Economic Viability of Infil Drilling Program for Marginal Oil Field Development: A Case Study of Sango Field in Nigeria

Abstract

Abstract Infill drilling can be defined as the drilling of an additional well in a field that has already completed primary production; it is a rate acceleration investment that increases cash flow schedule similar to installing large volume lift equipment. The study evaluates the economic viability of applying infill drilling program to marginal oil field development in Nigeria using Sango field as a case study. This study was carried out to evaluate the economic viability of infill drilling program for marginal oil field development in Nigeria using Sango Field as case study. The study employs the dynamic reservoir simulation using Eclipse 100 Black oil simulation software to quantify the infill potential of the remaining reserves and based on the results of the incremental recovery from the simulation, one additional well was proposed for drilling. Economic analysis was carried out on the drilling prospects using cash flow model to evaluate the profitability. Stochastic evaluation of the deterministic single values was conducted using Oracle Crystal Ball software to quantify the risk and inherent uncertainties. This was followed by performing a sensitivity analysis to determine the effect of key variables on the profitability of the venture. The result of the analysis showed that the Long Term Activities (combined) scenario recorded the highest incremental recovery of 2.45MMSTB. The project Net Present Value for the drilling option is $1.0 Million at a discount rate of 11% while the internal Rate of Return is 12%, the profitability index is 1.1 and Payout Period of 4.26 years. Probabilistic analysis gave better confident level that encourages investment while the sensitivity analysis revealed tax rate, oil price and initial investment as key parameters affecting the profitability of the venture. The long time activities that gave an incremental of 2,45MMSTB was proposed for the Sango field which involves the production of the fields with both old existing well and the newly drilled well. It is recommended that there is the need for less demanding and cost effective method to quantify infill potential in marginal oil field as against the detailed integrated reservoir study that is time consuming and expensive for operations of marginal fields. The significance of the study is that it will provide valued information for marginal field operators that will guide investment decision making.