PETROLEUM PROJECT ECONOMICS AND RISK MANAGEMENT

PETROLEUM PROJECT ECONOMICS AND RISK MANAGEMENT
Course Objectives
This highly interactive and scenario-based training programme will enable you to apply a structured approach to project justification, investment appraisal and decision-making in the upstream petroleum business.
What you will learn
• how to apply economic and risk management evaluation tools for oil and gas project proposals
• how to identify and quantify key uncertainties during field development and full life-cycle economics
• how to calculate the economic and financial viability of expenditure proposals projects under risk conditions
• how to develop a structured approach to measuring, managing and combating commercial risk
• how to assess the ranking of alternative projects
• how to prepare convincing project proposals in a way that will win management, partner and government approval
• how to improve project and business outcomes
Training method
Over half of this course comprises practical exercises, case studies, and industry-based scenarios, for which you will need your own laptop with Microsoft ExcelTM pre-installed. Prior knowledge of spreadsheet techniques is assumed, and you will be able to retain for future reference all project examples created during the course.
Who Should Attend?
This workshop is aimed at delegates with little or no previous project investment appraisal experience. Recent attendees have included:
• Explorationists and petroleum/reservoir engineers
• Refinery and petrochemical plant managers
• Asset managers, project managers and facilities engineers
• Information systems managers and project leaders
• Management accountants, finance and contracts specialists
• Government and advisory executives
• Service/supplier company personnel
Course Content Summary
Basic concepts
• Identifying project cash flows and sources of information

How to calculate project benefits and interpret the answer
• Project payback
• Net Present Value (NPV)
• Internal Rate of Return (IRR) and the cost of capital
• Profitability Index (PI)
• Strengths and limitations of each method

Project ranking - how to choose the best alternative
• How to optimise expenditure

How to deal with inflation and with exchange rates

Taking account of taxation

Accounting measures versus economic measures
• Understanding other financial criteria for decision making
• Balancing short term versus long term business objectives

Dealing with risk and uncertainty
• How to identify and quantify project risks and uncertainties
• Sensitivity analysis
• How to draw and interpret spider and tornado diagrams
• Calculation of maximum exposure as a risk measure
• Decision trees and the calculation of Expected Monetary Value (EMV)
Economics, risk and decisions - decision points are risk points
• Decision points for oil fields and gas fields
• Risk and probability definitions and concepts
• Risk identification, measurement and management
• Forecasting as risk management
• Assumptions, sensitivities and risk premiums

Exploration and appraisal decisions, uncertainty, risk and exposure

Monte Carlo simulation

Economic models and spreadsheet design

Development decisions
• Workscope definition and options
• Decommissioning economics and risks
• Cost estimating and contingencies
• Financing options
• Construction contracts

Further development decisions and economic cut-off

Preparing convincing project proposals

Post-project appraisal