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Upstream Economics & Management

15 days EAM/UEM
Level
Foundation
Audience
  • This course is designed for managers from the upstream sector who require a global picture of all the economic, financial and contractual aspects of exploration and production activities.
Purpose
  • This training aimes to provide 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 auditing.
Learning Objectives
  • Upon completion of this course, participants working in the upstream sector will be able to:
  • evaluate all aspects of taxation and the contracts used,
  • build advanced economic models for the economic evaluation of projects,
  • analyze the economic results and conduct sensitivity analysis,
  • incorporate the geological risks and uncertainties in the economic evaluation of projects,
  • analyze the main corporate financial statements (profit/loss and balance sheets) issued by oil companies.
Prerequisite
  • Participants need to be comfortable with Microsoft Excel.
Ways and means
  • Case studies simulated on computers.
  • Development of an oil field (under concession and production sharing agreements).
  • Acceleration of a production project with or without EOR.
  • 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 block.
  • 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 (Northwestern Europe, North Africa, West Africa, Middle East, Asia-Pacific, etc.).

Module 1 – UPSTREAM ECONOMIC & CONTRACTUAL FRAMEWORK
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 & 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.
Module 2 – UPSTREAM PROJECT ECONOMICS
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 & 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.
Module 3 – UPSTREAM ACCOUNTING & FINANCE
  • Statements of accounts for an Oil & 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.