Commercial valuation of a gas reservoir undergoing a unitization agreement

Background

• The client who is an oil & gas exploration and production company discovers that their wholly owned reservoir is connected to a nearby reservoir in which they partially own in a JV
• Although unitization is new in Thailand, it is a worldwide practice in which concession owners join connected reservoirs into a unit operation and each owner gets corresponding share for revenues and costs
• The client would like to determine how much they should claim for their share of historical production and also weighing the tradeoff if they pursue the future production as a wholly owned standalone

Role and methodology

• Unitization agreement depends largely upon negotiations between concession owners which is typically subject to various possibilities
• Identifies key strategic parameters which are oil price, participating interest, unitization timing, fiscal regime change of participating concession blocks
• Develop a financial model to incorporate all key parameters, and determine the loss/gain of each owner including government take

Project outcome

• Provide commercial value of different market scenarios and corresponding gain/loss to each owner including the uncertainties in negotiation process e.g. loss in commercial value per delay time
• The result helps the client management make decision on the concession and support the negotiation process

Keywords: Oil & gas, Unitization, Valuation, Financial Model, Petroleum Act, Petroleum Income Tax