Kosmos_Introduction to O&G education deck_EN

AN INTRODUCTION TO OIL & GAS

Kosmos is a premier international oil and gas exploration and production company, based in Dallas (US):

• Experts who are proven oil finders:- Track record of deepwater exploration success - in 2007,

Kosmos found the massive Jubilee Field in Ghana’s deep waters• Focused on under-explored offshore frontier / emerging basins

with substantial hydrocarbon potential• Fully self-funded to undertake ambitious exploration and

appraisal drilling program

The Process BreakdownPHASE 6

Production

PHASE 2Exploring the block through

site and seismic surveys

PHASE 1Entering a

new market

PHASE 3Undertaking exploration

drilling

PHASE 4Appraisal

drilling

PHASE 5Development

1. Identify potential under-explored or overlooked geological territories

3. Assess geopolitical, operational and financial viability of operating in territory

2. Aquire existing seismic surveys

4. Secure rights to explore area through licenses with host governments

Timeline: up to a year

PHASE 1 Entering a new market

Key activities:

Opportunities

• Opening a new petroleum basin• Exploring new horizons can

result in good commercial terms

Challenges

• Proving to investors and the stock market that it is worth proceeding

• Ensuring that the conditions are mutually beneficial between host nation and company

Opportunities and ChallengesPHASE 1

Upstream - refers to exploration, production and transport of oil and gas prior to refiningDownstream - the refining of crude oil and the processing and purifying of raw natural gas, as well as the marketing and distribution of products derived from crude oil and natural gas.Exploration licence - permits geological and geophysical surveying and drilling of exploratory wellsProduction licence - confers exclusive rights on the licensee to search and drill for oil or gasProduction sharing - agreement between parties to a well and a host country regarding the percentage of production each party will receiveExploration - the search for oil and gas deposits

Discovery - confirmation of the presence of a petroleum-bearing reservoir Appraisal - drilling carried out once oil or gas has been discovered in order to assess the extent of the discovery Development - drilling a known producing formation to begin production Production - the extraction of oil or natural gas Abandonment - to cease work on a well which is non-productive and to plug off the well with cementEquity - share or interest in an oil or gas licence or fieldJoint venture - formal relationship between an oil company and its partner/s(Petronas / Tullow, Kufpec, Sterling and NOC)NOC - National Oil Company

Block - subdivision of sea area for the purpose of licensing exploration/production rightsPSC - production sharing contractGSPA - gas sales and purchase agreementPOD - plan of developmentExploration phase - exploration wells are drilled to determine whether oil or gas is present.Work obligations - the work that parties have committed toFinancial obligations - the financial commitment that the parties commit toContractor - 3rd party companies that provide technical services to the OperatorOperator - the company responsible for the exploration, development, and production of an oil or gas licenceFarm-out - where a company decides to assign part or all of its commercial interest to another company, sharing some of the costs of exploration in return for a proportion of any income generated in the future

Key TermsPHASE 1

PHASE 2Exploring the block through site and seismic surveys

Timeline: 1 - 2 years

1. Assessment of potential impact on the environment when undertaking seismic surveys

3. Site surveys to assess conditions on and below ocean floor

2. Undertake 2D/3D seismic surveys to establish potential presence of oil or gas

4. If possibility of oil or gas (‘prospects’) shown to exist, oil and gas company (‘operator’) moves to exploration drilling phase

5. Companies may consider bringing in other O&G companies (farm-in) at this stage

Key activities:

Opportunities and Challenges

Opportunities

• Some social projects will be started, as well as investment in local facilities (e.g. ports)

Challenges

• Predominantly environmental:- Increased noise levels can potentially

impact marine mammals, such as whales - Some marine species may temporarily

migrate away from affected area- Potential short-term impact on fishing in

area while seismic survey takes place

PHASE 2

Seismic survey - compressed air or sonic waves

sent to ocean floor to gauge depth, location and

structure of hydrocarbon resources beneath

Seismic acquisition vessel - vessel used for

conducting offshore seismic operations

Offshore seismic operations - general term

describing seismic exploration and surveys

offshore

Source - a device that records seismic data

using sound waves

Streamer - floating data collection device

towed behind vessel

Air guns - conduct sound waves to ocean floor

using compressed air

Hydrophone receivers - receive sound waves

reflected back from ocean floor

2D - basic ‘single line’ data recording

technique used for rapid survey of large areas

of virgin territory

3D - multiple lines of data, giving a 3D image

of surface below ocean floor

Operator - the member of a joint venture

responsible for carrying out operations

Farm-in - where a company enters into a joint

venture in return for paying a share/all of

specific future operations

Mmbbls - million barrels

Mmboe - million barrels of oil equivalent

Key TermsPHASE 2

PHASE 3


1. Exploration drilling is preceded by an Environmental Social Impact Assessment

3. Exploration wells are drilled into seabed (by drillship) to determine presence of oil or gas and a working hydrocarbon system 2. An oil spill

response plan will be developed and approved by the Government

4. Additional information on seabed and subsea conditions is also gathered

5. Three potential scenarios.See below

a. Dry hole - if no oil or gas is found, well is plugged, sealed, and securedb. Non-commercial well – if oil or gas is found but well is not commercial, further exploratory drilling may be undertakenc. Discovery - if well is found to be ‘hydrocarbon-bearing’, it is further tested to determine viability and companies will move to appraisal phase

Key activities:

Undertakingexploration drilling


Opportunities

• Potential for some local employment• Boost to local economy from

spending and supply contracts

• Further social investment projects

Challenges

• Key concern is environmental: preventing leaks and spillages

• Possible risk of occupational injury or illness among workforce

• Possible local disruption due to drilling rig, supply vessels and transport helicopters

PHASE 3

ESIA - a study to ensure that the environmental and social

impacts of exploration are assessed and planned for

Oil spill response plan - a contingency plan to assist in

the effective response to an oil spill, which will include

modelling

Well - a boring in the Earth that is designed to bring oil

and gas to the surface

Wildcat - a speculative exploration well drilled in search

of new oil or gas reservoirs

Spud - the process of beginning to drill a well

Rig / Drillship - a ship fitted with drilling apparatus, most

often used for exploratory drilling

Exploration well - a well drilled to confirm presence

of oil or gas

Exploration discovery - an exploration well that

finds oil or gas

Wellbore - a drilled hole or borehole

Directional well - a wellbore aimed at a target located

away from (as opposed to directly beneath) the surface

location of the well

Drilling mud - water-based lubrication fluid used when

drilling a well

Porosity - percentage of space within carbonate rock

that can contain fluids

Permeability - a characteristic that allows the oil and

gas to flow through the rock

Log - the results of exploration drilling

Key TermsPHASE 3

1. In some circumstances, companies that don’t find oil and gas may look to relinquish their licence(s) or opt not to renew their licence(s)

3. There are three ways in which a licensee can give up acreage:

- Surrender part of the licensed area while the licence continues over the remaining area - Relinquish the entire licence - Decide not to renew the exploration licence when the contract expires

2. This can happen at any point during phases 2 and 3

4. Depending on the original licence agreement, the company may have certain obligations to complete e.g. social investments, before it is released from the agreement

Key activities:

OPTIONALACTION Exiting a block

PHASE 4


1. Appraisal drilling follows successful exploratory drilling

2. Can involve drilling multiple wells

3. Assesses size of oil or gas discovery and whether it is commercially viable

4. If discovery is deemed commercially viable, the operator can move on to development

5. Social and environmental impact of appraisal drilling is comparable to exploration drilling

Key activities:

Appraisal drilling


Opportunities

• Further jobs for local people• Increased boost to local economy

(oil industry typically creates fewer opportunities than mining, especially when oil industry is offshore) from spending and supply contracts

• Continued social investment

Challenges

• Same issues as in exploratory phase

PHASE 4

Appraisal - further work to establish

commercial potential of discovery

Delineation well - well drilled to determine the

size of an oil or gas deposit

Well test - a test used to asses a well’s potential

by measuring its capacity

Hydrocarbon / oil / gas kitchen - an area of

the subsurface rock containing hydrocarbons

Reservoir - an area of porous rock containing

hydrocarbon deposits

Field - an area consisting of a single reservoir

or multiple reservoirs

Structural / strategic trap - a rock reservoir

where liquid oil becomes trapped

Key TermsPHASE 4

PHASE 5


1. A development plan is submitted to relevant national authorities for approval

3. Materials, services and equipment procured and installed

4. Drilling of production wells takes place

5. Tests run to verify that a stable production level can be achieved

6. Production begins

Key activities:

Development

2. Carry out assessment of all potential risks, including long-term appraisal of environmental and social impact


Opportunities

• Potential short to medium-term jobs for local people

• Boost to local, regional and national economy from spending and investment

• Establishment of more sophisticated local community development and education programmes

Challenges

• Low but ongoing risk of impact on local marine life

• Potential long-term local disruption due to drilling rig, supply vessels and transport helicopters

• On rare occasions, contractors supporting development can cause local issues

PHASE 5

Platform - a structure resting on, or attached to,

the seabed from which wells are drilled

Wellhead - point at which the hydrocarbons

exit the seabed / also equipment at the surface

used to control flow

FPSO - a structure used for Floating Production,

Storage and Offloading

Gas injection - pumping gas into an oil

reservoir to stimulate the crude oil

Water flooding - injecting water into oil

reservoir to increase pressure and stimulate

production

Water drive - water present in a reservoir

below the oil or gas deposit, driving it to

the surface

Gas cap drive - gas expanding as well

depletes, driving oil to surface

Water contact - surface in a reservoir

above which gas occurs and below which

water occurs

Key TermsPHASE 5

1. Phased increase in production until maximum level is reached

3. Regular ongoing reviews of social and environmental performance

2. Production is maintained at maximum level until it begins to decline


PHASE 6 Production

Key activities:


Opportunities

• Potential long-term jobs for local people

• Long-term benefit to local, regional and national economy from oil revenue and spending

• Ongoing local community development and education programmes

Challenges

• Ensuring that economies remain balanced and increased revenues are used effectively

• As production ends, countries need to ensure they plan for life after oil and gas revenues

PHASE 6

Plateau level - level of peak production

reached by an oil or gas field

MMBtu - million British thermal units per day

Mmcf - million cubic feet

Mmcfd - million cubic feet per day

Mmscfd - million standard cubic feet per day

Bopd - barrels of oil per day

Boepd - barrels of oil equivalent per day

Bcf - billion cubic feet

Tax and royalty - profits and royalty tax paid

on any oil produced

GSA - gas sales agreement

Key TermsPHASE 6

Kosmos_Introduction to O&G education deck_EN

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