E&P Project Risk & Decision Analysis Workshop

PIMP/PRDAWGB

Who should attend?

  • This course aims to comprehend the methods and gain a practical knowledge of the probabilistic models applied in Oil & Gas project decision analysis through a workshop dedicated to problem solving with spreadsheet applications.
Audience :
  • Oil & Gas professionals from various disciplines who need to acquire the skills needed to analyze risk of Oil & Gas projects and build probabilistic models to provide the decision analysis required for analyzing investment opportunities.

Level : Proficiency

Course Content

  • OVERVIEW OF THE DECISION PROCESS

      • Strategic issues in Oil & Gas: E&P portfolio components and risk dynamics, important value drivers, life cycle of upstream assets, critical decision points and value creation, economic rent sharing through Oil & Gas contracts.
      • Exploration phase: exploration rounds and blocks, fundamental questions for a manager, speculation and decision process, exploration risk and prospect reserves evaluation, techniques and expertise involved, exploration risk and reward analysis, impact of state participation, risk mitigation.
      • Development/production phase: appraisal, uncertainties and discovery reserves evaluation, techniques and expertise involved, field development schemes, capital expenditures, operating expenses, abandonment issues and costs, economic modeling, value of a discovery, fundamental condition for value creation.
      • Fundamental issues in decision analysis: uncertainty in capital investments, decision analysis process, terminology used in decision analysis, various applications in the Oil & Gas industry.
  • MAIN STATISTICS & PROBABILITY CONCEPTS

      • Descriptive statistics: measures of central tendency, measures of dispersion, grouping of large data sets, frequency distribution, cumulative and decumulative relative frequency.
      • Probability concepts: simple, conditional, joint, and marginal probability, probability rules, discrete probability distributions, continuous probability distributions.
      • Spreadsheet applications: drilling data, exploration drilling, reservoir data, workover...
  • RISK & DECISION ANALYSIS

      • Expected value concepts: expected value and standard deviation of random variables, structural elements of decision problems, payoff tables, expected monetary value, expected profitability index, performance index, expected opportunity loss, sensitivity analysis, fundamental decision criteria, mean-variance analysis.
      • Decision tree analysis: designing and solving decision trees, risk profiles, expected value of information (perfect or imperfect), expected net gain, prior, conditional and posterior probabilities, Baye’s rule.
      • Attitudes towards risk: expected preference value or expected utility, utility function, risk tolerance, certainty equivalent and risk premium, assessing the utility function, mathematical representation of utility functions, gambler’s ruin, risk-adjusted value and working interest.
      • Simulation in decision analysis: applications of simulation, steps in simulation modeling, probabilistic dependence of input variables.
      • Spreadsheet applications: decision tree analysis with the software PrecisionTree, Monte Carlo simulation with the software @Risk, reserves probability distribution, reserves uncertainties in the valuation of a simple prospect, Bayesian tree analysis for prospect evaluation, drilling prospect with farm-out option, cost and value of information from a delineation, seismic option, investment decision with a risk tolerance…

Learning Objectives

  • Upon completion of the course, participants will be able to:
  • understand the concepts of risks, uncertainties and probability distributions and tables,
  • practice the use of the various tools of expected values, decision trees and Monte Carlo simulation,
  • develop and solve different types of probabilistic models used in prospect evaluation and field development projects.

Ways & Means

  • Spreadsheet applications for numerous problems of decision analysis in the upstream sector.
  • Illustration with software @Risk and PrecisionTree.