Petroleum Projects Economics & Risk Analysis

Course details

The Course
This course provides practical guidance in the application of the techniques of the economic analysis currently used in the oil & gas industry. When executing a petroleum related project, such as a field development, you should be able to choose the best alternative from economics point of view. You should be able to properly evaluate various investment opportunities by determining economic indicators and conducing sensitivity analysis. Techniques for predicting profit, production, costs, and cash flow enable the analyst to evaluate decision alternatives for optimum results. Understanding economic indicators, risk and uncertainty, different economic structures such as tax regimes and production sharing contracts, enhances the quality and the value of economic analysis.

The Delegates:
Engineers, geologists, economists, accountants, technicians who need to learn how to conduct economic evaluation and to understand the role of petroleum economics in investment decision making. This course is also recommended for supervisors & managers in the Planning, Exploration, Production, Projects, Financing and Technical Departments in Oil & Gas Companies.

The Goals:
The Primary Objectives of the Course are to:

• Understand various economic terms used in the oil & gas industry
• Understand how to develop economic models of various petroleum fiscal regimes
• Understand different depreciation methods.
• Carry out cash flow analysis and determine economic indicators
• Carry out different economic analyses for petroleum related projects
• Evaluate and quantify risks and uncertainties
• Make the right investment decision in the presence of risk
• Evaluate farming-out alternatives
• Carry out sensitivity analysis to determine the sensitivity of a number of key economic indicators when varying assumed parameters.
• Carry out a comprehensive economic evaluation study for any petroleum related project including risk analysis and sensitivity study using spreadsheet models.

The Process:
The course will include a number of exercises aimed at enhancing each participant capability to conduct various economic evaluations. In addition, each participant will develop spreadsheet models of various economic analyses. At the end of the course each participant will be given a comprehensive spreadsheet program that can carry out a complete economic evaluation including a sensitivity analysis.
Additionally, the course assumes no or limited prior knowledge of the topics covered in the course. New concepts and tools are introduced gradually to enable delegates to progress from the fundamental to the advanced concepts of economic evaluation.

The Benefits:
Participants will gain the knowledge and skills of evaluating upstream petroleum assets, including the determination of economic indicators and analyzing risk and uncertainty.

The Results:
This course is a practical petroleum economics course, which introduces participants to methods and practices utilized in the international oil industry to examine the economic viability of upstream oil & gas projects. The development and the application of spreadsheet models will enable participants to evaluate the economics of a field development project.

Core Competencies:

• Experience gained will allow participants to apply tools for analyzing risk and uncertainties.
• Participants will be able to prepare cash flow analysis including the determination of economic indicators for different fiscal regimes
• Experience gained will include quantifying and qualifying risk and uncertainty through decision analysis and sensitivity analysis.
• Participants will be able to determine recoverable reserves using probabilistic methods.
• Participants will understand the role of petroleum economics in evaluating reservoir development project.

Course Content:
DAY 1 – Cash Flow Analysis

• Familiarization with Economic terms.
• Feasibility Studies
• Setting up Cash Flow Calculation
• Petroleum Fiscal Regimes
• Production Sharing Contracts (PSC)
• Depreciation
• Depreciation Methods
• Loss Carry Forwards
• Inflation
• Nominal & Real Cash Flow
• Sunk Costs
• Project Financing

DAY 2 – Economic Indicators

• Economic Indicators Definitions
• Present Value Concept
• Discount Factor
• Net Present Value

• Internal Rate of Return
• Effect of Project Delay
• Payback Period
• Profit/Investment Ratio

• Incremental Projects
• Comparing Economic Indicators

DAY 3 - Risks and Uncertainties

• Risk & Uncertainty
• Expected Monetary Value Concept
• Decision Tree Analysis
• Farm-out Decision
• Probability Analysis
• Sensitivity Analysis
• Spider and Tornado Diagrams
• Probability Distribution
• Monte Carlo Simulation

DAYS 4 - 5 – Setting up Oil Field Development Model

• Introduction to Spreadsheet Calculation

• Simple Cash Flow Using Excel
• Setting up an Integrated Economic Model of a Typical Oil Field Development Project including Sensitivity Analysis

Updated on 14 April, 2025