Neqsim Field Economics

NeqSim Field Economics Skill

Reference for petroleum project economics — cost estimation, cash flow modeling, tax regimes, NPV/IRR calculations, breakeven analysis, and uncertainty.

Economics Workflow Overview

Reservoir Volumetrics → Production Profile → Revenue Forecast
                                                    ↓
CAPEX Estimate → Cash Flow Engine ← OPEX Estimate
                       ↓
              Tax Model (NCS/UK/Generic)
                       ↓
              NPV / IRR / Payback / Breakeven
                       ↓
              Monte Carlo Uncertainty (P10/P50/P90)

Cost Estimation

CAPEX Components (Typical Offshore NCS)

NeqSim Cost Estimation Classes

// Well cost
WellCostEstimator wellCost = new WellCostEstimator();
wellCost.setRegion(SubseaCostEstimator.Region.NORWAY);
wellCost.setWaterDepth(350.0);
wellCost.setTotalDepth(3800.0);
wellCost.setDrillingDays(45);
wellCost.setCompletionDays(25);
wellCost.setRigDayRate(540000.0);  // USD/day
double wellCapex = wellCost.estimate();

// SURF cost
SURFCostEstimator surfCost = new SURFCostEstimator();
surfCost.setRegion(SubseaCostEstimator.Region.NORWAY);
surfCost.setNumberOfWells(4);
surfCost.setFlowlineLength(25.0);      // km
surfCost.setUmbilicalLength(27.0);     // km
surfCost.setWaterDepth(350.0);
surfCost.setTreeType("vertical");
surfCost.setHasManifold(true);
double surfCapex = surfCost.estimate();

// Regional cost factors
RegionalCostFactors factors = new RegionalCostFactors("Norway");
double adjustedCost = baseCost * factors.getCostMultiplier();

OPEX Components

Cash Flow Engine

Direct Lifecycle Integration

FieldLifecycleSimulator aggregates live NeqSim reservoir/process results by calendar year and feeds oil and export gas volumes directly to CashFlowEngine("NO"). FieldLifecycleResult exposes after-tax NPV, IRR, payback and break-even oil/gas prices together with the technical production, injection, energy and emissions profiles. Use this route when economics must reflect process capacity and reservoir response rather than an independent decline curve. For a host tieback, only the new field's attributed oil and gas enter project revenue; existing-host production is a capacity load, not project revenue. Configure tieback tariff/OPEX and modification CAPEX explicitly. The result's holdback, capacity-deferred oil, peak operating/requested utilization and annual bottleneck fields explain the economic difference between standalone greenfield, direct tieback through existing SURF, managed allocation and debottleneck cases. A user-supplied ProcessModel keeps the economic result coupled to all SURF and host process areas. For area studies, use AreaDevelopmentEvaluator to compare multiple producing hosts and greenfield routes on the same economic basis. A REJECT_OPTION product-quality policy makes an off-spec route ineligible before NPV ranking; REPORT_ONLY preserves the route for sensitivity and debottleneck diagnosis.

Basic Usage

CashFlowEngine engine = new CashFlowEngine("NO");  // Norwegian tax regime
engine.setCapex(5000.0, 2025);       // MUSD, year
engine.setOpexPercentOfCapex(0.04);  // 4% of CAPEX/year
engine.setOilPrice(70.0);           // USD/bbl
engine.setGasPrice(0.30);           // USD/Sm3

// Add production year by year
for (int year = 2027; year <= 2045; year++) {
    engine.addAnnualProduction(year, oilSm3[year], gasSm3[year], waterSm3[year]);
}

CashFlowResult result = engine.calculate(0.08);  // 8% discount rate

double npv = result.getNpv();           // MUSD
double irr = result.getIrr();           // fraction (e.g., 0.15 = 15%)
double payback = result.getPaybackYears();
double pi = result.getProfitabilityIndex();

DCF Calculator (Low-Level)

DCFCalculator dcf = new DCFCalculator();
dcf.setDiscountRate(0.08);
double[] cashFlows = {-500, -300, 100, 200, 300, 250, 200, 150, 100};
double npv = dcf.calculateNPV(cashFlows);
double irr = dcf.calculateIRR(cashFlows);

Tax Models

Norwegian Continental Shelf (NCS)

The Norwegian petroleum tax regime has three key components:

Additional features:

• Uplift: 5.5% of investment per year for 4 years (deductible only against special tax)
• Depreciation: 6-year straight-line for offshore investments
• Loss carry-forward: Losses can be carried forward indefinitely (with interest)
• Exploration refund: 78% of exploration costs refunded

NorwegianTaxModel taxModel = new NorwegianTaxModel();
// Automatically applied when CashFlowEngine("NO") is used

// Direct tax calculation
TaxResult tax = taxModel.calculateTax(
    grossRevenue,    // NOK
    opex,            // NOK
    depreciation,    // NOK
    uplift           // NOK
);
double corporateTax = tax.getCorporateTax();
double specialTax = tax.getSpecialTax();
double totalTax = tax.getTotalTax();
double effectiveRate = tax.getEffectiveRate();

UK Continental Shelf (UKCS)

Generic Tax Model

GenericTaxModel generic = new GenericTaxModel();
generic.setCorporateTaxRate(0.25);
generic.setRoyaltyRate(0.10);
generic.setDepreciationYears(10);

Tax Model Registry

// List available models
TaxModelRegistry.getAvailableModels();  // ["NO", "UK", "BR", "GENERIC"]

// Get model by country code
TaxModel model = TaxModelRegistry.getModel("NO");

Production Profile Generator

ProductionProfileGenerator gen = new ProductionProfileGenerator();
gen.setResourceVolume(100.0);    // MMboe
gen.setRecoveryFactor(0.55);
gen.setPeakRate(25000.0);        // boe/d
gen.setBuildUpYears(2);
gen.setPlateauYears(5);
gen.setDeclineType("exponential");
gen.setDeclineRate(0.12);        // 12%/year
gen.setProjectLife(25);          // years

double[] profile = gen.generate();  // Annual production (boe)

Sensitivity & Uncertainty Analysis

Tornado Diagram (One-at-a-Time)

SensitivityAnalyzer sensitivity = new SensitivityAnalyzer(engine);
sensitivity.addParameter("oilPrice", 50.0, 70.0, 90.0);     // low, base, high
sensitivity.addParameter("capex", 4000.0, 5000.0, 7000.0);
sensitivity.addParameter("recoveryFactor", 0.45, 0.55, 0.65);
sensitivity.addParameter("opexRate", 0.03, 0.04, 0.06);

Map<String, double[]> tornado = sensitivity.runTornado();
// Returns: {"oilPrice": [npv_low, npv_base, npv_high], ...}

Monte Carlo

MonteCarloRunner mc = new MonteCarloRunner(engine);
mc.addTriangularInput("oilPrice", 50.0, 70.0, 90.0);
mc.addTriangularInput("capex", 4000.0, 5000.0, 7000.0);
mc.addTriangularInput("recoveryFactor", 0.45, 0.55, 0.65);

MonteCarloResult result = mc.run(1000);
double p10 = result.getPercentile(10);
double p50 = result.getPercentile(50);
double p90 = result.getPercentile(90);
double probNegative = result.getProbabilityBelow(0.0);

Breakeven Analysis

// Breakeven oil price (NPV = 0)
double breakevenPrice = engine.calculateBreakevenPrice(0.0);

// Breakeven at different discount rates
for (double rate : new double[]{0.05, 0.08, 0.10, 0.12}) {
    double be = engine.calculateBreakevenPrice(rate);
    System.out.println("Breakeven at " + (rate*100) + "%: " + be + " USD/bbl");
}

Decommissioning Cost Estimation

DecommissioningEstimator decom = new DecommissioningEstimator();
decom.setNumberOfWells(6);
decom.setWellAbandonment(true);
decom.setSubseaRemoval(true);
decom.setPlatformRemoval(false);    // tieback — no platform
decom.setPipelineDecommissioning(true);
decom.setWaterDepth(350.0);
decom.setRegion("Norway");

double decomCost = decom.estimate();  // MUSD

Common Economic Pitfalls

Key Conversion Factors