Feasibility Study in Oil and Gas: Process, Types, and Key Steps

Before an oil and gas company commits millions to a new project, it needs to know whether it can actually work or not. That is the question a feasibility study in oil and gas can answer professionally.

A feasibility study in oil and gas tests the technical, commercial, regulatory, and market conditions and risk cases of a project early enough before any major resources are committed so that changing direction still costs very little.

This guide will explore key steps, the main types, and what a feasibility study in oil and gas should contain to get a successful outcome that improves the decision-making process in your organisation.

What Is a Feasibility Study in Oil and Gas?

A feasibility study in oil and gas is a structured assessment of whether a proposed project is technically achievable, commercially worthwhile, and legally permitted. It checks costs, revenues, opportunities, possible risks, and required resources so decision-makers can choose whether to proceed, redesign, or stop before capital is committed. Conducting these global studies actually saves the company time and resources from being drained into an unprofitable project.

What Are the Key Steps in an Oil and Gas Feasibility Study?

The feasibility study in the oil and gas process usually includes main steps, like preliminary analysis, financial estimations, market insights, requirement evaluation, profitability expectations, risk assessment, and final decisions.

1. Conduct a Preliminary Analysis:

Start with the basics, including process objectives, market need, competition, and the main constraints. Understand and explore possible technical and commercial risks early, so weak ideas are avoided before money is spent.

2. Prepare Financial Projections:

Next, put real numbers on it, make sure to include capital expenditure (CAPEX) and operating expenditure (OPEX), set your revenue assumptions, and then build cash-flow projections to understand the expected return from this investment. Usually, this exploration should be done under more than one price scenario.

3. Conduct a Market Analysis:

Who will buy the output, and at what price? Understand more about your possible customers by looking at market demand, competitors, pricing insights, expected market opportunities, and growth rate.

4. Assess Technical and Operational Requirements:

Once you reach this step, you need to check what it takes to run a successful project, like equipment and technology, facilities and infrastructure, energy resources, personnel, supplies, and the operating costs that follow.

5. Evaluate Project Financing and Financial Position:

How will it be paid for? Pin down the assets required, total funding needs, possible financing sources, and the liabilities the project will require to keep functioning. Compare these requirements with company resources and goals.

6. Analyse Risks and Feasibility Results:

Review technical, market, financial, and regulatory risks, oil and gas challenges, environmental considerations, and plan contingencies. Moreover, keep in mind the possibility of price drops or schedule slips, and whether the results will still be positive or not.

7. Make the Go/No-Go Decision:

This is the final step that includes decision-making based on the combined technical, commercial, financial, regulatory, and risk findings, oil and gas professionals will decide whether to proceed or not with the project.

What Are the Main Types of Feasibility Studies in Oil and Gas?

There are different types of feasibility studies in oil and gas based on the most important aspect for the company, the known types cover technical, financial, operational, legal, or schedule feasibility studies.

• Technical Feasibility:

Can the project be built and run with the resources, equipment, technology, and skills the company has? This answer directly reveals the possibility of implementing the project or not, based on the company's resources.

• Economic and Financial Feasibility:

In business, it all comes down to returns, so ensure to set total costs against expected revenues, then see whether the expected numbers could survive lower prices, difficult market conditions, or an increase in costs.

• Operational Feasibility:

Even if the company has all technical requirements, knowing if the organisation can run it efficiently and safely requires operational feasibility. This means evaluating based on people, processes, logistics, and existing operations.

• Legal and Regulatory Feasibility:

Usually, this covers permits, contracts, and local regulations, furthermore, in the oil and gas industry, it includes environmental feasibility and impact assessments, which can hold up approval.

• Schedule Feasibility:

Can approvals, procurement, construction, and start-up happen on realistic timelines without impacting any other ongoing project or operation? Having the needed time is as vital as cost availability to ensure project feasibility and success.

What Does an Oil and Gas Feasibility Study Include?

Based on estimating, planning & scheduling of projects for oil & gas production courses a strong oil and gas feasibility study must include:

• Technical assessment: Show whether the project can be built and operated with proven technology.
• Market analysis: Read about demand, economics, competition, and the market share the project can realistically win.
• Cost and financial model: Lay out CAPEX, OPEX, revenues, cash flow, and expected returns in energy fields.
• Risk assessment: Rank technical, market, financial, and environmental risks, with a mitigation plan for each.
• Regulatory review: List the licences, permits, and approvals needed, plus ongoing compliance duties.
• Development scenarios: Compare different ways to develop the asset on cost, risk, and return.
• Project schedule: Map main milestones from approval through construction to first production.
• Go/no-go recommendation: Give a clear call to proceed, revise, or stop, and explain why with facts.

Oil and Gas Feasibility Study Example:

The Jicarilla Apache Nation in north-central New Mexico hired RETTEW to evaluate oil and gas potential in a sensitive northeast area, which includes about 200,000 acres currently closed to conducting any exploration or development studies.

The study found that horizontal drilling and hydraulic fracturing could reach required reserves under sensitive areas from adjacent and less-sensitive land across much of the area without impacting it. However, whether to develop or not remains the Nation's decision.

Conclusion,

Conducting a feasibility study in oil and gas will not remove every uncertainty from a project, but it shows where the weak points are before the big spending starts. In other words, this helps the company make an informed investment decision and increase revenue.

Developing professional oil and gas project management skills with quality training and accredited certifications is vital to empower your career, boost market value, and update your knowledge.