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Advanced Training Workshop for Upstream Oil & Gas Professionals
3 days of interactive sessions - a must for all personnel involved in the upstream oil/gas industry including engineers, geologists, economists and
planners who work with fiscal systems. This is a practical hands-on workshop on understanding the role of petroleum economics in
upstream petroleum industry investment decision-making.
An intensive workshop giving a complete and in-depth understanding of the use of the techniques of upstream petroleum economic analysis and risk analysis as currently practiced. Workshop participants can expect to receive a thorough understanding of the context of such analyses as well as practical instruction and an appreciation of the analytical techniques used.


Your Workshop Leader

Guy Allinson is an upstream oil and gas industry consultant and a lecturer at the School of Petroleum Engineering, University of New South Wales ("UNSW").

Guy Allinson has over 40 years’ experience as a petroleum economist in the upstream industry. Guy is an international consultant in petroleum economics and a Senior Lecturer in petroleum economics at the School of Minerals and Resource Engineering, UNSW. He has presented over 220 short courses for the petroleum industry in the Asia, Europe, USA and Africa on petroleum economics and worldwide PSC/fiscal regimes. He has also given frequent presentations to oil and finance industry seminars and conferences internationally.

Guy has held various petroleum economics and commercial positions in the oil and gas industry. He has advised companies and governments in the Asia/Pacific region on petroleum PSC and fiscal terms. He has valued many petroleum properties and companies for acquisition and sale; prepared economics research reports on oil and gas industry projects and has provided commercial support for oil field operations and investments worldwide.


Workshop Overview


This 3-day Upstream Petroleum Economics is specially designed to equip delegates with the skills and understanding to evaluate and make decisions on upstream petroleum projects. The workshop covers cash flow analysis, economic indicators, risk analysis and fiscal analysis. Throughout the workshop, participants will complete practical exercises to reinforce their understanding of the concepts. In today’s volatile oil price environment, the analysis of risk in an economic evaluation of an upstream oil and gas investment is absolutely crucial. This course will give a complete understanding of the techniques of economic analysis and risk analysis as currently practiced in the oil & gas industry. Course participants will receive a thorough understanding of the context of economic analysis as well as practical instruction and an appreciation of the analytical techniques used.

The workshop will rely heavily on the participants carrying out worked examples and examining cases to aid their understanding of the concepts introduced.


Workshop participation and hands-on exercises will enable you to -
  • UNDERSTAND the way in which the oil and gas industry evaluates and makes decisions on petroleum project investments through a hands-on learning.
  • APPLY risk analysis to oil and gas investments.
  • EVALUATE petroleum fiscal and PSC terms of worldwide.
  • PREPARE oil and gas industry economic analyses and to review critically the analyses prepared by others.
  • DISTINGUISH between good and bad practice in oil and gas industry economic/financial evaluation.
The workshop provides participants with critical information necessary to create the right commercial framework.(Participants should bring laptops to work on)


This critical 3 day workshop will be of most benefit to:

Geologists, Explorationists, Accountants, Economists, Engineers, Financial managers, Negotiators, Geophysicists, Managers and staff from service industries, Bankers, Brokers, Consultants, Corporate Planners, Policy Analsysts, Legal Advisers, In-House Counsel, Commercial Managers, Senior Petroleum Engineers and Government Representatives for National Oil Companies


Testimonials - What other participants thought of Guy’s past workshops

"This was a fantastic course. I was worried that the content would be dry and boring but it was the opposite, very interesting. The notes are great and will make a very good uture reference as will the exercise spreadsheets. Thanks very much"

"This is an excellent short course for anyone interested in understanding the basics of petroleum economics. The presenter is highly knowledgeable of the subject and excellent in delivering the content"

"I was very pleased with the content, delivery, pace of delivery and accessibility and style of presentation. Simple to understand, supported by working examples and solutions to work at our own pace. An invaluable course"

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Agenda

The following gives the content an appropriate schedule for the 3 day workshop. Adjustments in timing might need to be made to accommodate the progress of the course and the participant’s stated and perceived requirements
  1. Introduction
    Aims and Scope
    Discussion of Contents - Cash flow analysis - Economic indicators - Economic evaluation examples - Risk analysis – Fiscal Analysis

  2. Net Cash Flow Analysis
    Discussion of the main components and the relative importance of the components of cash flow for oil and gas investments (production, price, revenue, operating costs, capital costs, abandonment costs and fiscal costs).
    Delegates’ exercise in preparing a net cash flow projection.
  3. Economic Life and Reserves
    How net cash flow projections are critical in determining economic life and reserves. The effects of oil price, costs and fiscal terms on economic life and reserves estimates. Errors in reserves estimation made in the oil and gas industry.
    Delegates’ exercise in determining economic life and estimating reserves.
  4. Distinction between Cash Flow and Profit
    How cash flow is distinguished from profit. The role of depreciation. When we use cash flow and when we use profit.
  5. Cash Flow and Tax
    How tax is incorporated into cash flow projections. The rules for calculating tax worldwide. The effect of depreciation and tax on field development decisions. Loss carry forward and the economic effect of different petroleum tax regimes.
    Delegates’ exercises in calculating tax and demonstrating the economic effects of typical tax regime.
  6. Cash Flow and Production Sharing Contracts (PSCs)
    Brief discussion of the economic distinction between tax regimes and production sharing contract regimes. How to make cash flow projections for production sharing systems worldwide. Cost recovery and profit sharing arrangements.
    Delegates’ exercises in calculating cost recovery and profit sharing.
  7. Sunk Costs
    The treatment and mistreatment of sunk costs in cash flow analyses and petroleum property acquisitions. Discussions of the effects of sunk costs.
  8. Incorporating Inflation into Cash Flow Projections.
    Inflating the components of cash flows. The conventions and the jargon.
    Delegates’ exercise in incorporating inflation.
  9. Real and Nominal Cash Flows
    The distinction between real and nominal cash flows. Fiscal drag and the problems associated with taking short cuts to derive real cash flows. Common misunderstandings in the use of real cash flows. The effect of fiscal drag.
    Delegates’ exercise in showing the effect of fiscal drag.
  10. Depreciation
    The main methods of depreciating capital costs used in fiscal regimes worldwide.
    Delegates’ exercises in depreciating capital costs.
  11. Net Present Value (NPV)
    The time value of money. Compounding and discounting. Using a discount factors and measuring the effect of time and discount rate. Discounting a cash flow projections and calculating NPVs. Understanding the meaning, uses and features of NPV. Valuing petroleum properties using NPV. Preliminary discussion of choosing discount rates.
    Delegates’ exercises in calculating NPV and demonstrating its features.
  12. Real and Nominal NPVs
    The distinction between deflating and discounting and between real and nominal discount rates and NPVs. Dealing with the pitfalls of using real NPVs.
    Delegates’ exercises in calculating real and nominal NPVs.
  13. Internal Rate of Return
    The definition and application of IRR. Calculating the IRR. Problems with IRR. Multiple IRRs – when, how often and how they arise. How the NPV and IRR measures can give conflicting results and how to resolve this.
    Delegates’ exercises in calculating IRR and interpreting multiple IRRs.
  14. Payback
    Calculation and use of payback and discounted payback indicators. The use of discounted payback in petroleum fiscal regimes. Problems with payback.
    Delegates’ exercise in calculating payback.
  15. Capital Productivity Index (CPI).
    Calculation and use of CPI. The use of CPI in oil companies and petroleum fiscal regimes. Capital rationing. Problems with CPI.
    Delegates’ exercise in calculating CPI.
  16. Example Economic Evaluations
    Accelerated production example. Modelling incremental net cash flows. The effects of fiscal terms and fiscal relief.
    Delegates’ exercise in incremental economics and the effects of fiscal terms.
  17. Analysing Risk and Uncertainty - Introduction
    The importance of applying uncertainty analyses to economic evaluation. The nature of uncertainty in oil and gas investment decisions. The approaches to and errors in oil and gas industry estimates of key variables.
  18. Sensitivity Analysis
    Analysing the sensitivity of investment decision to variations in input parameters. Interpreting sensitivity diagrams. The pitfalls of using sensitivity analyses for oil industry investment decisions.
    Delegates’ exercises in preparing sensitivity analyses and using them to make investment decisions.
  19. Probability Analysis
    Defining and using probability distributions. Means, standard deviations, levels of confidence.
    Delegates’ exercise in preparing probability analysis and defining the statistics.
  20. Using Probability in the Oil and Gas Industry Investment Decisions
    Making estimates under uncertainty in the petroleum industry. Constructing and using probability distributions of oil price forecasts, capital and operating costs and other variables used in estimating the value of oil & gas developments. The potential pitfalls in using single values as representations of uncertainty. Combining uncertain variables and issues with adding reserves, adding costs and analysing economics.
    Delegates’ exercises in using probability and combining uncertain oil industry variables.
  21. Monte Carlo Simulation
    The mechanics of Monte Carlo simulation. Choosing probability distributions. The pitfalls of Monte Carlo simulation and how to avoid them. Reserves estimation using Monte Carlo simulation. Investment decisions using Monte Carlo simulation.
    Delegates’ exercises in Monte Carlo simulation
  22. Exploration decisions
    The definition, meaning and examples economics for oil and gas exploration drilling decisions. Expected value (EV) versus probability of success lines. Using EV to compare drilling and farm out decisions. The effects of fiscal terms and common problems with using EV. Choosing probabilities of success. Valuing properties using EV.
    Delegates’ exercises in the economics of drilling, farming out acreage and the effects of fiscal terms on exploration decisions.
  23. Example petroleum fiscal analysis
    Example analysis of the fiscal terms in an example country. How the fiscal components work from an economics perspective.
    Delegates’ exercises in calculating the net cash flow of an example field development under the country’s fiscal terms.
  24. Worldwide petroleum fiscal terms
    The economic effect of fiscal terms across the world. Severity, efficiency and the effect on exploration and field development.
(The 3-day workshop will break for morning coffee, lunch and afternoon tea)
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Companies that have benefitted from attending Guy’s workshops include BHPP, Santos, Woodside, BP, Bligh, Cairn Energy, Chevron-Texaco, Oil Search, Boral, Migas (Indonesia), Pertamina, Petronas, Arco, Caltex, Mobil, Unocal, PetroVietnam, Vico Indonesia, Shell Australia, Shell (Malaysia), Shell (Brunei), JNOC, Inpex, BP, Union Texas, Korea Petroleum Development Corporation, ONGC, Romanian National Oil Company, Libyan National Oil Company, Egyptian National Oil Company, Tunisian National Oil Company, Origin Energy, Geoscience Australia, Asamera, Lasmo, Premier Oil, Roc Oil, Total, British Gas, PTT (Thailand), Maxus, Conoco, Santa Fe, Schlumberger, Amoseas, Gulf, Sasol and Mosgas.
     
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