Integrated Economic Analysis Of Waterflood Projects:A Case Study In Ecuador

Crude oil as an energy source is widely considered as the most important energy in the world even with the rapid growth of alternative energies.The problem of oil production decline has addressed growing concerns about applying new technology such as waterflooding to increase the oil recovery factor.Ecuador has been highly relying on the revenue from oil exports.Therefore,it is critical to evaluate the profitability of waterflooding technology in Ecuador and provide policy suggestions to the government.The purpose of this study is to evaluate the effectiveness of applying water injection in the oilfields of Ecuador using both deterministic and probabilistic methods.The data used with the purposes of the economic valuation is collected from an Ecuadorian oilfield(CUP Field).Three alternative options are proposed based on different timing of waterflooding application,through Discounted Cash Flow Analysis and Monte Carlo simulation the alternatives are compared to identify the most profitable development option for a reservoir to be produced with water injection.The influence of different strategies on profitability and the risks introduced by uncertainties on the oilfield development projects are discussed in this study as well.A waterflooding alternative applied from the beginning of the oilfield development got NPV of 94.48 MMUSD and Internal rate of return of 44.42%.Furthermore,probabilities of getting a positive outcome for NPV and IRR are 95% and 96.7 % respectively.The combination of the two methods allows the decision maker to improve their decision process,with the insights provided by economic indicators as the net present value and internal rate of return.Furthermore,with the probabilities of getting positive outcomes generated by the simulation,it provided an improvement of the criterion reaching high-level reliability.