Mini MBA: Understanding Petroleum Industry Dynamics

Topics covered: Review of the current petroleum markets; oil and gas supply and demand, future global trends Key concepts and processes in exploration, development and production International fiscal systems, IOCs, NOCs and geopolitics The emergence of expanding natural gas markets, future growth trends, global trade through LNG, inter-regional trade through long distance pipelines, gas to power markets Global trading markets for oil, gas and refined products; physical and derivative markets Transportation logistics, costs and tariffs; marine tankers, pipelines, rail, river and road Refining and petrochemical manufacturing processes; cost, prices and margins The petrochemical industry, its major players, and their key success factors Major gas export supply chains; LNG and pipeline, trends and risks Key gas market sectors; industrial, residential, commercial, gas to power petrochemicals Non-conventional petroleum, shale oil revolution in the USA - future impacts on global markets, and its environmental impacts? Why alternative to fossil fuels are important Renewable energy sources, comparison of costs of solar, geothermal, wind and wave energy, biomass Several business cases dealing with upstream, midstream, and downstream petroleum industry, petrochemicals, emerging renewable energy sources and nuclear energy "All the supporting material is very well adapted and useful, especially diagrams detailing physical illustrations of oil & gas operations" - European Investment Bank "Very comprehensive and relevant; good focus across technical and business areas" - Deutsche Bank "Very practical and relevant industry knowledge passed on in a relatively short time" - Bank of Africa "Overall a very good course. I would recommend for others to attend. The lecturer was good at explaining concepts / terms in simple and understandable words." - Standard Bank
Day 1 The Upstream - Exploration, Development, Production, Value Addition and Measures of Efficiency The oil & gas industry fundamentals: The origin, accumulation and migration of petroleum resources Stratigraphic traps, geophysical prospecting and 3D seismic studies Exploration process; geological, geochemical and geophysical analysis & interpretation Drilling for oil & gas, evaluating wells and well completions Horizontal well technology, efficient multilateral well completions Improving and enhancing petroleum recovery E & P strategies - areas of focus Global energy statistics Global oil & gas reserves and production by region, by countries Classification of reserves, and estimation of reserves by key methodologies The E&P company cashflow and business model Capital expenditure, CAPEX: front-end, during development and production Geological and geophysical costs, breakdown of drilling costs, facilities costs Production operations and operating expense (OPEX) Field production curve - cash flow curves for projects Cash flow model for E&P companies Reserves estimation methods, petroleum economics and value addition Decline curve analysis, forecasting production techniques Measures of efficiency- payback, NPV, IRR, ROE, ROA, PI, LRMC Value addition benchmarks prioritised Business case studies & exercises: Case study 1: The number of years of global oil supply from current reserves Case study 2: Calculating initial oil in place and oil reserves Case study 3: Number of wells required developing an oil field Case study 4: Oil productivity - horizontal well versus vertical well Case study 5: Crude oil price estimation   Day 2 International Fiscal Systems - Petroleum Contracts, IOCs, NOCs, Geopolitics The midstream - transportation, distribution and storage and crude oil characteristics & trading Government/ investor relationships Historic evolution of relationships between host countries and foreign investor Economic rent and the change of fiscal terms Roles, relationships, and objectives of IOCs and NOCs Factors that impact investment decisions Oil company structures, priorities, advantages Government fiscal terms & agreements with investors The need for collaboration Contrast between host government and investor objectives Key attributes of production sharing, concessionary and services agreements Structure of petroleum contract, contract types, fiscal tools Different fiscal regimes, comparison and key strategies in contracts Key issues, and how to negotiate the “right” contract Geopolitics Key attributes of petroleum as a strategic commodity Energy security issues, OPEC Resource nationalism, expropriation World oil transit chokepoints – key locations Crude oil supply from wellhead to market Marine transportation, common tanker sizes Pipeline transportation, pros and cons, investment considerations, costs and tariffs Crude oil market characteristics and dynamics Types of hydrocarbons Classification of crude oil, benchmarks, netback calculations Crude oil sales and purchase agreement – INCO terms Business case studies & exercises: Case study 6: Gross product worth calculation of a petroleum refinery Case study 7: Levelised cost of energy (LCOE)- methodology to compare the costs of power from different renewable sources - discussion Case study 8: Cost of electricity using natural gas Case study 9: Concessionary agreement – oil price change & impact on contractor’s take Case study 10: Production sharing agreement – profit oil government’s take Day 3 Crude Oil Trading, the Downstream - Refining, Petrochemicals, Integration, and key success factors of Petrochemical Industry Crude oil trading How world oil markets work Global benchmarks and references Crude oil quality, crude assay, conversion units, CDU Gross product worth, net refinery margin, crude value and crude selection The derivative markets; forwards, futures, hedging and arbitrage The refining process; technologies, costs and refinery margins Refined products: commodities (gasoline, diesel, naphtha and kerosene and specialties (waxes, lubricants)) Refineries & petrochemical plants, processes, performance indicators and trends The crack spread Optimising yield and crude oil selection Petrochemical feedstock and products Global competition, the new super-refineries Petroleum products, specification, distribution and trading The current global petroleum products picture The key refined products; gasoline, naphtha, diesel and jet kerosene Swaps and arbitrage Global product tradeflows Storage, distribution and supply logistics The petrochemical industry the current global petroleum products picture The petrochemical processes; feedstocks, base chemicals, end-user products, global trends and risks Wellhead to refined products Feedstock for petrochemicals Gas liquids fractionation Challenges in petrochemical business Drivers for refining, petrochemical Integration and its benefits International oil companies key strategies Key success sactors for petrochemical industry Business case studies & exercises: Case study 11: Analyse profitability in a sliding scale royalty Case study 12: Changing profitability versus government’s take and the impact of different fiscal tools in oil & gas contracts Case study 13: Types of fiscal regimes to build into an oil & gas contract to encourage investments by an international oil co. Case study 14: Application of fiscal tools by host government to manage production from marginal oil & gas fields Day 4 Crude Natural Gas and Gas Liquids Fundamentals - Characteristics, Gas Processing and Specification, Commercial Contracts in Oil & Gas Investments Non-conventional petroleum, alternatives to fossil fuels, cost comparison of renewables, and summary of energy industry Defining the natural gas downstream market Overview from wellhead to end-user markets Natural gas; occurrence and characteristics Major holders and suppliers of natural gas Value considerations Specification, units and thermal value Correlation/indexation to crude oil prices Gas processing and specification Regional variations in specification Calorific value/commercial value considerations Impurities and inerts-elimination processes Gas transportation pipelines and LNG The LNG supply chain-principles, processes and costs LNG case studies from liquefaction to regasification LNG trends and risks Pipeline processes, technology and costs, case studies Natural gas trading markets Hub references Indexation to crude oil prices in specific markets Price formation- price-makers and takers Physical and derivative markets Non-conventional petroleum Oil sands, shales, bitumen and ultra-heavy oil (UHO) Shale gas and coal bed methane Alternative energy sources – green technology Alternatives to fossil fuel and why they are important Renewable energy sources and their cost comparison Advantages/disadvantages of renewable sources Putting it all together Challenges confronting the petroleum industry New technology trends Environmental, and economic considerations Group discussion Business case studies & exercises: Case study 15: Calculating oil pipeline tariff Case study 16: Calculating net present value (NPV), maximum exposure, payback period, and the internal rate of return Case study 17: Crude oil swap to transfer price risk Case study 18: Discussion - Fukushima nuclear disaster and its associated costs Case study 19: Cost of electricity using offshore and onshore wind energy Case study 20: Discussion on the safest and cleanest form(s) of energy Course summary and close