Petroleum Economics and Business
Surface and sub-surface technologists
(engineers of all disciplines, geologists and geophysicists, petrophysicists)
who directly or indirectly contribute information or data to economic
evaluations.
This course teaches the fundamentals of
assessing the economic viability of upstream oil & gas projects in terms of
the data/information required, the calculation techniques used, the assumptions
made and how to interpret the resulting metrics such as NPV, ROI, ROR, IRR,
P/I, etc.
The days of “over-the-wall” economics are
drawing to a close. More and more
technologists are being directly involved in economic valuations – either
through being asked to perform these evaluations or by participating in related
issues such as calculating the value of information, data, technical work or
research. Any technologist who wants to
be aware of the value of their contribution, or who aspires to management or decision-making
positions, will find great value in understanding project economics and its
underlying assumptions.
The material learnt in this course underlies
the economic evaluation of projects large and small – from the economics of a
fracture stimulation, through side-tracking a well, to major field development
decisions. Due to the large impact of
discounting, an emphasis will be placed on the philosophy and assumptions
behind it and the choice of appropriate discount rate. The importance of the distinction between new
and incremental projects will be made.
Attendees will leave with the ability to carry out straightforward
economic calculations that do not involve complex tax regimes. Finally, the impacts of uncertainty in the
data that goes into economic calculations, and how risk is dealt with, will be
discussed.
Course Contents
·
Context and purpose of economic evaluation
·
Developing Net Cash Flow (NCF) estimates
·
Revenue and Expense (Capital and Operating) streams
·
Depletion, Depreciation and Abandonment provisions
·
Taxes, Royalties and Production Sharing Contracts
·
Discounted Cash Flow analysis: time value of money and discount rates
·
Value and investment metrics: Net Present Value, Rate-of-Return,
Return-on-Investment, Investment Efficiency, hurdle rates
·
Incremental vs acceleration projects
·
Strengths and weaknesses of DCF and NPV
·
Sources of uncertainty and accounting for risk