Upstream Petroleum Economics, Risk, and Fiscal Analysis
• Cash flow analysis
• Economic indicators
• Economic Evaluation Examples
• Risk analysis
• Fiscal system and PSC analysis
• Worldwide fiscal terms
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.
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.
How cash flow is distinguished from profit. The role of depreciation. When we use cash flow and when we use it to profit.
How tax is incorporated into cash flow projections. The basic rules for calculating tax worldwide. The effect of tax on field development decisions. Loss carries forward and the effect of different petroleum tax regimes.
The treatment and mistreatment of sunk costs in cash flow analyses and petroleum property acquisitions. Discussions of the effects of sunk costs.
How to inflate the components of cash flows. The conventions and the jargon.
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.
Coverage of the main depreciation methods used in fiscal terms worldwide.
The need to measure net cash flow projections with single indicators. The indicators used in the oil and gas industry.
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
The distinction between deflating and discounting and between real and nominal discount rates and NPVs. Dealing with the pitfalls of using real NPVs.
The definition and application of IRR. Calculating the 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.
Calculation and use of payback and discounted payback indicators. The use of discounted payback in petroleum fiscal regimes. Problems with payback. How compound payback is used in some fiscal regimes
[EXERCISE]: Delegates’ exercises in calculating simple and compound payback for tax.
Calculation and use of CPI. The use of CPI in oil companies and petroleum fiscal regimes. Capital rationing. Problems with CPI.
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.
Defining and using probability distributions. Means, standard deviations, levels of confidence. Industry-standard reserves definitions and classifications.
Making estimates under uncertainty in the petroleum industry. Combining uncertain variables and issues with adding reserves, adding costs, and analyzing economics.
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.
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.
What is Upstream Petroleum Economics, Risk, and Fiscal Analysis training course objective?
- GAIN a thorough understanding of oil & gas economic evaluations
- IDENTIFY the main components and CONSTRUCT cash flow projections for your upstream projects
- DETERMINE key elements and determinants involved in making oil and gas investment decisions
- UNDERSTAND and APPLY economic indicators to assess oil & gas industry projects
- QUANTIFY and MANAGE uncertainty and risk faced in upstream business decisions
- APPLY Monte Carlo Simulation and other statistical methods in risk analysis to exploration and production investments effectively
- UNDERSTAND, EVALUATE, and MODEL both fiscal and production-sharing contract terms worldwide
Who should join Upstream Petroleum Economics, Risk, and Fiscal Analysis training course by PetroSync?
The course is designed for upstream E&P professionals with a need for a detailed understanding of upstream petroleum economics :
- 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/Manager
- Petroleum Economists
- General Managers
- Finance and Account Executive/Managers
Delegates will be required to bring a Laptop computer with Microsoft Excel
Guy Allinson has over 30 years’ experience as a practicing Petroleum Economist in the international oil and gas industry. He consults internationally and is a Senior Lecturer at the School of Petroleum Engineering, University of New South Wales. Guy has held a range of petroleum economics and commercial positions in the oil and gas industry in Europe and the Asia Pacific regions. He has also advised companies and Governments in the Asia Pacific region on petroleum PSC and fiscal terms. He has valued many petroleum properties and companies for acquisition and sale, prepared economics research reports on the oil and gas industry and has provided commercial support for oil field operations and investments worldwide.
Guy has conducted many oil industry short courses in petroleum economics and PSC/fiscal analysis to oil industry professionals in many countries including USA, UK, Denmark, Switzerland, Australia, New Zealand, Indonesia, India, Iran, Malaysia, Thailand, Vietnam, Brunei, Egypt, Libya and South Africa. He has also given frequent presentations to oil and finance industry seminars and conferences.
Guy has delivered training courses and workshops to the following companies: BP, BHP Billiton Petroleum, Saudi Aramco, Shell Australia, Malaysia and Brunei, TOTAL, Chevron Pacific Indonesia, Conoco, Schlumberger, Sinopec, Mobil, Pertamina, Petronas, PetroVietnam, PTTEP, Petrofac, Petrochina, Murphy Oil, BPMigas (Indonesia), Vico Indonesia, Premier Oil, Santos Indonesia, Indonesian Association of Geologists, ONGC, Korea Petroleum Development Corporation, etc.