By the end of this programme, participants will:
- Develop a solid understanding of economic terms and how they apply to petroleum project economics.
- Learn how to set up and calculate cashflows for oil and gas projects, including depreciation methods and handling inflation.
- Master key economic indicators such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period.
- Analyze risks and uncertainties in project economics through techniques like sensitivity analysis and Monte Carlo simulations.
- Gain hands-on experience in applying economic indicators and risk analysis methods to real-world projects using spreadsheets.
- Understand how to set up an integrated economic model for oil field development and conduct project sensitivity analysis.
Day 1
Cashflow Analysis
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- Introduction to key economic terminology and concepts relevant to project evaluation.
- Step-by-step guide on setting up and calculating project cashflows.
- Overview of different depreciation methods and their impact on financial projections.
- Understanding loss carry forwards and their role in tax planning.
- Exploring the effect of inflation on project cashflows and costs.
- Distinguishing between nominal and real cashflows.
- Addressing sunk costs and their implications in decision-making.
- Introduction to project financing methods and their application in oil and gas projects.
Day 2
Economic Indicators
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- Defining and explaining key economic indicators used in project evaluation.
- The concept of present value and its significance in financial analysis.
- Understanding and calculating the discount factor for project evaluations.
- Techniques for calculating Net Present Value (NPV) and assessing project profitability.
- The role of Internal Rate of Return (IRR) in determining project viability.
- Analyzing the effect of project delays on economic performance.
- Calculating and interpreting the payback period for investments.
- Evaluating projects through the profit/investment ratio.
- Assessing the viability of incremental projects and their impact on the overall portfolio.
Day 3
Risk and Uncertainty
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- Exploring the concepts of risk and uncertainty in project economics.
- Understanding the expected value concept and its application in decision-making.
- Introduction to decision tree analysis for evaluating potential project outcomes.
- Evaluating farm-out decisions and their impact on project economics.
- Conducting probability analysis to understand potential risks and their implications.
- Utilizing sensitivity analysis to measure the effect of varying assumptions on project outcomes.
- Understanding probability distributions and their role in assessing risk.
- Introduction to Monte Carlo simulations for modeling project uncertainties and risks.
Day 4
Setting up Spreadsheet Calculations
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- Introduction to using spreadsheets for economic calculations in petroleum projects.
- Hands-on practice with simple cashflow models in Excel.
- Performing NPV calculations using spreadsheet tools.
- Applying economic indicators such as IRR and payback period in spreadsheet models.
- Engaging in class discussions to explore real-world challenges in spreadsheet-based analysis.
Day 5
Developing an Oil Field Economic Model
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- Setting up an integrated economic model for a typical oil field development project.
- Conducting project sensitivity analysis for the selected oil field model.
- Introduction to the Russell Field Model as a case study for real-world application.
- Final remarks and review of key takeaways, including best practices for petroleum project economics and risk analysis.
