Upstream Petroleum Economics, Risk Fiscal Analysis Training

Given the current instability in oil prices, it is crucial to economically evaluate investments in upstream oil and gas. Making business decisions related to acquiring assets, assessing lease-buy options, exploring drilling opportunities, developing oil and gas fields, purchasing equipment, and negotiating finances all require a thorough economic analysis.

PetroSync’s Upstream Petroleum Economics, Risk & Fiscal Analysis Training Course is designed with analytical techniques and tools so attendees can perform thorough economic evaluations. They will learn to analyze cash flows, interpret economic indicators, and conduct fiscal assessments, allowing them to evaluate the financial viability of upstream projects more effectively.

What Is Upstream Petroleum Economics, Risk & Fiscal Analysis Training Course Overview?

The course will cover the analysis of cash flows, understanding and deriving economic indicators, and conducting detailed probability and fiscal assessments. These components are essential for evaluating investments in the international upstream oil and gas industry today.

This three-day course focuses on practical petroleum economics and aims to provide attendees with a comprehensive understanding of economic and risk analysis techniques used in the oil and gas industry. attendees will gain a thorough comprehension of the context of economic analysis, receive practical instruction, and develop an appreciation for the analytical methods employed. Throughout the course, attendees will actively engage in exercises and examples to reinforce their understanding of the concepts taught.

What Is Upstream Petroleum Economics, Risk & Fiscal Analysis Training Course Objective?

The primary objective of the Upstream Petroleum Economics, Risk & Fiscal Analysis training course is to provide attendees with the fundamentals of the key concepts and techniques involved in upstream petroleum economics, risk analysis, and fiscal analysis. Specifically, the training course aims to achieve the following objectives:

1. Acquire a comprehensive comprehension of economic evaluations in the oil and gas sector.
2. Recognize the primary constituents and formulate cash flow predictions for your upstream ventures.
3. Ascertain the crucial elements and factors implicated in decision-making for oil and gas investments.
4. Grasp and utilize economic indicators to evaluate projects in the oil and gas industry.
5. Measure and control uncertainty and risk involved in upstream business choices.
6. Utilize Monte Carlo Simulation and other statistical methods to effectively analyze and manage risk in exploration and production investments.
7. Comprehend, assess, and model fiscal and production-sharing contract terms across the globe.

What Is Upstream Petroleum Economics, Risk & Fiscal Analysis Training Course Outline?

The outline regarding PetroSync’s Upstream Petroleum Economics, Risk, & Fiscal Analysis training course is listed down below. For a more detailed and complete outline, you can refer to PetroSync’s Upstream Petroleum Economics, Risk & Fiscal Analysis training course brochure.

DAY 1

Topic 1 Introduction: Aims and Scope

Contents

• Cash flow analysis
• Economic indicators
• Economic Evaluation Examples
• Risk analysis
• Fiscal system and PSC analysis
• Worldwide fiscal terms

Topic 2 Cash Flow Analysis

Net Cash Flow

Discussion of the main components and relative importance of components of cash flow for oil and gas investments (production, price, revenue, operating costs, capital costs, abandonment costs, and fiscal costs). Oil and gas price forecasts and the treatment of price forecasts in net cash flow analysis.

[EXERCISE]: Delegates’ exercise in preparing a net cash flow projection.

Economic Life and Reserves

How net cash flow projections are critical in determining economic life and reserves. The effects of oil price, costs, and fiscal terms on reserves estimates.

[EXERCISE]: Delegates’ exercise in determining economic life and estimating reserves.

The distinction Between Cash Flow and Profit.

How cash flow is distinguished from profit. The role of depreciation. When we use cash flow and when we use it to profit.

Cash Flow and Tax

How tax is incorporated into cash flow projections. The basic rules for calculating tax worldwide. The effect of tax on field development decisions. Loss carried forward and the effect of different petroleum tax regimes.

[EXERCISE]: Delegates’ exercises in calculating tax and demonstrating the effects of different tax regimes.

Cash Flow and Production Sharing Contracts (PSC)

The basic economic distinction between tax regimes and production-sharing contract regimes. How to make cash flow projections for production sharing systems worldwide. Cost recovery and profit sharing arrangements.

[EXERCISE]: Delegates’ exercises in cash flow analysis with different PSC terms.

Sunk Costs

The treatment and mistreatment of sunk costs in cash flow analyses and petroleum property acquisitions. Discussions of the effects of sunk costs.

Incorporating Inflation into Cash Flow Projections.

How to inflate the components of cash flows. The conventions and the jargon.

[EXERCISE]: Delegates’ exercise in generating cash flow incorporating inflation.

Real and Nominal Cash Flows

The distinction between real and nominal cash flows. Fiscal drag and the problems associated with taking shortcuts to derive real cash flows. Common misunderstandings in the use of real cash flows.

[EXERCISE]: Delegates’ exercise in preparing real and nominal net cash flows.

Depreciation

Coverage of the main depreciation methods used in fiscal terms worldwide.

[EXERCISE]: Delegates’ exercise in preparing depreciation schedules

DAY 2 

Topic 3 Economic Indicators

Introduction

The need to measure net cash flow projections with single indicators. The indicators used in the oil and gas industry.

The importance of time.

Net Present Value (NPV)

The time value of money. Compounding and discounting. Using a discount factor table and measuring the effect of time and discount rate. Discounting a cash flow projection and calculating NPV. Understanding the meaning, uses, and features of NPV. Valuing petroleum properties using NPV. Preliminary discussion of choosing discount rates.

[EXERCISE]: Delegates’ exercises in calculating NPV and demonstrating its features.

Real and Nominal NPVs

The distinction between deflating and discounting and between real and nominal discount rates and NPVs. Dealing with the pitfalls of using real NPVs.

[EXERCISE]: Delegates’ exercises in calculating real and nominal NPVs.

Internal Rate of Return (IRR)

The definition and application of IRR. Calculating the IRR.

[EXERCISE]: Delegates’ exercises in calculating IRR.

Problems with IRR

Multiple IRRs – when, how often, and how they arise. How the NPV and IRR measures can give conflicting results and how to resolve this. The effect of project delays and the use of IRR.

[EXERCISE]: Delegates’ exercises in calculating multiple IRRs and seeing how they arise and how to interpret them.

Payback

Calculation and use of payback and discounted payback indicators. The use of discounted payback in petroleum fiscal regimes. Problems with payback. How is compound payback used in some fiscal regimes?

[EXERCISE]: Delegates’ exercises in calculating simple and compound payback for tax.

Capital Productivity Index (CPI).

Calculation and use of CPI. The use of CPI in oil companies and petroleum fiscal regimes. Capital rationing. Problems with CPI.

[EXERCISE]: Delegates exercises in calculating CPIs and their application in some PSCs

Topic 4 Example Economic Evaluations

Accelerated production example.

[EXERCISE]: Delegates’ exercise in incremental economics and the effects of fiscal terms.

DAY 3

Topic 5 Risk Analysis

Sensitivity Analysis

Analyzing the sensitivity of investment decisions to variations in input parameters. Interpreting sensitivity diagrams. The pitfalls in using sensitivity analyses for oil industry investment decisions.

[EXERCISE]: Delegates’ exercise in preparing sensitivity analyses and using them for investment decisions.

Probability Analysis

Defining and using probability distributions. Means, standard deviations, levels of confidence. Industry-standard reserves definitions and classifications.

[EXERCISE]: Delegates’ exercise in preparing probability analysis.

Using Probability in The Oil and Gas Industry

Making estimates under uncertainty in the petroleum industry. Combining uncertain variables and issues with adding reserves, adding costs, and analyzing economics.

[EXERCISE]: Delegates’ exercises in combining uncertain oil industry variables.

Monte Carlo Simulation

The mechanics of Monte Carlo simulation. Choosing probability distributions. The pitfalls of Monte Carlo simulation and how to avoid them. Reserves estimation using Monte Carlo simulation. Investment decisions using Monte Carlo simulation.

[EXERCISE]: Delegates’ exercises in deriving and using probability distributions of oil in place, NPV, and reserves using spreadsheet Monte Carlo simulation.

Exploration Decisions

The definition, meaning, and examples of economics for oil and gas exploration drilling decisions. Expected value (EV) versus probability of success lines. Using EV to compare drilling and farm-out decisions. The effects of fiscal terms and common problems with using EVs. Choosing probabilities of success. Valuing properties using EV.

[EXERCISE]: Delegates’ exercises in the economics of drilling, farming out acreage, and the effects of fiscal terms.

Topic 6 Production Sharing Contracts, Fiscal Systems, and Terms in The Asia Pacific Region

Analysis of example PSCs and fiscal terms in the Asia-Pacific region. Evaluating the severity of fiscal terms. How the fiscal components work. How certain fiscal terms can distort oil and gas project investment decisions? How to avoid potential investment distortion in the design or negotiation of fiscal terms. Examples for Indonesia, Malaysia, Thailand, Vietnam, and Australia.

[EXERCISE]: Delegates’ exercises in showing the structure and dynamics of example fiscal regimes in SE Asia.

Topic 7 Worldwide Fiscal Terms

The economic comparison of fiscal terms across the world – severity and efficiency.

Summary and Conclusion

The above is a guide to the topics covered during the course and the approximate timing of the topic. The presenter reserves the right to make modifications to these depending on the delegates’ background and experience and the progress of the course.

Who Should Attend Upstream Petroleum Economics, Risk & Fiscal Analysis Training Course?

The course caters to professionals in the upstream exploration and production (E&P) field who seek a comprehensive understanding of upstream petroleum economics. This includes individuals:

• Geoscientists
• Reservoir Engineers
• Production Engineers
• Petroleum Engineers
• Planning and Development Analysts/Executives
  Commercial Analysts/Executive/Managers
• Business Planners/Analysts/Executives/Managers
• Production Sharing Executives/Managers
• Project Executives/Managers
• Petroleum Economists
• General Managers
• Finance and Account Executive/Managers

Taking Upstream Petroleum Economics training courses can provide a comprehensive understanding of the fundamental concepts and techniques in the related field. Any personnel involved, from engineers to finance and account managers, can thoroughly comprehend economic evaluations in the oil and gas sector.

By knowing the fundamentals, they will acquire the knowledge and skills necessary to make informed business decisions related to upstream oil and gas investments, including lease-buy options assessment, drilling opportunities exploration, oil and gas field development, and finances based on thorough economic analysis negotiation.

The training course also focuses on risk assessment and management. Attendees will learn how to measure and control uncertainty and risk involved in upstream business choices. We include topics such as sensitivity analysis, probability analysis, and Monte Carlo simulation as a way to equip attendees with tools to analyze and manage risk in exploration and production investments effectively. Reserve your training spot and cater for your necessary skills and knowledge to evaluate upstream oil and gas investments, make informed decisions, manage risk, and navigate fiscal terms in the industry with PetroSync!