Cost Engineering

Development of new oil regions (Yamal, East Siberia and Arctic offshore areas) involves delivery of major capital projects that require prevention of risks of cost and schedule impacts. This, in turn, requires initial adequate assessment of necessary investment, cost control during construction, and consideration of external economic conditions. Cost engineering tools enable accurate evaluation of expected costs at all stages of field development. 

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 a minimum cost. Estimates show that over 80% of Gazprom Neft’s investments in the upstream segment may be forecasted with pin-point accuracy if cost engineering tools are used.

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 wellbore and optimal production profile, as well as optimization of well and infrastructure construction solutions.

Conceptual projects and re-engineering projects considered by the Company always involve significant flexibility with regard to the management of hydrocarbons production, treatment and transportation processes, as well as to the setup of reservoir pressure maintenance system. A deliberated choice of the optimal scenario depends on the accurate assessment of the total cost of ownership that includes both capital and operating expenditures.

Cost engineering tools are being developed under the Integrated Conceptual Engineering project that is also being delivered by STC. This project is part of the Electronic Asset Development program of Gazprom Neft’s Technology 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 expenditures for infrastructure construction and well drilling, as well as forecast operating costs for the entire lifecycle of an asset.