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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 and 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
  • to build advanced economic models for the economic evaluation of Exploration-Production projects
  • to analyze the economic results and carry out sensitivity analysis
  • to 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 and 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