Page 3: Field development
The gas business has a number of characteristics that are particularly important in relation to investment decision making:
- It is very capital intensive so that decisions may typically involve a spend of several hundred million pounds.
- There are long lead times between the start of a project and the receipt of earnings from that project, typically over five years from first investment to first revenue.
- The taxation and contract structure is unique to the energy industry and is complex. Gas is a finite resource for a nation. Its exploitation is of strategic importance to the host government for some time.
Governments own the rights to minerals found on land (onshore) and under water (offshore) in their countries. Governments divide the ground into exploration 'blocks' and invite energy companies to bid for the right to explore for oil and gas in those blocks.
To earn the right to explore a block, the energy company commits to a work programme, which describes the steps it will take in order to find oil/gas. The energy company's investment and expertise helps governments access the mineral wealth beneath the ground. BG Group makes important decisions as to whether or not to apply for the right to explore for new gas fields and how much to bid.
Shown below are some of the key risks in a typical gas project and the experts responsible for addressing those risks:
- geologists and geophysicists evaluate the risks around volume and the chance of finding those volumes
- engineers examine facility and well design, costs, production rates
- HSSE managers assess health, safety, security and environmental risks
- economists analyse market demand and price, government and partner commercial terms.