neqsim-field-economics

name	neqsim-field-economics
description	Oil & gas field economics, NPV, IRR, cash flow, and fiscal regime modeling with NeqSim. USE WHEN: calculating project economics (NPV, IRR, payback), evaluating tax regimes (Norwegian NCS, UK, generic), building cost estimates (CAPEX/OPEX), or running Monte Carlo sensitivity analysis on economic outcomes.
last_verified	2026-07-19

NeqSim Field Economics Skill

Reference for petroleum project economics — cost estimation, cash flow modeling, tax regimes, NPV/IRR calculations, breakeven analysis, and uncertainty.

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Economics Workflow Overview

Reservoir Volumetrics → Production Profile → Revenue Forecast
                                                    ↓
CAPEX Estimate → Cash Flow Engine ← OPEX Estimate
                       ↓
              Tax Model (NCS/UK/Generic)
                       ↓
              NPV / IRR / Payback / Breakeven
                       ↓
              Monte Carlo Uncertainty (P10/P50/P90)

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Cost Estimation

CAPEX Components (Typical Offshore NCS)

Category	Typical Range	NeqSim Class
Wells (drilling + completion)	200-800 MNOK/well	WellCostEstimator, WellMechanicalDesign
SURF (subsea, umbilicals, risers, flowlines)	500-5000 MNOK	SURFCostEstimator
Topsides / Processing	2000-15000 MNOK	FacilityBuilder + MechanicalDesign
Subsea equipment (trees, manifolds)	100-500 MNOK/well	SubseaProductionSystem
Pipeline / Export	50-300 MNOK/km	PipelineMechanicalDesign
FPSO hull + mooring	5000-20000 MNOK	Parametric estimate
Decommissioning (ABEX)	10-30% of CAPEX	DecommissioningEstimator

NeqSim Cost Estimation Classes

// Well cost
WellCostEstimator wellCost = new WellCostEstimator();
wellCost.setRegion(SubseaCostEstimator.Region.NORWAY);
wellCost.setWaterDepth(350.0);
wellCost.setTotalDepth(3800.0);
wellCost.setDrillingDays(45);
wellCost.setCompletionDays(25);
wellCost.setRigDayRate(540000.0);  // USD/day
double wellCapex = wellCost.estimate();

// SURF cost
SURFCostEstimator surfCost = new SURFCostEstimator();
surfCost.setRegion(SubseaCostEstimator.Region.NORWAY);
surfCost.setNumberOfWells(4);
surfCost.setFlowlineLength(25.0);      // km
surfCost.setUmbilicalLength(27.0);     // km
surfCost.setWaterDepth(350.0);
surfCost.setTreeType("vertical");
surfCost.setHasManifold(true);
double surfCapex = surfCost.estimate();

// Regional cost factors
RegionalCostFactors factors = new RegionalCostFactors("Norway");
double adjustedCost = baseCost * factors.getCostMultiplier();

OPEX Components

Category	Typical Range	Estimation Basis
Fixed OPEX	3-6% of CAPEX/year	Insurance, manning, maintenance
Variable OPEX	2-8 USD/boe	Chemicals, power, logistics
Well intervention	50-200 MNOK/event	Frequency-based estimate
Pipeline inspection	10-50 MNOK/year	IMR schedule

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Cash Flow Engine

Direct Lifecycle Integration

FieldLifecycleSimulator aggregates live NeqSim reservoir/process results by calendar year and feeds oil and export gas volumes directly to CashFlowEngine("NO"). FieldLifecycleResult exposes after-tax NPV, IRR, payback and break-even oil/gas prices together with the technical production, injection, energy and emissions profiles. Use this route when economics must reflect process capacity and reservoir response rather than an independent decline curve. For a host tieback, only the new field's attributed oil and gas enter project revenue; existing-host production is a capacity load, not project revenue. Configure tieback tariff/OPEX and modification CAPEX explicitly. The result's holdback, capacity-deferred oil, peak operating/requested utilization and annual bottleneck fields explain the economic difference between standalone greenfield, direct tieback through existing SURF, managed allocation and debottleneck cases. A user-supplied ProcessModel keeps the economic result coupled to all SURF and host process areas. For area studies, use AreaDevelopmentEvaluator to compare multiple producing hosts and greenfield routes on the same economic basis. A REJECT_OPTION product-quality policy makes an off-spec route ineligible before NPV ranking; REPORT_ONLY preserves the route for sensitivity and debottleneck diagnosis.

Basic Usage

CashFlowEngine engine = new CashFlowEngine("NO");  // Norwegian tax regime
engine.setCapex(5000.0, 2025);       // MUSD, year
engine.setOpexPercentOfCapex(0.04);  // 4% of CAPEX/year
engine.setOilPrice(70.0);           // USD/bbl
engine.setGasPrice(0.30);           // USD/Sm3

// Add production year by year
for (int year = 2027; year <= 2045; year++) {
    engine.addAnnualProduction(year, oilSm3[year], gasSm3[year], waterSm3[year]);
}

CashFlowResult result = engine.calculate(0.08);  // 8% discount rate

double npv = result.getNpv();           // MUSD
double irr = result.getIrr();           // fraction (e.g., 0.15 = 15%)
double payback = result.getPaybackYears();
double pi = result.getProfitabilityIndex();

DCF Calculator (Low-Level)

DCFCalculator dcf = new DCFCalculator();
dcf.setDiscountRate(0.08);
double[] cashFlows = {-500, -300, 100, 200, 300, 250, 200, 150, 100};
double npv = dcf.calculateNPV(cashFlows);
double irr = dcf.calculateIRR(cashFlows);

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Tax Models

Norwegian Continental Shelf (NCS)

The Norwegian petroleum tax regime has three key components:

Component	Rate	Base
Corporate tax	22%	Revenue - OPEX - Depreciation
Special petroleum tax	56%	Revenue - OPEX - Depreciation - Uplift
Total marginal rate	78%	—

Additional features:

• Uplift: 5.5% of investment per year for 4 years (deductible only against special tax)
• Depreciation: 6-year straight-line for offshore investments
• Loss carry-forward: Losses can be carried forward indefinitely (with interest)
• Exploration refund: 78% of exploration costs refunded

NorwegianTaxModel taxModel = new NorwegianTaxModel();
// Automatically applied when CashFlowEngine("NO") is used

// Direct tax calculation
TaxResult tax = taxModel.calculateTax(
    grossRevenue,    // NOK
    opex,            // NOK
    depreciation,    // NOK
    uplift           // NOK
);
double corporateTax = tax.getCorporateTax();
double specialTax = tax.getSpecialTax();
double totalTax = tax.getTotalTax();
double effectiveRate = tax.getEffectiveRate();

UK Continental Shelf (UKCS)

Component	Rate	Notes
Ring Fence Corporation Tax (RFCT)	30%	Ring-fenced profits
Supplementary Charge (SC)	10%	On ring-fenced profits
Total marginal rate	40%	Investment allowance applies

Generic Tax Model

GenericTaxModel generic = new GenericTaxModel();
generic.setCorporateTaxRate(0.25);
generic.setRoyaltyRate(0.10);
generic.setDepreciationYears(10);

Tax Model Registry

// List available models
TaxModelRegistry.getAvailableModels();  // ["NO", "UK", "BR", "GENERIC"]

// Get model by country code
TaxModel model = TaxModelRegistry.getModel("NO");

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Production Profile Generator

ProductionProfileGenerator gen = new ProductionProfileGenerator();
gen.setResourceVolume(100.0);    // MMboe
gen.setRecoveryFactor(0.55);
gen.setPeakRate(25000.0);        // boe/d
gen.setBuildUpYears(2);
gen.setPlateauYears(5);
gen.setDeclineType("exponential");
gen.setDeclineRate(0.12);        // 12%/year
gen.setProjectLife(25);          // years

double[] profile = gen.generate();  // Annual production (boe)

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Sensitivity & Uncertainty Analysis

Tornado Diagram (One-at-a-Time)

SensitivityAnalyzer sensitivity = new SensitivityAnalyzer(engine);
sensitivity.addParameter("oilPrice", 50.0, 70.0, 90.0);     // low, base, high
sensitivity.addParameter("capex", 4000.0, 5000.0, 7000.0);
sensitivity.addParameter("recoveryFactor", 0.45, 0.55, 0.65);
sensitivity.addParameter("opexRate", 0.03, 0.04, 0.06);

Map<String, double[]> tornado = sensitivity.runTornado();
// Returns: {"oilPrice": [npv_low, npv_base, npv_high], ...}

Monte Carlo

MonteCarloRunner mc = new MonteCarloRunner(engine);
mc.addTriangularInput("oilPrice", 50.0, 70.0, 90.0);
mc.addTriangularInput("capex", 4000.0, 5000.0, 7000.0);
mc.addTriangularInput("recoveryFactor", 0.45, 0.55, 0.65);

MonteCarloResult result = mc.run(1000);
double p10 = result.getPercentile(10);
double p50 = result.getPercentile(50);
double p90 = result.getPercentile(90);
double probNegative = result.getProbabilityBelow(0.0);

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Breakeven Analysis

// Breakeven oil price (NPV = 0)
double breakevenPrice = engine.calculateBreakevenPrice(0.0);

// Breakeven at different discount rates
for (double rate : new double[]{0.05, 0.08, 0.10, 0.12}) {
    double be = engine.calculateBreakevenPrice(rate);
    System.out.println("Breakeven at " + (rate*100) + "%: " + be + " USD/bbl");
}

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Decommissioning Cost Estimation

DecommissioningEstimator decom = new DecommissioningEstimator();
decom.setNumberOfWells(6);
decom.setWellAbandonment(true);
decom.setSubseaRemoval(true);
decom.setPlatformRemoval(false);    // tieback — no platform
decom.setPipelineDecommissioning(true);
decom.setWaterDepth(350.0);
decom.setRegion("Norway");

double decomCost = decom.estimate();  // MUSD

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Common Economic Pitfalls

Pitfall	Impact	Prevention
Double-counting depreciation in tax bases	Overstates tax, understates NPV	Norwegian model: depreciation deducted from BOTH bases independently
Wrong CAPEX timing	Wrong NPV (time value)	CAPEX in year 0, first production year 2-3, match reality
Ignoring loss carry-forward	Understates early-year cash flow	Norwegian model carries losses with interest adjustment
Using nominal discount rate with real cash flows	Wrong NPV	Be consistent: real-real or nominal-nominal
Ignoring decommissioning	Missing 10-30% lifecycle cost	Always include ABEX in project economics
Oil price in wrong currency	Wrong revenue	NOK on NCS, USD internationally; use consistent FX

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Key Conversion Factors

From	To	Factor
1 Sm3 oil	boe	1.0 (by definition)
1 Sm3 gas	boe	~0.001 (varies, typically 1000 Sm3 gas = 1 boe)
1 bbl oil	Sm3 oil	0.159
1 Sm3 oil	bbl	6.29
1 tonne oil	bbl	~7.33 (depends on API gravity)
1 BCF gas	Sm3	28.3 × 10⁶