Course Description

INTRODUCTION

Exploration and Production companies often must evaluate their potential E&P investment using proper present value analysis of expected future cashflows. From the projected cashflows and required investments, the annual rate of return and other project economic indicators can be extracted to evaluate the significance of company investment.

This Petroleum Project Economics & Risk Analysis training 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, one should be able to choose the best alternative from economic point of view as well as to properly evaluate various investment opportunities by determining economic indicators and sensitivity analysis. Techniques for predicting profit, production, costs, and cashflow 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.

Objectives

The primary objectives of this training course are to:

Understand various economic terms used in the Oil & Gas industry

Understand how to develop economic models of various petroleum fiscal regimes

Carry out cashflow analysis, different economic analyses for petroleum related project and determine economic indicators

Evaluate and quantify risks and uncertainties

Make the right investment decision in the presence of risk

Carry out a comprehensive economic evaluation study for any petroleum related project including risk analysis and sensitivity study using spreadsheet

Contribute to the petroleum project investment within a solid economic system and do a detailed economic evaluation

Contribute to the decision-making process for any petroleum related project

The benefit of this course

Participants learn about the application of economic valuation and risk assessment processes and techniques within the global Oil & Gas industry

Help the participants to identify and analyse the risk involved in a petroleum related project

Help the participants to apply the decision-making procedures to justify the petroleum projects in term of profitability

Help the participants to recognize the uses of options in the ranking criteria to select and execute the high profitable project

Learn to construct a project cashflow model

Gain the techniques in project ranking and screening

Gain the operational decision-making techniques under risk

Course Outline

DAY 1

Cashflow Analysis

Familiarization with Economic terms

Setting up Cashflow Calculation

Depreciation Methods

Loss Carry Forwards

Inflation

Nominal & Real Cashflow

Sunk Costs

Project Financing

DAY 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

DAY 3

Risk & Uncertainty

Expected Value Concept

Decision Tree Analysis

Farm-out Decision

Probability Analysis

Sensitivity Analysis

Probability Distribution

DAY 4

Setting up Spreadsheet Calculation

Introduction to Spreadsheet Calculation

Simple Cashflow using Excel

NPV Calculations

Application of Economic Indicators

Class Discussion

DAY 5

Setting up Oil Field Development Model

Setting up an Integrated Economic Model of a Typical Oil Field Development

Project Sensitivity Analysis for the Selected Model

Introduction to Russell Field Model

Final Remarks