Cost Engineering

Development of new petroleum production regions (Yamal, Eastern Siberia and shelves of Arctic seas) involves delivery of major capital projects that require prevention of risks of cost and schedule impact. This, in turn, requires initial adequate assessment of necessary investment, cost control during construction, and consideration of external economic conditions. Inaccurate cost assessment leads to non-optimal engineering solutions, which in turn reduces potential value of the project, its NPV and ORF. This is why the matters of cost assessment and management in new regions of oil production are as important as the issues of petroleum engineering and employment of new technologies.

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To ensure effective project cost management, Gazprom Neft employs advanced methods of cost engineering, i.e. management of infrastructure investment to achieve maximum operational effect at minimum cost. Estimates show that over 80% of Gazprom Neft’s investment programs in the upstream segment may be forecasted with pin-point accuracy if cost engineering tools are used, and accuracy is critical to decision-making with regard to major projects.

The effect is largely achieved due to in-depth analysis of project cost drivers and subsequent use of analysis results for optimization of design solutions: definition of optimal length of horizontal section of well and optimal production profile, as along with the optimization of well and infrastructure construction solutions.

In 2015, STC specialists completed the development of a software module for estimation of construction cost of on-site oil and gas treatment and transportation facilities. Five engineering modules of well drilling capital cost assessment tools are currently ready for use. A project is now underway to improve accuracy of operating cost assessment.

Cost engineering tools are being developed under the Integrated Conceptual Engineering Project also delivered by STC. This project is part of the Electronic asset development program of Gazprom Neft’s Technological Strategy that combines all of the company’s proprietary IT solutions for the upstream segment. Integrated Conceptual Engineering Project enables a comprehensive assessment of field development with due account for its geology, infrastructure solutions and cost models. The results of this assessment are then used to pick the best development scenario and are ranked on the basis of economic and operational parameters. The best development scenario is selected with the help of cost engineering tools that enable prompt estimation of capital costs of infrastructure construction and well drilling, as well as forecast operating costs for the entire lifecycle of an asset.