Abstract
Target Cost Setting (TCS) objective is set up for required capital and operating cost for development of products at desired profit margin (Cooper, 2001). Dropping oil price recently which predicted longer (Bloomberg, 2016) will lead to a shortage in production by year 2035 (Woodmac, 2016). The various concepts for oil and gas development have to be analyzed in order to sustain the growth of production while maintaining an economic threshold limit during this low oil price period. The preferred concept development shall be achievable by doing reverse engineering (top down estimate) at the early stages of oil and gas life cycle.
The driving idea behind this method is expediting the project framing and front end engineering process as well as maintaining continuous exploration and development within limited budget by allowing some "low hanging fruit" projects, while still obtaining the desired profit margin. The TCS model is working in the existing fiscal arrangement for any particular field and subsurface definition. The TCS simulations are performed by using available tools for cost estimation and economic models.
