Training Course on Petroleum Project Economics and Risk Analysis

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

This program 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 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.

Course Objectives

By the end of the course the participant should be able to:

• Understand various economic terms used in the oil & gas industry.
• Understand how to develop economic models of various petroleum fiscal regimes.
• Carry out cash flow 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.

Duration:       5 Days

Who Should Attend

This workshop is designed to provide technical and practical approaches to executing a petroleum related project in upstream sector. This program is suitable to a wide range of professionals but will greatly benefit:

• Professionals from Ministries of Oil, Gas & Petroleum,
• Oil and Gas Field Engineers,
• Oil and Gas Managers,
• Oil and Gas Auditors,
• Oil and Gas Planners,
• Financial Analysts.

Course Content

Day 1

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 2

Cash Flow Analysis

• Familiarization with Economic terms
• Setting up Cash Flow Calculation
• Depreciation Methods
• Loss Carry Forwards
• Inflation
• Nominal and Real Cash Flow
• Sunk Costs
• Project Financing

Day 3

Risks and Uncertainties

• Expected Value Concept
• Decision Tree Analysis
• Farm-out Decision
• Probability Analysis
• Sensitivity Analysis
• Probability Distribution
• Monte Carlo Simulation

Day 4

Setting up Calculation

• Introduction to Spreadsheet Calculation
• Simple Cash Flow 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

General Notes

• This course is delivered by our seasoned trainers who have vast experience as expert professionals in the respective fields of practice. The course is taught through a mix of practical activities, theory, group works and case studies.

• Training manuals and additional reference materials are provided to the participants.
• Upon successful completion of this course, participants will be issued with a certificate.