PROGRAM DETAILS

Introduction

This practical course covers the fundamental aspects of upstream petroleum economics and risk analysis through a variety of lectures and workshop exercises. It will allow participants to construct computer-based economic models, incorporate relevant cash-flow data and draw conclusions to aid decision-making. It also provides practical guidance in the application of the techniques of the economic analysis currently used in the oil & gas industry. Techniques for predicting profit, production, costs, and cash flow enable the analyst to evaluate decision alternatives for optimum results. Understanding economic indicators, risk and uncertainty, different economic structures such as tax regimes and production sharing contracts, enhances the quality and the value of economic analysis.

Learning Objectives 

The Primary Objectives of the Course are to:

1. Understand various economic terms used in the oil & gas industry
2. Understand how to develop economic models of various petroleum fiscal regimes
3. Carry out cash flow analysis and determine economic indicators
4. Carry out different economic analyses for petroleum related projects
5. Evaluate and quantify risks and uncertainties
6. Make the right investment decision in the presence of risk
7. Carry out a comprehensive economic evaluation study for any petroleum related project including risk analysis and sensitivity study using spreadsheet

Target Audience

Engineers, geologists, economists, accountants, technicians who need to learn how to conduct economic evaluation and to understand the role of petroleum economics in investment decision making. This workshop is also recommended for supervisors & managers in the Planning, Exploration, Production, Projects, Financing and Technical Departments in Oil & Gas Companies

Training Methodology

The workshop will include a number of exercises aimed at enhancing each participant capability to conduct various economic evaluations. In addition each participant will attempt to develop spreadsheet calculations of various economic analyses. At the end of the workshop each participant will be given a comprehensive spreadsheet program that can carry out a complete economic evaluation including a sensitivity analysis.

Additionally, the workshop assumes no or limited prior knowledge of the topics covered in the course. New concepts and tools are introduced gradually to enable delegates to progress from the fundamental to the advanced concepts of economic evaluation. 

Program Content

Day 1 – Cash Flow Analysis

• Familiarization with Economic terms.
• Calculation of Capex, Opex and Revenue
• Cash Flow Calculation
• Petroleum Fiscal Regimes
• Tax & Royalty Regime
• Production Sharing Contracts (PSC)
• Depreciation Methods
• Nominal & Real Cash Flow
• Sunk (Past Exploration)Costs
• Project Financing

Day 2 – Economic Indicator

• Present Value & Discount Factor
• Net Present Value
• Internal Rate of Return
• Effect of Project Delay
• Payback Period
• Maximum Exposure
• Capital Productivity Index
• Evaluating Incremental Projects
• Comparing Indicators

Day 3 – Risks and Uncertainties

• Expected Monetary Value
• Quantifying Risk and Uncertainty
• Decision Tree Analysis
• Added Value of Data acquisition
• Farm-out Decision
• Probability Analysis
• Sensitivity Analysis
• Spider and Tornado Diagrams
• Probability Distribution
• Monte Carlo Simulation

Day 4 Setting up Spreadsheet Calculation

Setting up an Integrated Economic Model of a Typical Oil Field Development Project including Sensitivity Analysis

Day 5 – Setting up Oil Field Development Model

Team Participation to Evaluate Different Project Economics Using the Model