Petroleum Economics

Introduction to Project Economics

• Methods of evaluation
• Project lifecycle and who is involved
• Common types of oil and gas upstream projects
• Forecasting production, prices and expenses

Participants will learn why project economics are necessary and the methods for economic evaluation.  They will also learn about the project lifecycle and who is involved.  During the course, common types of oil and gas upstream projects will be presented.  The concepts and methods of forecasting production, prices and operating expenses will also be reviewed.

Cash Flow and Economic Indicators

• Defining revenue and operating expenses
• Capital expenditures
• Discounting and present value
• Economic indicators

The cash flow stream will be constructed and discussed in detail, including company revenue, operating, and capital expenditures.  In addition, the concepts of discounting and net present value will be presented and practiced using Excel.  Multiple economic indicators will be discussed, including DPI, IRR, hurdle rate, WACC and more.

Fiscal Regimes

• The main types and elements of fiscal regimes
• Cash flows for concessionary systems and production sharing contracts
• Service agreements
• Current trends in fiscal systems 

Participants will be introduced to the main types and elements of fiscal regimes around the world.  They will also learn to build cash flows for concessionary systems and simple production sharing contracts.  The different types of service agreements will be reviewed, and then investments under different fiscal regimes will be analyzed, compared and discussed.

Project Risk and Uncertainty

• Defining and incorporating uncertainty using sensitivity analysis and other methods
• Defining and incorporating risk
• Calculating EMV and ENPV

Methods and best practices for incorporating risk and uncertainty in economic evaluations, including using sensitivity analysis, are extensively discussed.  Guidelines and best practices for calculation of EMV and ENPV, as well as discussion of more advanced project economics, are investigated.  The purpose of incremental investment analysis will be presented, examples given, and an incremental analysis done, time permitting.

Project Investment Analysis

• Incremental investment analysis
• The capital budgeting and project selection process
• Financing, ownership, and contracting
• Multiple project analysis and comparison
• Final project analysis

A general capital budgeting and the project selection process will be extensively discussed in the context of different types of companies.  Understanding of where and how project economics evaluations are used in this process should be gained.  Participants will then evaluate and make recommendations about a group of potential oil and gas investments, as well as a comprehensive final group problem.