Wildcat Oil In Kasakstan

6551 words - 27 pages
Wildcat Oil in Kasakstan Case Report

By

Varun Khurana

Engineering Economics

May 10, 2011

To: Wildcat Oil in Kasakstan

From:Varun Khurana

About: Cost Estimate of a facility to produce oil

Recommendations

1. Larger facility is a wise investment and therefore recommended

Discussion

Wildcat Oil has recently discovered a 500 million barrel crude oil reservoir in Kasakstan, and the firm needs a preliminary cost estimate for a feasibility study for a facility to produce the oil and for transporting this oil. Wildcat Oil has already paid the Kasakstan govt. $400M in up-front lease costs for this reservoir. Engineers predict recovery of about 300 million barrels with current technology, however the oil facilities and the remaining oil will belong to the Kasakstan govt. after 100 million barrels of oil is extracted by Wildcat Oil. Kasakstan govt. is also entitled to 10% of the net revenues (net revenue is, selling price of per barrel of oil minus operating and transportation costs).

Major cost items for a basic 36,000 bbl/day facility are identified in below in Table 1. The table below includes the item name, cost, and factor estimate (for each item) which includes equipment, piping, and controls. Total cost for each item and the faciltiy is identified in the extreme right column in Table 1 show below.

Table 1 - Cost Estimation Basis|

| | | |

Cost Item| Cost (in Million $)| Factor Estimates| Total Cost (in Million $)|  |  |  |  |

Turbines| 33.2| 2.5| 83.00|

Compressors| 24.8| 2.8| 69.44|

Vessels & tanks| 25.6| 2.7| 69.12|

Valves| 7.2| 3.8| 27.36|

Switchgear| 4.8| 2.4| 11.52| ...

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