Economic Evaluation of Cooperation Projects in the Offshore Petroleum Exploration and Development

Abstract

Abstract Abundant petroleum resources are predicted to be present in the Chinese offshore continental shelf. Since 1979 when the policy of "Opening toward outside world and stimulating domestic economy" was adopted by the Chinese government, in order to speed up the pace of the four modernization, over one million km2 on the offshore continental shelf covering Bohai, South Yellow Sea, Pearl River Mouth, Beibu Gulf and Yinggehai of South China Sea were offered for bidding to cooperate with foreign contractors in the cooperative exploration and development. The practice of recent years proves that such an undertaking has played a positive role in speeding up the development of our offshore petroleum resources and in the introduction of foreign advanced technology and managerial expertise. Remarkable success has been achieved. In the light of the precondition of safeguarding the state's sovereignty, the following considerations were given and implemented in dealing with the cooperation: first, to consider whether our country's four modernizations can benefit technically and economically through such cooperation, secondly, whether the state can maximize its economical rent from it because the petroleum resources are owned by the state; and thirdly, whether foreign contractors can obtain their reasonable profits through such cooperation and whether it is attractive to foreign investments, because foreign contractors have put in a great deal of risk money, manpower as well as material resources. This is also a basic principle which we are following with in the cooperative exploration and development of offshore petroleum resources. We all understand that the offshore petroleum exploration and development cover the stages of geophysical surveying, drilling (including wildcat and appraisal drilling), field development (including platform design and fabrication, installation of production facilities, storage and transportation facilities, drilling of production wells as well as injection wells, and onshore facilities), and oil/gas production, etc. When a decision is to be made before commencing any activities of these stages, evaluations are needed for decision making. Thus, we consider that evaluation would certainly be carried out without interruptions in every stage, for the purpose of decision making during each stage. As for offshore petroleum exploration and development projects, the evaluations usually include resource evaluation, development evalution, engineering evaluation and finally economic evaluation. Therefore, economic evaluations are carried throughout the whole process of projects with their contents and accuracy changing with the advancement of activities. The so-called successive evaluation is the fact that, along with intensification of the work and updating of the knowledge, the requirements for evaluation are also upgraded.