Robust Exploration and Production Sharing Agreements Using the Taguchi Method
The short- and long-term volatility of oil and gas prices has a wide-ranging impact on both parties of petroleum contractual agreements, thus affecting the profitability of the project at any stage. Therefore, the government (first party) and the international oil company (second party) set the para...
| Main Authors: | , , , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2022-07-01
|
| Series: | Energies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1996-1073/15/15/5424 |
| _version_ | 1797432881172185088 |
|---|---|
| author | Saad Balhasan Mohammed Alnahhal Brian Towler Bashir Salah Mohammed Ruzayqat Mosab I. Tabash |
| author_facet | Saad Balhasan Mohammed Alnahhal Brian Towler Bashir Salah Mohammed Ruzayqat Mosab I. Tabash |
| author_sort | Saad Balhasan |
| collection | DOAJ |
| description | The short- and long-term volatility of oil and gas prices has a wide-ranging impact on both parties of petroleum contractual agreements, thus affecting the profitability of the project at any stage. Therefore, the government (first party) and the international oil company (second party) set the parameters of their contracts in a way that reduces the uncertainty. The effect of price fluctuations on economic indicators is investigated in this paper. The Taguchi method is used for the first time to find the best-agreement parameters, which are the “A” and “B” factors, in the standard Libyan agreement. There are four “A” components from “A1” to “A4”, and four “B” components from “B1” to “B4”. The purpose is to reduce the variability in the response variables, which are the company take (the percent of net cash flow for the international company) and average value of the second-party percent share of production (ASPS). The noise factors considered in this paper are oil, liquefied hydrocarbon byproduct (LHP), and gas prices. The method was applied to a case study of oil field development in Libya. The results showed that “A3” and “A4” were the most important control factors that affect the ASPS, while “B2” and “B3” are the most important factors affecting the company take. To obtain robust results, the most important factors to reduce variability were also determined. The effect of control parameters on the average NPV may be worth more than USD 22 MM in the 1-billion-barrel oilfield case study. The results showed that, for a given combination of “A” and “B” factors with a certain company take, the mean absolute deviation (MAD) of the NPV of the second party was reduced by 18% if the optimal combinations of the levels were used. |
| first_indexed | 2024-03-09T10:08:08Z |
| format | Article |
| id | doaj.art-05b6cf0ec3a24811a7a775c2176c4672 |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-03-09T10:08:08Z |
| publishDate | 2022-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-05b6cf0ec3a24811a7a775c2176c46722023-12-01T22:54:43ZengMDPI AGEnergies1996-10732022-07-011515542410.3390/en15155424Robust Exploration and Production Sharing Agreements Using the Taguchi MethodSaad Balhasan0Mohammed Alnahhal1Brian Towler2Bashir Salah3Mohammed Ruzayqat4Mosab I. Tabash5Chemical and Petroleum Engineering Department, American University of Ras Al Khaimah, Ras Al Khaimah P.O. Box 10021, United Arab EmiratesMechanical and Industrial Engineering Department, American University of Ras Al Khaimah, Ras Al Khaimah P.O. Box 10021, United Arab EmiratesRetired from Chemical Engineering School, University of Queensland, St. Lucia, QLD 4072, AustraliaDepartment of Industrial Engineering, College of Engineering, King Saud University, P.O. Box 800, Riyadh 11421, Saudi ArabiaDepartment of Mechanical and Process Engineering, University of Duisburg-Essen, Keetmanstraße 3-9, 47058 Duisburg, GermanyDepartment of Business Administration, College of Business, Al Ain University, Al Ain P.O. Box 64141, United Arab EmiratesThe short- and long-term volatility of oil and gas prices has a wide-ranging impact on both parties of petroleum contractual agreements, thus affecting the profitability of the project at any stage. Therefore, the government (first party) and the international oil company (second party) set the parameters of their contracts in a way that reduces the uncertainty. The effect of price fluctuations on economic indicators is investigated in this paper. The Taguchi method is used for the first time to find the best-agreement parameters, which are the “A” and “B” factors, in the standard Libyan agreement. There are four “A” components from “A1” to “A4”, and four “B” components from “B1” to “B4”. The purpose is to reduce the variability in the response variables, which are the company take (the percent of net cash flow for the international company) and average value of the second-party percent share of production (ASPS). The noise factors considered in this paper are oil, liquefied hydrocarbon byproduct (LHP), and gas prices. The method was applied to a case study of oil field development in Libya. The results showed that “A3” and “A4” were the most important control factors that affect the ASPS, while “B2” and “B3” are the most important factors affecting the company take. To obtain robust results, the most important factors to reduce variability were also determined. The effect of control parameters on the average NPV may be worth more than USD 22 MM in the 1-billion-barrel oilfield case study. The results showed that, for a given combination of “A” and “B” factors with a certain company take, the mean absolute deviation (MAD) of the NPV of the second party was reduced by 18% if the optimal combinations of the levels were used.https://www.mdpi.com/1996-1073/15/15/5424production sharing agreement (PSA)Taguchi methodoil and gas sectorLibya |
| spellingShingle | Saad Balhasan Mohammed Alnahhal Brian Towler Bashir Salah Mohammed Ruzayqat Mosab I. Tabash Robust Exploration and Production Sharing Agreements Using the Taguchi Method Energies production sharing agreement (PSA) Taguchi method oil and gas sector Libya |
| title | Robust Exploration and Production Sharing Agreements Using the Taguchi Method |
| title_full | Robust Exploration and Production Sharing Agreements Using the Taguchi Method |
| title_fullStr | Robust Exploration and Production Sharing Agreements Using the Taguchi Method |
| title_full_unstemmed | Robust Exploration and Production Sharing Agreements Using the Taguchi Method |
| title_short | Robust Exploration and Production Sharing Agreements Using the Taguchi Method |
| title_sort | robust exploration and production sharing agreements using the taguchi method |
| topic | production sharing agreement (PSA) Taguchi method oil and gas sector Libya |
| url | https://www.mdpi.com/1996-1073/15/15/5424 |
| work_keys_str_mv | AT saadbalhasan robustexplorationandproductionsharingagreementsusingthetaguchimethod AT mohammedalnahhal robustexplorationandproductionsharingagreementsusingthetaguchimethod AT briantowler robustexplorationandproductionsharingagreementsusingthetaguchimethod AT bashirsalah robustexplorationandproductionsharingagreementsusingthetaguchimethod AT mohammedruzayqat robustexplorationandproductionsharingagreementsusingthetaguchimethod AT mosabitabash robustexplorationandproductionsharingagreementsusingthetaguchimethod |