Petroleum Projects Economics & Risk Analysis - With Spreadsheet Application

This course provides practical guidance in the application of the techniques of the economic analysis currently used in the oil & gas industry. When executing a petroleum related project, such as a field development, you should be able to choose the best alternative from economics point of view. You should be able to properly evaluate various investment opportunities by determining economic indicators and conducing sensitivity analysis. 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.

The Delegates:

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 course is also recommended for supervisors & managers in the Planning, Exploration, Production, Projects, Financing and Technical Departments in Oil & Gas Companies

The Goals:

• The Primary Objectives of the Course are to:
• Understand various economic terms used in the oil & gas industry
• Understand how to develop economic models of various petroleum fiscal regimes
• Understand different depreciation methods.
• Carry out cash flow analysis and determine economic indicators
• Carry out different economic analyses for petroleum related projects
• Evaluate and quantify risks and uncertainties
• Make the right investment decision in the presence of risk
• Evaluate farming-out alternatives
• Carry out sensitivity analysis to determine the sensitivity of a number of key economic indicators when varying assumed parameters.
• Carry out a comprehensive economic evaluation study for any petroleum related project including risk analysis and sensitivity study using spreadsheet models.

Part 1 – Cash Flow Analysis

• Familiarization with Economic terms.
• Feasibility Studies
• Setting up Cash Flow Calculation
• Petroleum Fiscal Regimes
• Production Sharing Contracts (PSC)
• Depreciation
• Depreciation Methods
• Loss Carry Forwards
• Inflation
• Nominal & Real Cash Flow
• Sunk Costs
• Project Financing

Part 2 – Economic Indicators

• Economic Indicators Definitions
• Present Value Concept
• Discount Factor
• Net Present Value
• Internal Rate of Return
• Effect of Project Delay
• Payback Period
• Profit/Investment Ratio
• Incremental Projects
• Comparing Economic Indicators

Part 3 - Risks and Uncertainties

• Risk & Uncertainty
• Expected Monetary Value Concept
• Decision Tree Analysis
• Farm-out Decision
• Probability Analysis
• Determining Added Value
• Sensitivity Analysis
• Spider and Tornado Diagrams
• Probability Distribution
• Monte Carlo Simulation

Part 4 – Setting up Oil Field Development Model

• Introduction to Spreadsheet Calculation
• Simple Cash Flow Using Excel
• Setting up an Integrated Economic Model of a Typical Oil Field Development Project including Sensitivity Analysis