market conditions in the Asian gas market, the
estimated selling price of LNG will be $ 400. Per 1000 cubic meters. meters of natural gas. In
accordance with current market conditions in the global oil market is the estimated selling price
of oil will be over 1 ton of oil to $ 800.. It supposed to moderate the pace of growth in world
prices for hydrocarbons at 2.5% per year. Revenue from the sale of hydrocarbons is calculated as
follows:
2
𝑉𝐼𝑅 = ∑ 𝑄𝑖 х 𝑃𝑖
𝑖=1
where proceeds from the sale of hydrocarbons;
𝑄𝑖 - the total amount of hydrocarbon production type i;
𝑃𝑖 - the price of hydrocarbon type i;
𝑖 = 1. . .2 - kind of produced hydrocarbons.
At the second stage, the calculation of an indicator system embodying commercial and
development budget efficiency evaluation object. It takes into account the net profit of the
investor, the total amount of taxes received by the state. As calculated by the Group's investment
attractiveness indicators, such as: net present value, internal rate of return, profitability index,
payback period. The calculations used the discount rate of 10% [202].
5. The resulting block of a comparative analysis of options for the project development of
offshore hydrocarbon-based financial and economic indicators. Held the final choice option of
the project, namely the hydrocarbon transportation scheme and the tax regime.
Thus, developed by the author of the technical and economic model to evaluate the costeffectiveness of offshore transportation of hydrocarbons for a particular offshore project, as well
as to give an opinion on the desirability or otherwise of the project.
36
CHAPTER 3. ECONOMIC EVALUATION OF HYDROCARBON TRANSPORTATION
IN THE DEVELOPMENT OF SITES ON THE WESTERN AFRICAN SHELF
3.1. General characteristics of the shelf area
The first embodiment is based on shipping "tankers" scheme. The principle of its
implementation is that the oil from the remote is loaded into an international-class tankers
shipping oil platform terminal capacity up to 150 thousand. Tons and is transported to the
market. For natural gas delivery circuit is as follows. Next to the gas production platform
expected occupancy floating plant the liquefied natural gas (LNG), where the natural gas will be
supplied with gas platform and further made product suitable for transportation, - LNG. Next, the
liquefied natural gas is shipped in linear LNG tankers which it will be transported to market.
The second embodiment provides transport scheme "tankers tankers". In this
embodiment, oil from a remote loading terminal oil platform is loaded into shuttle tankers that
carry cargo oil on the shoreline complex (Yamal Peninsula), where it is located in an onshore
storage facility, are trained to transport and reloaded into linear tankers to 150 thousand t. In this
case, the construction is provided onshore comprising storage unit and a terminal for receiving
and offloading. Transportation of natural gas is planned to be in a compressed form with gas
platforms to onshore. For this purpose, gas platforms must accommodate the installation of
compressed natural gas and despatch shuttle tankers. On Onshore natural gas will be liquefied in
the LNG plant and then transported to market for linear LNG tankers with 150 thousand. Cu. M.
As an estimate of the object has been selected group of sites on the West African
offshore in the waters of the Republic of Sierra Leone. The Republic of Sierra Leone has
significant potential resources of hydrocarbons on the shelf of the Atlantic Ocean within the
Sierra Leone-Liberian oil and gas basin. The presence of hydrocarbon resources is confirmed by
the results of drilling of the first well in 2009 and the subsequent work in this area in the
country's offshore. Hydrocarbon potential of the areas of the West African continental shelf is
estimated at 432 million tons of oil resources and 488 billion cubic meters. meters of natural gas
resources. The likely volume of oil reserves here is 216 million tons, natural gas - 244 billion
cubic meters. M.
Special features of the object of evaluation are extremely large depth of the waters, and
therefore for the development of deposits of these areas require the use of mobile offshore
drilling units semi-submersible type."Tributaries hydrocarbons" within projects Mercury, Venus,
Anadarko obtained at a depth of thickness of sea water of 1.7 to 3.1 thousand. M.
37
Another feature of this region is the large distance of the license area of the
coastline. Extreme point of land is located about 250 km from the coast. Due to the large water
depths and large distance to shore transport produced hydrocarbons to onshore advantageously
carried out by means of shuttle tankers instead of offshore pipelines.
Existing estimates hydrocarbon reserves and resources of the West shelf portions will
ensure oil at 11 million tons, natural gas and associated gas - to 9 bcm. m. As a result of
exploration on the West shelf portions to be opened single oilfield with an annual production
level of 5 million tons of oil, and two fields with the extraction 4 million tons and 3.2 million
tons per year, respectively. It is also expected to open two predominantly gas fields with an
annual production of 6 billion cubic meters. m, and 3-4 billion cubic meters. m per year.
As part of the development stations groups is expected to deliver the produced oil and gas
mixture (multiphase hydrocarbons) in the system semisubmersible underwater pipelines located
close to a vessel for storage and offloading of hydrocarbons. Transportation of hydrocarbon
mixture which includes both liquid and gaseous hydrocarbons from the drilling platform to the
storage and offloading vessel due to the need to organize in the vicinity of the preparation
process of hydrocarbon production center them for transport. The preparation process comprises
the following steps: separation with the separation of liquid and gaseous hydrocarbons
(associated gas from crude oil, condensate from natural gas), dehydration, desalting, removal of
mechanical impurities.
After separation and preparation of primary oil enters the store, where the control oil
quality and its standardization is performed in accordance with export grade «SL Light». Next,
the oil is supplied to remote terminal for loading tankers. The separated from the liquid
hydrocarbons and the dried natural gas and passing received in the repository, followed by
compression or liquefaction stage and subsequent transportation to a commercial market. The
existing experience of production and transportation of hydrocarbons in the deep shelf shows the
feasibility of placing infrastructure for production, storage and transport of hydrocarbons directly
into the fishing area.
The main problem of transportation of hydrocarbons on the Beach is the current lack of
proven technologies of building oil and gas pipelines at depths of 1.5-3.0 thous. M, where the
discovery of hydrocarbons is forecasted. Therefore, the possibility of building the offshore
pipeline from a special vessel for storage and offloading to shore infrastructure is absent. Under
these conditions, two possible schemes of the transport of liquid and gaseous hydrocarbons.
The first embodiment is based on a transport circuit "tankers - tankers." In this
embodiment, the oil is shipped from the vessel for storing and shipping of hydrocarbons in
shuttle tankers that deliver the goods on the waterfront complex, situated on the territory of the
38
Republic of Sierra Leone. For this storage facility on board must have a capacity of not less than
80 thousand. T. Part delivered on-shore oil will be processed for domestic consumption in the
country. Another part will accumulate in the onshore storage facility and then reloaded into
linear tankers to 300 thousand. T. In this embodiment, it is assumed onshore construction
comprising a storage unit and a terminal for receiving and shipping oil. The following procedure
when natural gas production. In a special vessel for storage and offloading of hydrocarbons will
be available for installation of compressed natural gas, which is compressed to be transported
onshore shuttle tankers. On the coastal complex of the gas will be liquefied and then transported
by linear LNG tankers to markets, the other part - the final consumer of the Republic of Sierra
Leone.
The second option involves the use of transport "tanker" scheme. According to this
embodiment, oil from a remote terminal special shipping vessel for storage and offloading of
hydrocarbons reloaded into linear tankers to 300 thousand. T, followed by shipment to
markets. A small portion of crude oil will be shipped to shuttle tankers that will deliver oil to the
ports of the Republic of Sierra Leone for its further processing and to provide consumers in the
country of motor fuel, petrochemical products. Natural Gas The following scheme. Beside
special vessel for storage and offloading of hydrocarbons floating LNG plant in which the
natural gas is liquefied to be installed. LNG will be transported straight LNG tankers on the
world's major markets. Part of the natural gas on the special vessel for storing and shipping of
hydrocarbons will be compressed for transportation to the ports of the Republic of Sierra Leone
to meet the needs of the energy sector, household sector, industry and commercial sector of the
state, will be supplied to the Republic of Sierra Leone.
3.2. Algorithm for choosing the transportation scheme for the development of
hydrocarbon resources of the continental shelf
When transporting hydrocarbons extracted from continental deposits, pipeline, railway,
road and water transportation methods are currently used.
Pipeline transport. Depending on the direction of transportation, three types of pipelines
are distinguished. Commercial pipelines transport hydrocarbons from wells to various sites in the
fields. Inter-field pipelines transport hydrocarbons from fields to main pipelines. Trunk pipelines
transport hydrocarbons from fields to transshipment, processing and consumption centers.
The main advantages of using the pipeline transportation method are low transportation
costs, low environmental risks and all-season use. Disadvantages of this method of transportation
39
are the need for large-scale one-time capital investments in construction, high repair costs and
the absence of the possibility to change the directions and volumes of supplies
Sea transport. The sea way of transportation of oil and natural gas is carried out with the
help of sea tankers of great carrying capacity. In terms of carrying capacity, tankers are divided
into low-tonnage (having a carrying capacity of 6-25 thousand tons), medium-tonnage (25-50
thousand tons), large-tonnage (45-300 thousand tons) and extra-large tankers (more than 300,000
tons). Large-tonnage tankers are able to enter only deep-water ports.
The main advantages of using the water transportation method are high waterway
capacity, low operating costs, low capital investment when using the existing port
infrastructure. Disadvantages of this mode of transportation are high dependence on the capacity
of ports and canals, high dependence on natural and climatic conditions, low transportation
speed.
When transporting large volumes of oil and natural gas by land, the most common
method of transportation is the pipeline method, and if it is not possible to use it, the railway
method (only for oil and oil products).
Due to the specifics of the shelf, traditional approaches to the choice of a hydrocarbon
transportation scheme for offshore projects are not entirely suitable.
One of such features of transportation of hydrocarbons from the continental shelf is the
two-way storage of the storage and the terminal for the preparation and shipment of
hydrocarbons: these objects can be placed on the shore complex or directly to the sea on a
mining platform or on a special vessel / platform installed nearby.
Also a specific feature of transportation of hydrocarbons from the continental shelf is the
two-way transport of shelf hydrocarbons to the coastal complex: by sea pipelines or by shuttle
tankers. The advantages and disadvantages of these options are presented in Table. 3.1.
Table 3.1
Advantages and disadvantages of various options for transportation of hydrocarbons from the
shelf to the shore
Sea Pipeline
Benefits
Disadvantages
High reliability, allweather and allweather
Inability to change
the direction of
transportation
Shorter transport
distance (straight
line)
Large non-recurrent
capital investments
in construction
Shuttle tankers
Benefits
disadvantages
Possibility to
transport
simultaneously in
several directions
The ability to quickly
change the volume of
supplies
Intermittent nature of
shipment and
delivery of
hydrocarbons
Exposure to the
influence of natural
and climatic
40
conditions
Ensuring continuous
deliveries
Long terms of
construction of
offshore pipelines
The ability to quickly
change the direction
of supply
High environmental
risks
Low losses of
transported
hydrocarbons
Inability to increase
the number of supply
lines
No restrictions on the
maximum transport
distance
The need to create
large inventories in
the shipment terminal
and in the consumer
warehouse
Low environmental
risks
Impossibility of
increasing the
volume of
transported products
The possibility of
using in arctic
conditions
(accompanied by
icebreakers)
The need to build a
shipping and
receiving terminal
Low operating costs
Limited maximum
transport distance
Unlimited waterway
capacity
Contamination of the
water area through its
tankers
Reduction of specific
The inability to use
operating costs with
High speed of
pipelines in the icy
increasing
High operating costs
delivery
waters
transportation
distance
Source: compiled by the author according to the data
Abroad, the development of Arctic shelf deposits began in the 1960-1970's. In North
America in the Cook Bay and the Beaufort Sea. In the 1960s. A successful experimental attempt
was made to export oil from the coastal fields of the Beaufort Sea with the help of the Arctic
tanker fleet. However, this was accompanied by a large number of difficulties. Small depths
required high construction costs for the deep Arctic port. The construction of reinforced ice class
tankers also required high costs. As a result, after analyzing alternative modes of transportation,
it was decided to transport oil from the Arctic fields of the Beaufort Sea through oil pipelines to
seaport terminals located in water areas with relatively light ice conditions, where year-round
navigation is possible
In this way, since 1977, oil has been transported from fields located in the area of the
Prado Bay of the Beaufort Sea. To transport this oil, a transport infrastructure was constructed,
consisting of the following elements: a trans-Alaska main oil pipeline with a diameter of 1,220
mm and a length of 1,300 km, a terminal port oil terminal near the port of Valdiz, a sea shipping
port Valdiz in the Gulf of Alaska. In the first years of operation of the main oil pipeline, the tariff
for pumping oil was quite high and amounted to $ 7 per barrel. As far as other fields were
connected to this system, the tariff gradually decreased. Transportation of Arctic oil from the
port of Valdis is currently carried out year-round, but depending on the season, different vessels
are used for this: in winter, tankers with an ice class of 40,000 tons are used, and in summer non-ice tankers with a carrying capacity of 285,000 tons. T [69].
41
Similarly, the gas transportation infrastructure for transporting Arctic natural gas is
constructed. On the main gas pipeline, natural gas has been transported since 1969 to a natural
gas liquefaction plant located near the city of Kenau in Alaska, and is then sent for
export. Liquefied natural gas is transported year-round by gas carriers to Japan. The terminal's
capacity is about 1.4 million tons per year. The gas transportation infrastructure also includes a
tank farm with a capacity of 80.7 thousand cubic meters. M berth for receiving tankers with a
cargo capacity of up to 90 thousand cubic meters. M [71].
For the export of offshore oil, various sea reloading structures are already in operation or
designed: one-arm, submerged turret buoy, monobuy, floating oil storages, stationary
gravitational structures of a tower type, stationary gravitational structures based on the use of
converted large-tonnage ships [70].
To select the type of marine reloading structure, first of all, it is necessary to take into
account the natural and climatic conditions of a particular region.
To ensure reliable operation and achieve economic efficiency, the terminal must have the
following characteristics: high loading safety, the possibility of shipment from either side of the
terminal, the simultaneous loading of at least two tankers, shipment both through the bow
loading device and through the onboard manifolds, minimal environmental risks , The possibility
of dismantling at the end of operation without harming the environment, providing a shipping
capacity of up to 15-20 m Litas per year.
Currently, there is no generally accepted approach for determining hydrocarbon
transportation schemes that take into account the specifics of offshore projects, so the
development of an algorithm that allows to determine affordable and economically feasible
options for transportation of hydrocarbons from the continental shelf is an urgent task.
The choice of hydrocarbon transportation scheme from the continental shelf is based on
the following factors: the geographical position of the water area, the depth of the sea, the
volume
of
transported
products,
the
transportation
distance,
Schemes for transportation of hydrocarbons from the continental shelf:
and
others.
42
1. Transportation of hydrocarbons from the shelf to the coastal complex by means of a
sea
pipeline,
and
then
along
the
shore
by
a
surface
pipeline
(Figure
3.1).
Figure 3.1 - Scheme transport "pipe-line"
2. Transportation of hydrocarbons from the shelf to the shore complex with the help of
shuttle tankers, and then along the shore by a surface pipeline (Figure 3.2).
Figure 3.2 - Scheme transport "tankers conduit"
3. Transportation of hydrocarbons from the shelf to the shore complex with the help of a
sea pipeline, and then along the shore with the help of public infrastructure (railway,
road)(figure 3.2
Figure 3.3 - Scheme transport "conduit w / d"
43
4. Transportation of hydrocarbons from the shelf to the coastal complex with the help of
shuttle tankers, and then along the shore with the help of public infrastructure (railway, road)
(Figure 3.3).
Figure 3.4 - Scheme transport "tankers w / d"
5. Transportation of hydrocarbons from the shelf to the coastal complex by means of a
sea pipeline, and then by sea by linear tankers (Figure 3.4).
Figure3.5- Scheme transport "conduit tankers"
6. Transportation of hydrocarbons from the shelf to the shore complex with the help of
shuttle tankers, and then by sea by linear tankers.(Figure 3.6)
Figure 3.6- Scheme transport "tankers tankers"
44
7. Transportation of hydrocarbons from the shelf to the maritime market by line tankers
without
the
use
of
a
coastal
complex
(Figure
3.7).
Figure 3.7- Scheme transport "tanker"
Six options are two-stage, i.e. suppose first of all the transportation of hydrocarbons to
the nearest shore, where they are prepared and shipped for further transportation. The seventh
option involves the refusal to build auxiliary facilities on the shore and provides for the
placement of all objects directly into the sea, on a mining platform or on a special vessel.
To determine the available schemes for transporting hydrocarbons from the continental
shelf, it is necessary to take into account the following factors: the freezing of the water area, the
depth of the sea, the distance from the shore, the level of development of the coastal transport
infrastructure, and the distance to the market.
The algorithm for choosing a scheme for transporting hydrocarbons from the continental
shelf consists of two stages.
At the first stage, it is necessary to identify the available schemes for transporting
hydrocarbons from the continental shelf, which may be several.
The second stage calculates the range of unit costs for transportation of hydrocarbon raw
materials for each available transportation scheme. When calculating unit costs, use the formula:
𝑆𝑆 = (𝐾𝑉 + 𝐸𝑍)/ ∑𝑁
𝑖=1 𝑄𝑖
Where SS - specific costs for transportation of hydrocarbon raw materials;
KV- Capital investments in the construction of transport infrastructure;
EZ- total transport operating costs (without depreciation), calculated taking into account
the discounting of cash flows;
N - The term of the transport infrastructure;
𝑄𝑖 - volume of hydrocarbon production in the year i.
45
Depending on the volume of hydrocarbons produced, the ratio of liquid and gaseous
hydrocarbons, the density of hydrocarbon distribution along the shelf area, the distance from the
fields to the shore, and other factors, the specific costs for transportation of hydrocarbons will
vary significantly.
The most universal scheme for transportation of hydrocarbons from the continental shelf
is the transportation of linear tankers from the production platform directly to the market,
without an intermediate stop on the shore. However, this option also assumes the largest costs
due to the fact that the storage, preparation and shipping of hydrocarbons have to be located on a
limited area of the offshore platform.
Thus, the algorithm developed by the author for selecting a hydrocarbon transportation
scheme allows us to determine the available schemes for transporting hydrocarbons from the
continental shelf for each shelf area, and also to calculate the range of unit costs for
transportation of hydrocarbons from the Russian shelf to the European and Asian markets, which
is extremely important in the conduct of the primary economic Evaluation of offshore
development projects in conditions of lack of information.
3.3. Estimating the cost of transporting hydrocarbons in the structure of capital and
operating costs of development of land plots
Qualification transportation costs hydrocarbon portions of the West shelf. For organizing
transportation of hydrocarbons from the areas of the West Shelf require the following transport
infrastructure objects: vessels for storage and offloading of hydrocarbons (consisting of storage
tanks and oil shipment terminal), the system is semi-submerged pipelines, LNG floating plant
(terminal LNG shipment), oil shuttle tankers , shuttle tankers for transportation of compressed
gas onshore terminal for receiving oil, the oil storage shore, onshore terminal for shipping oil
onshore terminal for receiving FAS th gas, coastal LNG plant onshore terminal and LNG
shipping. Acquisition of high-capacity linear tankers for transporting hydrocarbons to markets is
not expected due to the fact that this transport process is provided by the customer.
For a project to develop parts of the West on the shelf it was considered two options:
"tankers" And "tankers tankers"
Option "tankers" envisages the transportation of hydrocarbons from offshore fields in the
market with the help of linear tankers. In addition, it is assumed the transportation of a small
amount of oil and natural gas (compressed) in the onshore terminal for oil and compressed gas
supplies to meet the needs of the population and industry of the country's energy.
46
To implement this scheme with hydrocarbon transportation shelf require the following
transport infrastructure:
- vessels for storage and offloading capacity of 5 million tons / year and cost $ 620
million in the amount of 2 pcs .;.
- semi-submerged pipeline system (multiphasic hydrocarbons) length of 150 km and cost
$ 1 million 500 .;
- a floating LNG plant with capacity of 6 billion cubic meters. m / year and cost US $ 5
000 000 000 .;
-.. Oil shuttle tankers capacity of 20 tons and a cost of $ 40 million per 2 pcs .;
- shuttle tankers for compressed gas transport capacity of 60 tons and a $ 200 million a
quantity of 4 pcs .;..
- onshore terminal for oil receiving capacity of 1 million tons / year and cost $ 30 million
.;
- onshore terminal for receiving compressed gas capacity of 3 billion cubic meters. m /
year and cost $ 150 million.
For this embodiment, investment in transportation infrastructure formation amount $ 8
799 million, including in floating LNG plant -.. 5000 million (57% of the total capital investment
in the transport infrastructure), a system of semi-submersible pipelines - 1 per 500 million (.
17%), vessels for storage and shipping of oil - $ 1 239 million (14%), the tanker fleet and shore
terminals for oil and compressed gas supplies to meet the needs of the population and industry of
the country's energy -.. $ 1 060 million (12% ).
Option "tankers tankers" will transport hydrocarbons shuttle tankers from offshore fields
in the onshore and thence by line tankers to markets.
Scheme of transportation "tankers tankers" in the West African offshore
To implement this scheme, the transportation of hydrocarbons from offshore tanker
vessels require the following fleet and offshore pipelines:
- vessels for storage and offloading capacity of 5 million tons / year and cost US $ 580
million in the amount of 2 pcs .;.
- semi-submerged pipeline system (multiphasic hydrocarbons). 150 km and cost $ 1
million 500 .;
- oil shuttle tankers with capacity of 80 tons and cost $ 80 million in the number 4 pcs .;..
- shuttle tankers for compressed gas transport capacity of 60 tons and a $ 200 million a
quantity of 15 pieces...
Also as part of this option involves the construction of onshore facilities including:
47
- onshore terminal for receiving oil capacity of 11 million tons / year and cost $ 310
million .;
-. Shore oil storage capacity of 300 tons and a cost of $ 50 million .;
- coastal oil export terminal capacity of 10 million tons / year and cost $ 350 million .;
- onshore terminal for receiving compressed gas capacity of 9 billion cubic meters. m /
year, and a $ 340 million .;
- coastal LNG plant with capacity of 6 billion cubic meters. m / year and cost US $ 4 000
000 000 .;
- onshore terminal for LNG export capacity of 6 million tons / year and cost $ 800
million.
For this option, investment in transport infrastructure the formation amount to $ 11 831
million, including the onshore LNG plant -. 4000 million (33% of all capital investments in the
transport infrastructure), the tanker fleet to deliver hydrocarbons to the onshore -. 3 . 320 million
(28%), vessels for storing and shipping of oil together with a system of semi-submersible
pipelines - 2661 million (22%), shore terminals for receiving and shipping of oil and gas -. 1 to $
900 million (16%). .
Total capital investment in the development of the West Shelf portions 12 amount to $
599 Mill. For variant "tankers" and $ 15 631 Mill. For variant "tankers tankers" (Table 3.2.).
In addition to capital investment in the transport infrastructure of the formation are also
contemplated exploration costs and capital expenditures on the formation of mining
infrastructure.
Investments in mining infrastructure include the purchase of semi-submersible oil
platforms with capacity of 2.2 million tons / year (5 pcs.) And the semi-submersible gas
production platforms capacity of 1.8 billion cubic meters. m / year (5 pcs.). The volume of
investments in mining infrastructure is the same for both options and amounts to 2 000 million
dollars.
Cost of exploration work for both versions is the same and amounts to $ 1 400 million.
Also in the project estimated costs for the construction of an oil refinery, a gas processing plant
and a petrochemical complex. These costs are included in the group of "other expenses" and
amount to $ 400 million.
In the structure of capital investment in plant to transport liquefied natural gas occupies
57% in the embodiment "tankers" and 33% in an embodiment "tankers kers". The LNG plant is
necessary for the preparation of natural gas to be transported over long distances by sea
way. Also, a significant proportion of the capital investment in the transport infrastructure
48
occupy vessels for reception, separation of the primary oil and gas processing, storage and
shipment of these products in tankers.
The total operating costs in the development of the West shelf portions 109 amount to US
$ 112 Mill. Transportation costs (preparation of oil and gas for transportation, shipping and
transportation to market sales) occupy about 15% of total operating costs.
Table 3.2 - Investments in the development of the West African offshore areas
Quantity, pcs.
infrastructure facility power density
Cost, mn
Option
USD.
"tanker"
Investments, mln.
Option
"tankers tankers"
Option
"tankers"
Option
"tankers tankers"
mining infrastructure
Semi-submersible oil
2.2 mln. T /
platforms
year
200
5
5
1000
1000
200
5
5
1000
1000
2000
2000
1.8 billion
Semi-submersible gas
cubic
production platform
meters.m /
year
Mining infrastructure, total
Transport infrastructure
A vessel for storage
and offloading of
-
600
2
2
1239
1161
120
2
2
240
240
thirty
2
2
60
60
39
3
1
117
39
411
2
2
822
822
10
150 km
150 km
1500
1500
5,000
1
0
5,000
0
hydrocarbons
- Complex for
receiving, separating 5 million tons
and primary treatment
/ year
of oil and gas
- Quality control of
oil, oil
Standardization (SL
-
Light)
- Storage of oil and 100 thousand.
gas
- Oil Export Terminal
System piping
semisubmersible
T
5 million tons
/ year
-
Floating LNG Plant 6 billion cubic
49
meters. m /
year
Oil tankers-shuttles 20 thousand. T
40
2
0
80
0
Oil tankers-shuttles 80 thousand. T
80
0
4
0
320
200
4
15
800
3000
thirty
1
0
thirty
0
310
0
1
0
310
50
0
1
0
50
350
0
1
0
350
150
1
0
150
0
340
0
1
0
340
4000
0
1
0
4000
Shuttle tankers for
transportation of
60 thousand. T
compressed gas
Onshore terminal
1 million tons
receiving oil
/ year
Onshore terminal
11 million
receiving oil
tons / year
Onshore oil storage
300 ths. Tons
Shore terminal of oil
10 million
shipment
tons / year
Onshore terminal for
receiving compressed
gas
3.0 billion
cubic
meters.m /
year
Onshore terminal for 9 billion cubic
receiving compressed
meters. m /
gas
year
6.0 billion
Coast LNG plant
cubic
meters.m /
year
Onshore terminal for 6.0
million
0
800
Transport infrastructure, total
8799
11831
Exploration work for a total of
1400
1400
Other
400
400
Investments in total
12599
15631
LNG exports
tons / year
800
0
1
Results
The main result of the author's application of technical and economic model on the
example of the development of hydrocarbon resources of the West African continental shelf are
the guidelines for choosing the scheme of transportation of hydrocarbons from the shelf and the
economic evaluation of hydrocarbon transportation.
50
For the project development of hydrocarbon resources in the West African offshore
author recommends the use of transportation of hydrocarbons from shelf scheme based
on version number 7 "tankers" - transportation of the extracted hydrocarbons to line tankers
commodity market without the use of onshore (Figure 3.6.).
Due to the great distance from the shore production platforms and extra-large water
depths onshore construction for receiving hydrocarbons with shuttle tankers and their shipment
in tankers is linear uneconomical. Small volumes of extracted hydrocarbons allow for their
preparation for shipment and shipment from a special vessel, which is located next to the
production platforms. Due to the absence of the need to transport produced hydrocarbons to
onshore significantly reduced capital and operating costs of the tanker fleet.
In this embodiment, the capital investment in transport infrastructure would amount to $
8 799 million. Which is 69% of e of capital investments.
Transportation operating costs, including costs for the preparation of oil and natural gas
for transportation, shipment to their linear transportation tankers and to make a market of $ 16
297 Mill., Representing 15% of total operating costs.
Scheme of transportation "tankers" in the West African offshore
According to an embodiment of "tankers" net present value amount to 3916 million
dollars., Internal rate of return of 23%, payback period, taking into account the discount of 10
years, the payback period excluding the discount of 7 years, the profitability index of 1.48.
Table 3.3 - Economic indicators of the development of the West African offshore areas
Indicator / Value
The accumulated volume of gas production, billion
cubic meters. M
The accumulated volume of oil, million tons
Revenues from sales, $ mln
Sale of gas on the domestic market
Sales of liquefied gas for export
Sales of petroleum products from the refinery
Crude Oil Export
Implementations petrochemical complex products
Capital investments, $ mln
exploration work
mining infrastructure
transport infrastructure
Other
Operating costs, $ mln
Option
"tankers"
Option "tankers
tankers"
108
108
144
189209
1792
40386
7978
139052
11702
12599
1400
2000
8799
400
109112
144
189209
1792
40386
7978
139052
11702
15631
1400
2000
11831
400
109112
51
Taxes, $ mln
30602
29456
Net income, $ mln
49499
50645
Net present value, $ mn
3916
3046
Internal Rate of Return,%
23
21
The payback period undiscounted, years
7th
8
Payback period with discounting, years
10
12
profitability index units.
1.48
1.34
Source: Calculated by the author
The second variant of development of hydrocarbon resources of the West African
shelf "tankers tankers", suggesting to prepare hydrocarbons for transportation and shipment to
line tankers directly to the sea from nearby special courts is also cost-effective. Thus, the net
present value amount to 3046 million, The internal rate of return of 21%, payback period, taking
into account the discount of 12 years, the payback period excluding the discount of 8 years, the
profitability index of 1.34. The results of the calculations presented in Table. 3.5.
Thus, the project on the West shelf is most effective when choosing hydrocarbon
transportation scheme shelf type "tankers." Key project performance figures reflect the net
present value in the amount of $ 3 916 million, The internal rate of return is 23%.
3.3.Management results of developing Sierra Leone shelf
The Republic of Sierra Leone has significant resource potential in general and large
reserves of hydrocarbons in particular. Hydrocarbons were detected in the country not so long
ago and, therefore, the experience of industrial production, as well as available mechanisms and
facilities for transportation, processing and storage of industry products are still lacking. In the
situation of oil and gas early industrial development on the continental shelf of the country it is
necessary to create a single instrument to monitor the form of environmentally friendly
production, transportation and processing of hydrocarbons. The main goal for the National
Petroleum Company is to coordinate efforts to ensure the conditions for the formation of the
modern oil and gas industry and provide energy, transport and industrial sectors with sufficient
quantities of oil and gas.
The necessity of creating. Establishment of the National Oil and Gas Company is a
necessary condition for the implementation of development policy of the Republic of Sierra
Leone, defined by the President and the Government of the Republic and described in the basic
state policy documents. Usage uncivilized methods of extraction of hydrocarbons on the
continental shelf of the country will lead to their rapid depletion and will not give the necessary
jump-start for the economic development. According to the national policy aimed at the
industrial and socio-economic progress, development of oil and gas resources should be carried
52
out in a controlled form, as these resources are the basis for the development of the industrial
complex. For these purposes it is necessary to create the specialized company which will
undertake the maintenance of favorable conditions for the formation of the modern oil and gas
structures and its subsequent operation in accordance with the legal system established by the
President and the Government of the Republic.
Positive effects for the country. The National Petroleum Company is supposed to build
a unified system of transportation of oil and gas from points of production to processing plants
and points of transshipment for further usage in various sectors of the economy and sending for
export. Creating such system will allow controlling the transport of extracted hydrocarbons and
ecological safety of production, that would be impossible to implement in the case of fragmented
transportation system. In the case of uncontrolled export of extracted resources from the country,
the fuel and financial base for future development of the economy will be lost.
Creating a service facilities for storage, standardization and transshipment of
hydrocarbons will establish a system for monitoring and accounting of extracted resources. The
usage of a common oil storage and constant monitoring of the quality and quantity of extracted
hydrocarbons will allow operating relevant data and monitoring compliance with the interests of
the state and society in the product share agreements. Certification of oil brand «Sierra Leone
Light» will mark the country's position on the world market as a serious player.
As a result of establishing of the National Petroleum Company unified, modern,
environmentally friendly system of transportation of hydrocarbons will emerge in the country.
The state will have a handy instrument for transfer and usage of royalties received in-kind. New
high-paying jobs will be created for the population.
Connection with legislative initiatives. For the successful functioning of the National
Transpetroleum Company it is necessary make following changes to existing legislation:
1.
30% of physical volume of extracted oil and natural has to be passed to the
government through the National Transpetroleum company;
2.
National Company is the only company providing transportation services for
private companies producing oil and gas offshore and in the country to transport crude oil from
point of production to the storage tanks, from storage tanks to the oil terminal, from storage
tanks to the processing plant;
3.
National Company is the only company providing services for private companies
producing oil and gas offshore and in the country for storage (except oil and gas processing
plants) of crude oil, associated and natural gas, providing standardization of the oil to the brand
“Sierra Leone Light”;
53
4.
National Company is the only company serving all kinds of specialized transport
used in the process of (exploration) extraction and transportation of oil, associated gas, natural
gas and refined products;
5.
National company gets to manage a 100% of associated petroleum gas produced
on the shelf and the country;
6.
National company gets to manage a 30% of oil and natural gas produced on the
shelf and the country.
Transferred to the State hydrocarbons will be processed into fuel and then be used in the
energy, transport and industrial sectors of the economy. Transfer of resources in in-kind form
will meet the needs of a growing economy in energy resources.
The ownership structure. The National Transpetroleum Company will be a joint stock
company which shares will be distributed between the National Development Corporation - 60%
of the share capital; the Government represented by the Ministry of Mineral Resources and
Political Affairs - 20%; private companies of the Republic of Sierra Leone - 20%. Private
corporate investor owning 60% share in the National Development Corporation will undertake
all risks associated with investments and 100% financing of the costs. The State will hold the
"golden share" that allows controlling the activities of the company and monitoring compliance
with the interests of the state and society, in the absence of any financial investments.
The structure of the company. The structure of the company will consist of a number
of units to work on special activities. It is necessary to create: a construction department
providing the infrastructure, the legal department which will deal with regulatory issues,
transport department, repair department, service department and laboratory for oil quality
control.
The sequence of actions to create the National Transpetroleum Company:

adoption of laws on the national companies;

obtaining land for construction of infrastructure facilities;

obtaining the necessary licenses, corresponding to the main activities of the
National Company;

purchasing of construction materials and equipment;

integrated construction of oil and gas pipelines, collecting platforms, receiving
terminals for hydrocarbon, storage tanks, the gas redistribution center;

purchasing of specialized fleet.
Construction tasks. Thus, to begin transport service of the National Oil and Gas
Company, among others, it is necessary to solve the following problems:
54

Development of oil and gas transportation infrastructure to transport oil and gas
from offshore fields to the shore and then to the power plant, refineries and other industrial
facilities, as well as for export. The infrastructure should include: oil and gas pipelines, platforms
for the collection of hydrocarbon from production platforms of private companies, specialized
fleet for transportation of oil and gas, construction of a terminal for resources receiving on the
shore.

Construction of storage facilities capable of processing and standardization of
incoming crude oil, facilities for primary separation.

Construction of oil terminal for the export of hydrocarbons.
Logistics and construction. Transport and service infrastructure built in the country
will allow tankers to transport oil from drilling platforms to the receiving complex, located on
the shore. Separate terminal will be built in the port for tankers moorage and service. Next the
separating process and primary processing of crude oil on special facilities will take place. Oil
separated at the port will go through the process of standardization to the same brand - «SL
Light». Storage facility at the port will allow keeping oil before sending tankers for export. The
system of pipelines will connect the oil storage with private industry objects, such as refinery
and petrochemical complex. Oil exports will be carried out by oil terminal, located at the port in
the southern industrial zone.
Thus, the following facilities need to be build (Table 3.4).
Table 3.4
A brief description of all transport and service infrastructure facilities
For oil complex
Facility
Brief description
Place for tankers moorage and
Intended for tankers moorage and service
service in the port
Receiving complex
Located on the shore near the port.
Receives oil from the tankers.
Further, oil is directed to the center of
separation and primary processing.
Separation and primary processing
center
Located on the shore near the port.
Intended for separation, primary processing
of oil and standardization “SL Light” brand.
Then oil is sending to the storage facility.
Oil storage facility
Located near the port.
55
Intended for oil storage
Oil loading terminal in the port
Intended for shipment of oil tankers for
further export
Oil pipelines from the storage
facilities to the industrial objects
Connects storage unit with the refinery,
petrochemical complex and other industrial objects
of the industry.
Figure 3.7 shows the relationship between objects of transport and service infrastructure
of the oil industry.
Fig.3.7 Location scheme of transport and service infrastructure objects of the oil
industry.
Utilization of associated gas will be as follows: the National Trans petroleum Company
with tanker collects associated gas from each drilling platform, separates and transports it to the
power plants and other industrial facilities. In order to transport associated gas from offshore
platforms the special facilities for associated gas compression need to be installed. The gas will
be transported in a compressed form by special tankers to the collecting platform, where special
refinery facilities will be placed. Construction of two platforms processing associated is assumed
in the northern and southern parts of the shelf. After refining (removal of heavy fractions) gas
will be transported by two subsea pipelines from two collecting platforms to the shore, and then
two onshore pipelines will be connected to the gas redistribution center. By which the total gas
56
flow will be distributed and transported by pipeline to the northern, southern power plants and
port. Pipelines to private industrial facilities, such as gas processing plant will also be built.
Thus, the following facilities need to be build (Table 3.5).
Table 3.5
A brief description of all transport and service infrastructure facilities
for associated petroleum gas complex
Objects
Description
Place for tankers moorage and service
Intended for tankers moorage and
in the port
service
Two collecting platforms
Located on the northern southern shelf
parts
Intended for reception of compressed
associated gas from tankers and removal of
heavy fractions.
Then gas will be sent to an underwater
pipeline.
Two underwater gas pipelines from the
platform to onshore reception facilities
Connects two collecting platforms
with onshore reception facilities.
Two onshore reception facilities
Located on the shore.
Receive
gas
from
the
pipelines,
process and send the gas by pipelines to the gas
redistribution center.
Two gas pipeline from the receiving
facilities to the gas redistribution center
Connects two receiving facilities with
the gas redistribution center
Gas redistribution center
Intended for gas flows distribution of
to two power plants, gas processing plant, port
and other objects.
Gas
pipeline
from
the
redistribution center to industrial objects
gas
Connects the gas redistribution center
with two power plants, gas processing plant,
port and other objects.
Figure 2 shows the relationship between objects of transport and service infrastructure of
the associated petroleum gas industry.
57
North
Power
plant
Gas-processing
plant
Internal
terminal
Gas
distribution
center
Gas pipeline
South
Power
plant
Internal
terminal
Separation
Seaport
Service
center
Gas pipeline
Separation
Associated gas
Associated gas
Fig.3.8. - Location scheme of transport and service infrastructure objects of the
associated petroleum gas industry.
Functional tasks. In addition to the construction of transport and service infrastructure
within the National Petroleum Company the following tasks are assumed:

Control of oil, natural gas and associated gas production by tracking the
implementation of license conditions, tender documentation, coordination of drilling points by
private companies.

Collection of oil from the platforms of private companies, further transportation to
storage facilities on the coast, storage, standardization, transportation of branded oil to terminal
for export.

Collection of natural gas from the platforms of private companies, further
transportation to storage facilities on the coast, storage, transportation to terminal for export.

Collection of associated petroleum gas from the platforms of private companies,
transportation to shore and transfer for refining, further transportation of refined products in the
power and industrial facilities.

Monitoring the transfer of 30% royalty rate of the extracted oil and natural gas to
the State and management of these resources.

Monitoring the transfer of 100% of the produced associated gas, and management
of these resources.

Creation and promotion of new oil brand «Sierra Leone Light».
58

Operation of a specialized fleet intended for transportation of hydrocarbons from
the producing and collecting platforms to the shore;

Operation of transport and service facilities (oil and gas pipelines, collecting
platforms, the receiving complex, storage tanks, oil terminal, gas redistribution center).
Sources of Company’s revenues:
 Income from oil companies for the transportation of oil and gas to shore;
 Income from oil companies for the standardization of bring crude to the “SL Light”
brand;
 Income from providing power plants with fuel (associated petroleum gas);
 Income from the sale of the state share of crude oil received in-kind and standardized
to the “SL Light” brand (sales to the domestic (oil processing plant) and foreign markets);
 Income from supplying industry and population with the gas (gasification of
industrial parks and towns).
Resource support. In order to implement transportation services company planned to
use just as existing capacity and human resources, so energy, transport, construction and other
resources, which will be produced within the framework of the national companies:

building materials for the construction of pipelines, ports, platforms;

specialized fleet and onshore vehicles;

personnel to work in the port, the ships, in pipelines;

electricity to operate the elements of transport infrastructure (oil and gas pipelines,
oil port, platforms);

motor fuel for specialized fleet and onshore vehicles.
Private sector projects. Construction of transport infrastructure and service facilities
will give a powerful boost for the development of upstream and downstream sectors of oil and
gas industry. It is assumed that after creation of objects in the framework of the National Trans
petroleum Company, private companies will create a number that complement the integrated
technological structure of the industry. Production of this enterprises, including fuel and
petrochemicals, will be supplied to other sectors of the economy, allowing for complex
development of the country in accordance with the programs of the President and the
Government. The main projects to be undertaken by private investors are:

production of oil, natural and associated petroleum gas on the shelf;
59

construction of a petroleum refinery (the first stage involves the construction of
facilities to process up to 400 thousand tons of oil per year, receiving up to 200 tons of gasoline,
100 tons of fuel oil, 60 tons of kerosene for the needs of the country);

construction of a petrochemical complex (the production of alcohols, rubber,
latex, ethers, ethylene, propylene, phenol, in accordance with the needs of the country);

construction of a gas processing plant (deethanizing block, gas condensate
stabilization unit and the unit for production of motor oil, gasoline, propane, butane, ethane).
Target indicators (effectiveness). As a result of creation and reaching the full capacity
of the transport and service infrastructure owned by the National Transpetroleum Company, it is
supposed to ensure delivery from the shelf to the port, primary separation and delivery to
processing plants up to 8 million tons of oil, 6 billion cubic meters of natural gas, 1.4 billion
cubic meters of associated gas. In favor of the state to transfer to other industrial facilities in the
country each year will be collected up to 2.4 million of oil, 1.8 billion cubic meters of natural gas
and 1.4 billion cubic meters of associated gas.
Expected efficiency of the project
The suggested approach to the development of the country's economy will provide
guaranteed and well-timed chain: energy resources, raw materials - processing of raw materials –
producing finished goods - delivery to internal and external customers.
Establishment of industrial parks infrastructure, large enough to accommodate various
industries and government provision of preferences will allow for private businesses to locate the
most requested by country's economy and cost efficient productions, for example production of:
concrete products, polymers, aluminum products, glass, petroleum chemistry and fertilizers.
Development of base areas will allow resettling population from Freetown to the new
centers of development, including a new business center of the country located within one of the
base areas, thereby providing polycentric development of the country, which will grant a new
stage in the development of its economy.
The result of the project will be government revenue amounts $ 3570 million.
98 000 jobs, including 30 000 high-paying jobs provided by business group manufactures
will be created in the country. The qualification level of the working population will increase technological and humanitarian intelligentsia, middle class will be created, amount of
entrepreneurs and businessmen will be raised up.
60
CONCLUSION
Sierra Leone is is yet to dispose adequate institutions to manage it oil wealth. The
country’s human resource for the said sector is inadequately equipped to engage in the
development of substantial opportunities for the development of Oil and Gas complex.An urgent
task is therefore needed to develop an algorithm for selecting affordable and economically
feasible schemes for transporting hydrocarbons from fields to markets. The result of this study
will help to develop a methodological toolkit for the economic evaluation and selection of a
hydrocarbon transportation scheme in the framework of hydrocarbon development projects on
the continental shelf of Sierra Leone.
The study has developed by the methodological tools for the economic assessment and
selection of hydrocarbon transportation scheme in the framework of development of the
resources of the continental shelf hydrocarbon projects with the following result
1.
The author analyzed options for the development of offshore deposits in Sierra
Leone with the involvement of foreign investment in accordance with the Production Sharing
Agreement;
2.
An algorithm for selecting the transport scheme was developed depending on the
key parameters and on its basis the possible options for transporting hydrocarbons from the
continental shelf are presented;
3.
An economic model was developed to assess the economic efficiency of
hydrocarbon transportation from the Sierra Leone continental shelf according to the schemes
developed by the author;
4.
An economic assessment of the transport of hydrocarbons from the Sierra Leone
shelf was carried out, taking into account the submitted schemes for the transport of resources on
the results, management decisions and recommendations were developed for the Government of
Sierra Leone.
To achieve this goal a schematized available options for transportation of hydrocarbons
from the continental shelf and on their basis for developed transport scheme selection algorithm
of hydrocarbons offshore has been proposed, depending on the key parameters (water depth,
distance from shore, climatic conditions).This algorithm is designed for use by persons on the
development of hydrocarbon deposits in step search and evaluation of hydrocarbon resources
with limited initial information. This algorithm allows us to calculate the range of the unit cost of
transportation of hydrocarbons from the various portions of the shelf according to the key
parameters (sea depth, distance from shore and climatic conditions). Results of calculating the
unit cost of transporting offshore hydrocarbon European and Asian markets reveal the most
61
promising direction of transport for transporting hydrocarbons from each portion of the
continental shelf.
As a result of studies of the continental shelf of Sierra Leone the methodical approach to
the division of the continental shelf areas has been developed by a group of development
complexity, based on the registered resource, climatic, geological, infrastructure, environmental
and technological factors. Drafted classification can be used in determining the size of the tax
benefits in the development of various areas of the shelf. Also, this classification can be used by
specialists of oil and gas companies in the planning of transport routes to export hydrocarbons
from offshore fields.
The author of the economic model of an estimation of economic efficiency of
transportation of offshore hydrocarbons was used. This model is designed for use on the stage of
feasibility study of field development and implementation of the project as a whole. With the
help of techno-economic model of economic efficiency of the transport of offshore hydrocarbons
has been calculated for a specific project with a choice of hydrocarbon transportation scheme
and the tax regime.
As a result of evaluating the economic efficiency of transportation of hydrocarbons from
offshore West Africa shelf portions was selected and substantiated recommended organizational
scheme transporting hydrocarbons. Implementation of the project on production of hydrocarbons
offshore West African is the most efficient in the selection of hydrocarbon transportation scheme
"tankers". The scheme of transportation of hydrocarbons from the shelf involves storage and
preparation for transport of the extracted hydrocarbons directly into the sea on a special largecapacity vessels, with which there is a shipment of hydrocarbons in the linear high-capacity
tankers for transport to markets. Key performance indicators of the project are as follows: net
present value of $ 3 916 million, internal rate of return of 23%.
62
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