An Introduction to Upstream Petroleum Economics & Risk Analysis

Attend this practical and interactive four-day training course and enhance your knowledge on the following key areas: Theory of petroleum valuation based on discounted cashflow Key economic metrics for investment decision making The geological, reservoir and engineering inputs Oil and gas pricing issues Study of worldwide fiscal systems Advanced techniques: consolidation and incremental analysis Taxation and PSC ringfencing Quantification of risk: sensitivity analysis, decision trees and Monte Carlo analysis Plus: Upstream economics workshop: the taxation case study Plus: Upstream exploration prospect valuation workshop Plus: Upstream economics workshop: the PSC case study Course overview This practical Euromoney Energy Training course will enable delegates from all technical and commercial disciplines to understand the theories and methods used to value oil and gas projects. The four-days will reveal the fundamental aspects of upstream petroleum economics and risk analysis. Through computer-based exercises, participants will construct economic models, incorporating relevant cash flow data for case study projects and scenarios. How this Introduction to Upstream Petroleum Economics and Risk Analysis course will help you By attending this highly interactive and practical course you will: Understand the theory of petroleum economics based on discounted cashflow Calculate with confidence the key economic metrics used in investment decision making Appreciate the geological and engineering inputs to the cashflow model Understand oil and gas pricing and forecasting Appreciate the diversity of fiscal systems worldwide Build Excel-based economic models in both tax/royalty and production sharing contract fiscal systems Interpret the economic results and quantify the risks so as to put values to prospects, fields and companies
Day 1 Oil & Gas Asset Discounted Net Cash Flow Introduction Objectives of undertaking an economic analysis What makes the oil and gas industry different? Discounted cashflow The time value of money, compounding & discounting Discount rate, discount factor & discount method The cost of capital and the hurdle discount rate Capital budgeting techniques Undiscounted methods (PIR, payback, exposure) Discounted methods (e.g. NPV, IRR, DPIR) Valuing an asset, making development & investment decisions Oil & gas asset net cashflow – project components Reserves, production and sales profiles Tariff income Capital, operating, transportation & abandonment costs Working interests, carried interests, ORR’s & NPI’s Day 2 Oil & gas asset net cashflow – economic components Inflation, cost escalation, real versus nominal cash flows Oil and gas prices Interest rates & exchange rates Oil & gas asset net cashflow - taxation & government take components Production sharing contracts Royalty & taxation systems Risk service & other systems Calculating royalties, taxes, cost recovery and profit oil splits Oil & gas asset net cashflow determination Oil company (investor) net cash flow State oil company net cash flow Government net cash flow Upstream economics workshop: the taxation case study Introduction to the European gas field, taxation based case study Establishing the economic model framework, structure & calculation flows Understanding the taxation structure & algorithms Determining the field, economic & fiscal data and building the input decks Step by step construction and audit of the taxation model Running the economic cases & evaluating the results Summary and closing remarks Day 3 Upstream economics workshop: the PSC case study Introduction to the West African oil discovery, PSC based case study Establishing the economic model framework, structure & calculation flows Understanding the PSC fiscal structure & algorithms Determining the field, economic & fiscal data and building the input decks Step by step construction and audit of the PSC model Running the economic cases & evaluating the results Summary and closing remarks Day 4 Advanced petroleum economic techniques Aggregation and consolidation analysis Ring-fences Incremental analysis Discrete economic ssolutions Sensitivity analysis Spider & tornado diagrams Probabilistic economic solutions Expected value and decision tree analysis Farm-in and farm-out analysis Exploration prospect portfolio management Continuous economic solutions Risk versus uncertainty Distributions and central limit theory Monte Carlo simulation Exploration prospect valuation workshop Calculation of the prospect minimum economic reserve Establishment of the prospect commercial reserves distribution Construction of the risk tree of all outcomes Determination of the geological and commercial chance of success factors Calculation of the success case expected value and the prospect EMV Drill or no-drill decision? Course summary and close