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Economic Evaluation of the Construction of Several Gas Wells in the Upstream Area of Oil and Gas (Case Study: A gas field in the north-east of Iran)

Document Type : Original Article

Authors

Jafar Ramshini 1
Farzaneh Ahmadian-Yazdi 2
Masoud Homayounifar 3

1 MSc Student. Department of Economics, Ferdowsi University of Mashhad

2 Assistant Professor in Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Iran.

3 Associate Professor in Economics, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Iran.

https://doi.org/10.22050/pbr.2024.479277.1352
Abstract
The economic evaluation of oil and gas projects aims to provide decision-makers with a comprehensive estimate of costs and benefits. This study examines the impact of macroeconomic variables, such as interest and inflation rates, on the economic assessment of drilling several gas wells in northeastern Iran. The theoretical framework includes Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period (PP). The importance of accurately predicting these variables for economic decision-making by managers and policymakers is clearly established, with their analysis playing a key role in project evaluation. In this study, the planning of activities and analysis of the construction and operational phases of the project were first conducted. The inflation rate was forecasted using the ARIMA model, and an appropriate discount rate was determined. The pricing of gas and condensates, fixed and variable costs, and project revenues were also reviewed. The economic evaluation was performed using COMFAR software, with a sensitivity analysis to examine the impact of changes in key assumptions. The results indicate positive financial metrics for the project under different production rates, discount rates, inflation rates, and various energy prices, confirming the project's economic viability.

Highlights

  • This study examined the impact of macroeconomic variables such as interest and inflation rates on the economic evaluation of several gas wells in the upstream area of oil and gas.
  • The inflation rate was forecasted using the ARIMA model, and an appropriate discount rate was determined.
  • The economic evaluation was performed using tools such as NPV, IRR, and payback period, showing positive financial results.
  • A sensitivity analysis using COMFAR software assessed the impact of changes in production rates, discount rates, and energy prices.

Keywords

Oil and Gas Fields
Economic Evaluation
Net Present Value
Internal Rate of Return
COMFAR Software
Subjects
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  • Receive Date 18 January 2024
  • Revise Date 16 April 2024
  • Accept Date 02 May 2024

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