Oil and gas companies compete for resources and reserves around the globe. In recent years new technologies have changed the global picture in the oil and gas industry and the frontiers of exploration are continuously driven to harsher and/or more environmentally sensitive areas. Beside - or better because of - these technical challenges it is crucially important to keep project and company economics under control. What good is the best technological improvement, if the costs to apply these technologies cannot be recovered? In this course participants get introduced to the whole world of Petroleum Economics. The content spans from questions like: Why are the economics in the upstream industry different from those in other industries? Do I understand the whole value chain in my project? How do I deal with risks and uncertainties? What is my project NPV, EMV? Will the recent tax change kill my project?
Course Duration: 4 days
Course Level: Foundation Instructor: Siegfried Gugu
Designed for you, if you are...
A project manager or manager
An E&P professional (geologist, geophysicist, reservoir, production, drilling engineer etc.) seeking economic understanding in the projects you are involved in
Working in related professions such as legal, accounting, business development, HR, marketing
Working for a service provider to oil & gas industries to understand your roles and impact in the overall project life cycle
Working for government agencies to get an insight into the project and company economics
Keen to know more about petroleum economics
How we build your confidence
A combination of classroom lessons, real world examples and actual project calculations will ensure the practicality of this course. Interaction between the participants and the trainer as well as discussions and case studies amongst the participants are an integral part of this course. Interaction and discussions will give the participants the opportunity to further deepen the content. After return to your workplace you can immediately use the course content in your practical work.
By the end of the course you will feel confident in your understanding of:
The interactions in the industry
Setting up your own economic models
Terms like NPV, ROR, hurdle rate, etc.
The risks in you projects and tools to handle these risks
Understand the petroleum industry (value chain and its interactions) - Discuss petroleum industry specifics (oil and gas prices, IOC vs NOC) - Value generation in upstream, midstream and downstream - Partnering (developing projects jointly with competitors)
Project economics - Understand the basics for project economics (revenues, cost, cash flow, NPV, IRR) - Learn to set up projects - Identify critical parameters to project success
Multiple project economics - Compare projects according to KPIs - Rank projects and define investment strategy - Identify related risks and uncertainties
Company economics - Differences between project and company economics - Financing, depreciation and tax impact on company balance sheet - Cash flow versus profit
Cash flow and NPV - Understand the principles of revenues and cost streams - Appreciate the differences of time value of money - Set up and calculate your own cash flow and NPV models
Depreciation and amortisation - Understand the system of depreciation - Depreciation methods and its impact on economics - Concept of amortisation
Project milestones, rates of return and hurdle rates - Understand the importance of structuring a project according to milestones - Calculate KPI’s (ROR, hurdle rate, etc.) and experience the project impact - Base case und sensitivities > impact on project understanding
Upstream contracts and fiscal terms - Different forms of upstream will be discussed - Contractual and commercial terms and the impact on the overall project - Understand the key risks and uncertainties in these contract types
Risk analysis and uncertainty - Concept of risk and uncertainty - Inherent risks in the oil and gas industry - Risk evaluation and risk mitigation techniques
Decision tree analysis - Understand the concept of decision tree analysis - Calculation of EMVs (expected monetary values) - Develop your own decision tree