Introduction

This course introduces participants to the economic principles, financial evaluation techniques, and risk analysis methods essential to the petroleum industry. Covering the economics of exploration, production, and refining, the course provides insights into the factors influencing profitability and methods for assessing and managing financial risks.

Objectives

• Understand the fundamentals of petroleum economics and the factors affecting market prices.
• Learn financial evaluation techniques, including cash flow analysis, NPV, and IRR.
• Develop knowledge of cost structures in exploration, production, and refining.
• Explore risk analysis methods, including sensitivity analysis and scenario planning.
• Gain insight into the impact of market dynamics, price volatility, and geopolitical factors on the petroleum industry.

Who Should Attend?

This course is suitable for:

• Economists, financial analysts, and managers in the oil and gas industry.
• Engineers and technical staff interested in understanding petroleum economics.
• Individuals involved in project finance, budgeting, and economic planning.
• Recent graduates in finance or engineering exploring careers in oil and gas.

Course Outline

Day 1: Introduction to Petroleum Economics

• Fundamentals of Petroleum Economics
  • Economic principles applied to the petroleum industry
  • Key market factors: supply, demand, price elasticity, and cost structures
• Understanding Oil and Gas Pricing
  • Components influencing oil and gas prices: OPEC, geopolitical factors, market speculation
  • Price volatility and its effect on investment and production decisions
• Economic Lifecycle of Oil and Gas Projects
  • Stages from exploration to abandonment and their economic implications
  • Overview of investment requirements and revenue generation

Day 2: Cost Structures and Financial Evaluation Techniques

• Cost Analysis in Petroleum Operations
  • Types of costs: capital expenditures (CAPEX) and operating expenses (OPEX)
  • Cost drivers in exploration, drilling, production, and refining
• Investment Appraisal Techniques
  • Financial metrics: Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period
  • Break-even analysis and profitability index for project evaluation
• Cash Flow Analysis in Petroleum Projects
  • Cash inflows and outflows, cash flow projections, and discount rates
  • Importance of cash flow analysis for investment decision-making

Day 3: Risk Analysis and Management in Petroleum Projects

• Identifying Risks in Petroleum Economics
  • Economic, operational, market, political, and environmental risks
  • Analyzing risk factors across exploration, production, and distribution stages
• Quantitative Risk Assessment Techniques
  • Sensitivity analysis, Monte Carlo simulations, and scenario analysis
  • Understanding probability distributions and their application in risk assessment
• Project Risk Mitigation Strategies
  • Techniques for managing risks: diversification, hedging, insurance
  • Contingency planning and risk-sharing partnerships

Day 4: Economic and Geopolitical Factors in Petroleum Economics

• Impact of Geopolitical Factors on Petroleum Markets
  • Role of oil-producing regions and international organizations (e.g., OPEC)
  • Influence of political stability, sanctions, and trade policies on pricing
• Global Supply and Demand Trends
  • Shifts in energy demand, emerging markets, and renewable energy
  • Impact of global economic cycles and environmental policies on the industry
• Petroleum Fiscal Regimes and Taxation
  • Types of fiscal regimes: concessions, production sharing, service contracts
  • Understanding royalty and tax structures and their impact on project viability

Day 5: Economic Feasibility, Decision-Making, and Future Trends

• Making Investment Decisions in Petroleum Projects
  • Integrating economic and risk assessments in decision-making
  • Criteria for go/no-go decisions in oil and gas project investments
• Petroleum Industry Trends and Future Outlook
  • Transition to renewable energy and its impact on petroleum economics
  • Innovations in technology and shifts in demand and supply patterns
• Final Project: Economic Evaluation and Risk Analysis of a Hypothetical Project
  • Participants conduct an economic evaluation, including cash flow analysis, NPV, IRR, and risk analysis for a hypothetical oil and gas project