Technical Papers

Principles Associated With The Economic Evaluation of Enhanced Oil Recovery Projects

By 6 de January de 2022January 10th, 2022No Comments

The financial models which support the decisions for the enhanced oil recovery projects implementation are mainly based on the theory of discounted cash flows,  which yields the Net Present Value (NPV) and the Internal Rate of Return (IRR)  as the most important indicators, this fact allow first to determine the economic  feasibility of its execution or in any case compare, contrast and decide between  different projects, schemes and / or scenarios.

Each company (NOC’s and IOC’s)  or group of experts has designed their evaluation models based on their  experience and lessons learned. This economic evaluation model considers the  concept of the time value of money, which essentially reflects the simple issue  that the value of money today, or the present value, is not the same as it will be in  the future. 

The reason for this is that idle resources lose value if they are not used, because there are  always opportunities to invest and make a profit,  even if all you do is put the money in a savings  account in a bank. However, the evaluation of  enhanced oil recovery (EOR) projects, given the  large capital expenditures (CAPEX), is highly  sensitive to the consideration of several technical  (Heterogeneities, Well Arrangement, Spacing),  operational (Available Energy Sources, Facilities,  etc) and economic (price of a barrel of oil)  variables.

For this reason, the use of project  evaluation techniques such as the one proposed  by Skinner, based on the decision hierarchy  triangle (Policies, Strategies and Tactics) as well  as the implementation of influence diagrams or  decision trees to consider the impact of each  variable on the main economic indicators (NPV,  IRR, TP, EI, among others) is essential in order to  adequately support the decision making process  and even determine the moment from which it  would not be beneficial to continue with the  project, thus estimating the so-called economic  limit. All of the above will allow a more assertive  evaluation of the profitability during the  implementation of enhanced recovery projects, as well as to prioritize the application of a certain  technology or enhanced recovery scheme.

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