Petroleum Project Economics and Risk Management

Course Duration (4 days)
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
Who Should Attend?
This workshop is aimed at delegates with little or no previous project investment appraisal experience.
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

Economic models and spreadsheet design
Development decisions
• Work scope definition and options
• Decommissioning economics and risks
• Cost estimating and contingencies
• Financing options
• Construction contracts

Further development decisions and economic cut-off
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Monte Carlo simulation

Preparing convincing project proposals

Post-project appraisal