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Upstream Economics & Management

15 days EAM/UEM
  • Managers from the Exploration-Production sector who must acquire a complete picture of all the economic, financial and contractual aspects of the hydrocarbons exploration and production activities
  • To provide the participants with a clear view of the contractual and economic framework of Exploration-Production in order to apprehend the tools for decision making, financial management and audit
Learning Objectives
  • Upon completion of the course, participants will be able:
  • to evaluate all aspects of taxation and contracts used in the upstream sector
  • 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
  • to analyze the main corporate financial statements (Profit/Loss and Balance Sheet) issued by oil companies
Ways and means
  • Case studies simulated on computers:
  • 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
  • Gas pipeline 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
  • Analysis and construction of balance sheets, income statements and key financial statements of an oil & gas company
  • Examples of petroleum laws & fiscal regimes around the world (North West Europe, North Africa, West Africa, Middle East, Asia-Pacific, etc.)

Upstream economic environment 1 day
  • Economic development of the upstream sector
  • Various actors in Exploration-Production and their strategies. Oil markets and prices
  • Current exploration and production activities
  • Levels of investment
  • Examples of finding, development and production costs
Contractual and fiscal framework of upstream projects 4 days
  • Concession and Production-sharing contracts: principles, examples of tax regimes and case studies
  • Risk-service contracts and technical assistance contracts
  • Objectives of a flexible and progressive tax system, flexible taxation terms
  • General structure of Exploration-Production contracts
  • Exploration phase: duration, commitments, surrender, data and information, etc.
  • Appraisal phase: work program, gas provisions, commerciality, etc.
  • Development phase: financing, State participation, budgets and development plans, unitization, etc.
  • Production phase: work conduct and supervision, audit and accounting, financing, taxation, transportation and marketing of production, hydrocarbon price determination, etc.
  • General terms & conditions: title transfer, force majeure, governing law and dispute resolution
  • Main legal provisions in a Joint Operating Agreement, and Farm in / Farm out agreement
Economic analysis of E&P projects 4 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
  • Equity profitability analysis
Risk analysis of e&p projects 1 day
  • Introduction to risk analysis and risk discount rate: sensitivity analysis, Spider and Tornado diagrams
  • Probability of success, economic risk analysis in oil exploration
  • Economic study of an exploration project using Min, Mode and Max scenarios
  • Impact of “ringfencing” and the state participation in the decision-making process
Upstream accounting and financial management 5 days
  • Statements of accounts for an oil and gas company, upstream specificities
  • Exploration: full cost, successful efforts, FAS 19
  • Reserves accounting: rules, FAS 69, control
  • Consolidation and Joint Venture accounting
  • Contract accounting, social accounting, group accounting
  • Accounting for concessions and PSCs: reserves, inventories, commitments, revenues
  • Norms: asset amortization, asset retirement obligations, value impairment test, etc.
  • Reporting: purpose, obligations, financial communication
  • Analytical accounting. Cost management and control
  • Audit: general, fiscal, partners
  • Tax audit: recoverable costs, common costs, sole costs