Objective

By the end of this training course, participants will:

• Learn how to handle uncertainty in petroleum projects
• Understand different economic terms used in the oil and gas industry
• Understand the expected value concept and learn its impact on decision tree analysis
• Learn expected theory concepts and attitudes towards risk, risk eversion and risk premium
• Acquire spreadsheet skills including simulation software @RISK
• Carry out cash flow analysis, for petroleum related project and use common economic indicators to evaluate between competing alternatives
• Carry out a comprehensive economic study evaluating petroleum related projects using risk and sensitivity analysis by means of spreadsheets

Content

Development Economics

• A Brief History of Energy Usage
• Principles of Development Economics
• Understanding of Economic terms
• Inflation and its impact on Nominal and Real Cash Flows
• Project Financing

Uncertainty in Investments

• Handling uncertainty in Capital Projects
• Understanding Probability Concepts
• The expected Value Concept: Features and pitfalls
  • Expected monetary value (EMV)
  • Expected profitability index (EPI)
  • Expected opportunity loss (EOL)

Risks and Uncertainties

• Risk and Uncertainty
• Risk eversion and risk premium
• Exploration project threats and opportunities
• Economic decision criteria
• Decision Tree Analysis
• Probability Distribution
• Case study: Monte Carlo Simulation

Setting up Spreadsheet CalculationsUsing Excel

• Spreadsheet Calculations
  • Cash Flow Analysis
  • Sensitivity analysis calculations
  • Tornado Diagrams
• Introduction to Monte Carlo Simulations using @Risk
• Class exercises: Setting up an oil field Project

Practical use of the @Risk add-on - Oil Field Development Model

• Developing an Integrated Economic Model of an Oil Field Development
• Developing and using an @Risk model analysis
• Project sensitivity analysis utilizing data from @Risk model
• Course final review and close

TRAINING METHODOLOGY

The training methodology combines lectures, discussions, group exercises and illustrations. Participants will gain both theoretical and practical knowledge of the topics. The emphasis is on the practical application of the topics and as a result participant will go back to the workplace with both the ability and the confidence to apply the techniques learned to their duties.