ECONOMIC EVALUATION AND RISK ANALYSIS OF OIL AND GAS PROJECT

INTRODUCTION

This course combines the fundamentals of petroleum economics and risk analysis with the theory and practice of world fiscal systems and the economics of LNG projects. It uses a mixture of teaching methods including workshops to illustrate the elements of the upstream as well as the analysis of LNG projects.

The primary aim of this course is to equip the delegates with the necessary skills to:

• Understand the theory and practice of petroleum economics based on discounted cashflow
• Calculate with confidence the key economic metrics used in investment decision making
• Appreciate the geological, engineering and economic inputs to the Upstream cashflow model
• Understand the principles and appreciate the diversity of worldwide fiscal systems
• Be able to characterise fiscal systems and calculate government take
• Understand the different ways of financing projects
• Build Excel-based economic models of Upstream fields
• Characterise the LNG link as part of the gas value chain
• Become familiar with the Upstream/LNG interface
• Understand the implications of the value chain for the Upstream and LNG and the impact on the respective fiscal structures

The course is unique in its field: delegates will gain tangible skills to take back to their workplaces: economic model building, fiscal modelling integrated with practical investment and risk analysis. This will be achieved over the five days with a mixture of theory, question and answer, case studies and hands-on practical workshop sessions.

At the end of the course, delegates will be provided with fully functioning economic models which, as well as being useful modelling and valuation tools, will act as a memory jogger in future economic analyses or commercial negotiations in which the delegates are involved. In addition, a full course manual is provided with a text of the main subject matter and all presentational slides.

Due to the practical workshops and exercises, delegates will need to have a working knowledge of Microsoft Excel™ and will be expected to bring their own laptop.

The course is suitable for delegates of technical and commercial disciplines from oil, gas and energy companies, governments, banks, consultancies, legal and accounting organisations. The course is designed for all management and technical staff in the industry as the fundamentals of petroleum economics and investment will be presented. Even so, the most seasoned industry professional will benefit from the bottom-up approach and the review of the industry and value fundamentals.

OUTLINES

Introduction & Cashflow Analysis

• Objectives of undertaking an economic analysis
• What makes the oil and gas industry different?
• Cashflow equations
• Real vs Nominal cashflows

Fundamentals of Economic Analysis: Discounted Cash Flow

• The time value of money, compounding & discounting
• Discount rate, discount factor & discount method
• The cost of capital and the hurdle discount rate

Methods of Evaluating Projects

• Undiscounted methods (PIR, Payback, Exposure)
• Discounted methods (e.g. NPV, IRR, DPIR)
• Valuing an asset, making development & investment decisions

Oil and Gas Asset Net Cash Flow - Project Components: Revenue

• Resources, reserves and sales profiles
• Tariff income

Oil and Gas Asset Net Cash Flow - Project Components: Development Scenarios

• Onshore Oil & Gas Fields
• Offshore Oil & Gas Fields
• LNG Projects (including Floating LNG)
• Gas to Liquids (GTL)
• Unconventionals

Oil and Gas Asset Net Cash Flow - Economic Components

• Inflation, cost escalation
• Interest rates & exchange rates
• Oil and Condensate pricing & forecasting
• Gas and LNG pricing & forecasting
• Floating LNG (FLNG), GTL

Risk Analysis Techniques

• Sensitivity analysis
• Spider & Tornado diagrams
• Minimum economic reserve & break-even oil price
• Calculation of Expected Value in an Exploration context

Oil and Gas Asset Net Cash Flow - Taxation and Government Take Components

• Production sharing contracts
• Royalty & taxation systems
• Risk service & other systems
• Calculating royalties, taxes, cost recovery and profit oil splits

Methods of Financing Projects

• Equity vs Debt Financing
• Projects vs Corporate Financing
• Farm In/Farm Out
• Carried interests

INSTRUCTOR

Dr. Hanifah SE.,Ak.,Msi, CAand Team / Drs. Arif Budiarto , M.Si, Akuntan and Team