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Practice of Exploration-Production Contracts Economic Modeling

4 days EAM/PCM
Level
Proficiency
Audience
  • Managers and executives involved in Exploration-Production activities who need to acquire a deep understanding of fiscal modeling for project evaluation.
Purpose
  • To provide a practical understanding of the economic modeling of Oil & Gas field development project as well as exploration projects.
  • A number of computer case studies will be treated all along the course to apply the principles that are presented succinctly, which makes this course a very practical one.
Learning Objectives
  • Upon completion of the course, participants will be able to:
  • explain the critical aspects of taxation and upstream contracts,
  • build advanced economic models for the economic evaluation of Exploration-Production projects,
  • analyze the economic results and carry out sensitivity analysis,
  • incorporate the geological risk and uncertainty in the economic evaluation of E&P projects.
Prerequisite
  • Participants need to be comfortable with the use of Microsoft Excel.
Ways and means
  • Case studies simulated on computers.

CONTRACTUAL & FISCAL FRAMEWORK OF EXPLORATION-PRODUCTION 0.5 day
  • Overview of E&P activities, exploration, development and production costs.
  • General principles of oil taxation.
  • Concession contracts, production sharing contracts and service contracts.
  • Principles of rent sharing between States and oil companies.
  • Case studies: examples of contracts.
OIL CONTRACT MODELING 2.5 days
  • Cost of capital and discount rate, value creation.
  • Economic criteria for project evaluation: net present value (NPV), internal rate of return (IRR), payback period, etc.
  • Global profitability analysis, the impact of taxation and inflation on economic indicators.
  • Specific method to Exploration and Production: shadow interest.
  • Case studies: development of an oil field (under concession and production sharing agreements).
  • Equity profitability analysis.
  • Case studies: LNG project and gas pipeline project with specific financing.
RISK ANALYSIS OF EXPLORATION-PRODUCTION PROJECTS 1 day
  • Introduction to risk analysis and risk discount rate: sensitivity analysis, Spider and Tornado diagrams.
  • Probability of success, methodology of decision tree analysis.
  • Analysis of economic risk in exploration.
  • Typical problems with uncertainties:
  • Impact of ringfencing and State participation on the exploration decision process.
  • Farm in/farm out, cost and value of information.
  • Portfolio management for E&P projects.
CASE STUDIES
  • Development of an oil field (under concession and production sharing agreements).
  • Acceleration of production project with or without EOR (Enhanced Oil Recovery).
  • LNG plant project with specific financing.
  • Impact of “ringfencing” and the state participation in the decision-making process.
  • Valuation of a decision to acquire information (seismic or drilling).
  • Pricing of an exploration bloc.