Advanced Upstream Petroleum Economics
- Type
Training - Training Code
PST0154 
Course Overview
Advanced upstream petroleum economics describes the philosophy, process, and methods underlying upstream economic evaluation of capital investments under different categories of risk and uncertainty and risk attitudes of decision makers. The short course facilitates a thorough understanding of all the necessary concepts of capital investment evaluation, capital budgeting, and investment decision criteria available and techniques for making rational economic decisions in the oil and gas industry under risk and uncertainty.
Topics covered include deterministic measures of profitability; applications of expected value concept, decision tree and expected utility functions in decision analysis; spreadsheet stochastic modeling tools and Monte Carlo simulation process and applications in the oil and gas industry.
Key Course Content includes:
- Future Global E&P outlook
- Overview of Measures of Profitability
- Exploration Risk Analysis Methods
- Stochastic Modeling of Profitability
- Monte Carlo Simulation Applications
Specially design for:
- Petroleum Economists
- Petroleum Engineers
- Planning Officers and Managers
- Business Analysts and Managers
- Regulator
- Oil & Gas Financial Consultants
- Legislative Staff
- Independent Operators
Course Outline
Day 1 - Economic Decision Tools and Investment Criteria
Review economic decision tools to evaluate projects, understand what investment criteria really mean, and know which criteria to use to make rational economic decisions on best investment options; practice building spreadsheet cash flow economic models to characterize the economic factors inherent in different petroleum fiscal arrangements
•Introduction/course expectations
•Future global E&P outlook
•Petroleum economic evaluation fundamentals – NCF concepts / time value of money / DCF models
•Petroleum economic evaluation fundamentals – fiscal arrangements overview/ review economic profitability measures
•Review of expectations and feed back
Syndicate Exercise -- Build and analyze economic evaluation spreadsheet models fifiscal systems
Day 2 - Understanding the Basic Language of Risk and Uncertainty
Learn to calculate and use descriptive statistics in business decisions, know common probability distributions and use them to express judgments about risks and uncertainties; use built-in capabilities of a spreadsheet application to generate descriptive statistics and solve various problems associated with probability calculations and probability distributions
•Review
•Basic principles of probability and statistics—measures of central tendency, measures of variability
•Basic principles of probability and statistics—types of distribution curves and interpretations and applications
•Review of expectations and feed back
Syndicate Exercise -- Descriptive statistics and probability analysis using Excel spreadsheet applications
Day 3 - Risk and Uncertainty Analysis Methods and Applications
Review approaches to risk and uncertainty analysis and the advantages and disadvantages of each method; apply these methods to manage risk and uncertainty; apply add-in software package to quantify probabilistic treatment of uncertainty in decision making in terms of expected value and to solve decision analysis problems
•Review
•Expected value approach and decision tree analysis – definitions, calculation, meaning & interpretation
•Expected utility theory—incorporating risk attitude, utility function, decision criteria and application for exploration economic decisions
•Review of expectations and feed back
Syndicate Exercise -- Spreadsheet applications using excel add-in to solve decision analysis problem examples
Day 4 - Monte Carlo Modeling Process and Simulation Analysis
Learn simulation modeling for Monte Carlo applications using spreadsheets. Understand how to use commercial spreadsheet simulation add-ins to achieve simulation modeling analysis of uncertainties and risks
•Review
•Risk and uncertainty analysis using simulation—overview, process, modeling & applications
•Monte Carlo simulation spreadsheet modeling tools, analysis and interpretations of simulation results
•Review of expectations and feed back
Syndicate Exercise -- Spreadsheet applications using excel add-in software packages (Group Practicum)
Day 5 - Monte Carlo Simulation Applications in the Oil and Gas Industry
Develop skill to understand the process of using probabilistic spreadsheet models for Monte Carlo simulation for risk and uncertainty analysis. Apply spreadsheet simulation modeling tools to characterize business decision parameters subject to risk exposure.
•Review
•Spreadsheet probabilistic modeling and simulation analysis of royalty and tax contract examples
•Spreadsheet probabilistic modeling and simulation analysis of contractual system examples.
•Review of expectations and feed back
Syndicate Exercise -- Risk and uncertainty analysis in the petroleum industry using excel add-in (Group Practicum)
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