Economic evaluation in the oil and gas industry is an encompassing activity. It involves the bringing together of the principal technical and commercial dimensions of a project into a forecast of future performance, that allows different projects to be compared and ranked according to economic and/or other criteria. At its heart, economics is an organizing and quantification exercise. Increasingly, its boundaries are expanding to include a quantification of risk. Risk analysis is a rapidly growing discipline that can take many different forms. It is best understood and applied one step at a time – for professionals and for organizations.
This course provides practical guidance in the application of the techniques of the economic analysis currently used in the oil & gas industry. It covers the techniques which assist in making investment decisions. It also covers cash flow analysis, economic indicators, risk and uncertainty
At the end of the course, will be able to:
Introduce the fundamentals of economic evaluation and of risk analysis in the oil and gas industry.
Focus on basic, simple and pragmatic solutions.
Understand fundamentals; learn to take a practical approach.
Build understanding, apply concepts, use software tools, and increase sophistication one step at a time.
Understand various economic terms used in the oil & gas industry
Understand different economic models
Carry out cash flow analysis and determine economic indicators
Carry out different economic analyses for petroleum related projects.
Put economics and risk into perspective
Understand alternative approaches – advantages and disadvantages.
Evaluate and quantify risk and uncertainty
Make the right decision in the presence of risk
Carry out a comprehensive economic evaluation study for any petroleum related project including risk analysis and sensitivity study using spreadsheet.
Use real life examples and situations.
Engineers; senior supervisors; managers; strategic planners and project leaders; accountants and analysts; related industry personnel involved in project economics; and anyone seeking a comprehensive understanding of the economics of the oil and gas industry.
This course is beneficial to anyone who needs to learn how to conduct economic evaluation and to understand the role of petroleum economics in investment decision making.
This course takes a building block approach to understanding what economic and risk analysis is about. It is designed to become as sophisticated as its participants are comfortable. It will initially be a refresher course for those who are economics professionals and provide a framework for those who are not. We will advance our understanding as a group – learning from real examples and from each other – and we will take a hands-on approach at every opportunity. This is a course for anyone who has an interest in this field.
Day 1: Introductions-Cash Flow Analysis
Familiarization with Economic terms
Setting up Cash Flow Calculation
Loss Carry Forwards
Nominal & Real Cash Flow
Day 2: Economics
What is economics, where does it fit in an oil & gas company, who are the economists, when do they become activated, why is their work important?
Exploration versus development versus acquisitions & divestitures.
The many faces of the economist – economist as expert, organizer, innovator, motivator, communicator.
The many facets of economics – quantify, optimize, compare and combine projects.
Beyond economics – financing, financial impact.
Day 3: The Economic Model
The framework for economic analysis.
It’s about cash – cash flow versus income, integrated financial statements, value creation.
It’s about the future – point forward versus full-cycle evaluations.
The fundamentals of cash flow projection – revenues and costs.