In order to calculate important parameters concering the feasibility of the project different econimic scenarios were investigated. One of the major uncertainties during this project is the amount of hydrocarbons in place. Therefore we consider a low, a mid and a high case. Next  to this some financial values such as discount rate, CAPEX multiplication and oil prices can have a great impact on the projects economics. To cover these sensitivities on the economics an analysis is made from which will be clear what parameters have the largest influence.

11.1. Mid scenario

For the midbcase senario we have the following assumptions:

- Mid quantity of hydrocarbons in place;
- Base case of financial parameters (53 USD/bbls, 5.3 USD/mmBTU, 0% CAPEX multiplication)

The project’s cash flow built up is shown in the figure below. It becomes clear where the money originates from or where it will be spend on.

cash-flow-gas-field-mid-senario

 

In order be able to judge whether the project is profitable the cash flows are summed up and represent the Net Present Value (NPV). The NPV’s are calculated for different discount rates which can be seen below.

net-present-value-gas-field-project

The table below summarises the most important financial parameters: maximum exposure, paybout time, maximum internal rate of return (IRR) and cumulative cash surplus.

Financial parameter Maximum exposure [USD mln] Pay-out time [years] Discounted ultimate cumulative surplus [USD mln] Value Investment Ratio Break-even Point [USD/mmB TU] Unit Technical Cost [USD/boe] Internal Rate of Return [%]
Base case & mid price -1610 4 1766 1.01 1.92 2.58 24.45

11.2. Sensitivities

Table 5b4 gives a summary of the project economics, all important financial indicators are covered for the different scenarios. Fluctuations in oil and gas prices have a large impact on the NPV as well as the amount of hydrocarbons in place, therefore these quantities are split up in both three scenarios (low, mid and high). Other important values are: Discount Rate (10%), Tax (70%), Royalties (15%) and deprecation rate of the CAPEX (20%).

economic-indicators-oil-and-gas-projects

In order to bring other sensitivities forward a tornado diagram is made as seen in Figure 5b9. These key financial uncertainties are of great impact on the economics. To perform this sensitivity test the mid case production and mid case economics were formed the base from where adjustments were implemented.

Concluding from this tornado sheet, the highest impact on the profitability of the project forms the tax rates. Only a slight increase of tax of 10% will result in a NPV decrease of about 580 million USD. The government therefore is stated as key stakeholder. Our JV with statebowned PetroVietnam decreases the chance of tax rates being changed drastically.

Another sensitive parameter forms the ‘First Oil Date’, producing the oil and gas two years earlier results in an NPV increase of 670 million USD. Therefore planning of the field development has high priority, all sub contractors should deliver on time and must be able to keep schedule. By investing in thorough field research while drilling the amount of hydrocarbons in place must be more precise and more certain.

11.3. OPEX

ELEN Oil could expect the OPEX costs to rise in the future because of the fast growing Vietnamese economy suffering high inflation rates. The effect of these rising costs due to increasing labor and material costs have been researched. These findings can be found in Appendix XXX. The results of this research have been used to compare the three alternative concepts in chapter XX.

In order to cover the rise of OPEX in the sensitivities on the project’s economics an OPEX increase of 30% is checked. The conclusion is clear, the FPSO concept reacts with a small NPV decrease of only 140 million USD.

11.4. Local content overview

The estimated local content for each part of the project execution phase is preset. Also some measure to further increasing this percentage are suggested.

 
  Percentage Ways to increase
FEED 10 % Employing local engineers
Drilling 20 % Using PV- Drilling the procurement of all drilling consumables
FPSO 90 %  
Turret 10 % Use PVC or other local company for the procurement and installation of mooring systems and anchoring
Subsea 5 %  
Gas Pipeline 95 %  
Topsides 70 %