Course Description
Economics drives the entire oil/gas industry. Almost every decision is made on the basis of an economic evaluation, performed to determine the value and ranking of competing projects. In many cases, the goal of the company is to make decisions that have the best chance of maximizing the present day profit.
Economics of petroleum exploration involves the application of economic analyses in the development of oil and gas exploration and production. The economics of oil and gas projects are affected by a variety of factors, including the location of the oil or gas field, the type and number of wells, market conditions and the fiscal regime i.e. the tax & royalty systems in place.
By analyzing these factors, petroleum economists are able to make investment decisions such as whether or not to drill an exploration well or whether or not to develop an entire petroleum production project. The training course will enable the participant to make crucial decisions in negotiations involving Production Sharing Contracts PSC’s and purchasing oil and gas properties.
This training course will feature:
- The theory of upstream petroleum economics based on the time value of money
- How oil and gas economics are essential for comparing values of competing projects
- Critical evaluation and appraisal of the opportunities and challenges of this pivotal sector of the energy industry
- The assessment and management of the technical, economic and other risks associated with the different phases of an oil or gas projects
- An understanding and critical awareness of the principles, theory and practice of how economic analyses are performed
- A comprehension of the machinations of the international oil and gas industry
- Focusing on management interpretation of the diversity of fiscal arrangements and PSC’s
- Applying a judicious overview of contemporary issues like climate change and environmental concerns in exploration and development
Course Objective:
By the end of this training course, participants will be able to:
Calculate the key economic metrics used in investment decision making
Appreciate the geological and engineering inputs to the cash flow model
Understand oil and gas pricing and forecasting
Build Excel-based economic models in both tax/royalty and production sharing contract fiscal systems
Apply the principles of Oil and Gas economics to decision making relating to field development options
Understand development options (including modelling cash flows, profitability and risk indicators, net present value, and investment appraisal), incremental analysis and economics
Understand and manage the key characteristics of the oil and gas industry and activities
Course Certificate:
Masters Consultant Certificate will be issued to all attendees upon course completion
Course Outline:
Day One: Oil & Gas Economics
- Introduction to Energy Finance and Economics
- Geopolitics and world Oil and Gas markets
- Overview of world petroleum consumption and supply
- Oil and Gas prices and prospects for the future
- Transportation of Oil and Gas
- Storage of Oil and Gas
Day Two: Oil & Gas Value Chain
- Adding value: The refining process & Petrochemicals
- Petroleum products
- Sales and marketing of oil and gas products
- Netback Calculations
- Reference pricing
- OPEC and the future role of a cartel
Day Three: Oil & Gas Principles of Development Economics
- IOC's v’s NOC's and Fiscal regimes
- Basic Principles of Development Economics
- Financing and financial performance
- Financial and Economic Analysis in the Energy Industry
Financing Large Energy Projects
- Economics of a field development
Day Four: Oil & Gas Project Cash flow
- Conducting a Project Cash flow
- Calculating a discounted cash flow
- Profitability indicators
- Project screening and ranking
- Project Sensitivity analysis
- Case study: Exploration economics
Day Five: Oil & Gas Derivative Markets and Hedging
- Hedging of financial risks of oil and gas projects
- Forward, Futures, and options
- Real-option evaluation analysis and Energy trading commodities risks
- How do oil and gas companies handle operational risks?
Duration
