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E&P Value Chain & Front-End Development

PIMP/PROJAFLGB
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Who should attend?

  • This course provides a thorough understanding of Front-End Engineering issues and the interaction between all experts involved along the decision path in formulating Project Development Plans (PDP) and submitting them for Final Investment Decisions (FID).
Audience :
  • Professionals involved in E&P projects requiring a comprehensive view of the methodology and tools needed for successful front-end development.

Level : Advanced

Course Content

  • DECISION PATH ALONG THE E&P VALUE CHAIN

      • Strategic issues in exploration-production:
      • Requirements for decision in the Oil & Gas industry. Primary objectives of an Oil & Gas company. Strategies to feed the E&P portfolio asset funnel. E&P risk dynamics and objectives of economic analysis. Life cycle of upstream assets. Critical decision points and value creation at experts meeting points.
      • Decision process from block evaluation to exploration drilling:
      • Exploration rounds and block evaluation. Subsurface knowledge and definition. Exploration risk and reward analysis and EMV (Expected Monetary Value). Exploration project’s risked economics (case study). Framework and interaction of various disciplines. Basis for decision-making in exploration. Impact of fiscal framework and state participation on exploration decision (case studies). Exploration risk mitigation through farm-out agreements. Decision process for a farm-out strategy (case study).
      • Decision process from discovery to development and production:
      • Discovery appraisal, reserves evaluation and recovery mechanisms. Reserves probability distribution and classification. Oil & Gas field development scenarios. Decision tree analysis for choosing optimal strategy (case study). Expected value of perfect and imperfect information (case studies). Framework and interaction of various disciplines. Forward investment analysis for a development project. Steps along the decision path up to the FID (Final Investment Decision). Overview of appraisal, development and project studies.

  • VALUE ASSESSMENT OF DEVELOPMENT PROJECTS

      • Fundamental contractual and economic aspects:
      • Economic rent: value and sharing, bottom line of Oil & Gas E&P contracts. Overview of the contractual framework of E&P activities. Motivations for State participation and role of NOCs (National Oil Companies). Risk mitigation through Joint-Ventures and JOAs (Joint-Operating Agreements). Sharing value through concession and production-sharing contracts (case studies). Regressive aspects of E&P contracts and fields’ economic thresholds (case studies).
      • A field development project economic evaluation:
      • Investment decision based on cash-flow modeling and analysis. Corporate finance and remuneration of capital employed. Importance of weighted average cost of capital. Fundamental condition for value creation. Project’s cash flow modeling and discounting. Project’s economic indicators and sensitivity analysis. A field development project economic model and evaluation report (case study). Choosing the most economically viable option, with or without capital constraints (case studies).
      • Methodology of quantitative risk analysis:
      • Beyond sensitivity analysis. Decision tree analysis. Monte Carlo simulation. Decision theory and 3-scenario approach.

  • CONCEPTS FOR SUCCESSFUL FRONT-END DEVELOPMENT

      • Closer look at why projects fail:
      • Discussion of issues and constraints facing Oil & Gas projects. Large capital Oil & Gas projects challenges and performance. Aggressive pursuit and conservative response. Project risks, organizational risks, external risks and the influence curve. Asset front-end loading index. Keys to successful project delivery.
      • FEL (Front-End Loading) purpose and methodology:
      • Foundation for smarter project execution. Important effort in the FED (Front-End Development). FEL phases and deliverables: visualization, conception, definition. Goals for FED and benefits of FEL. Risk exposure and amount of control.
      • Oil & Gas field development project definition:
      • Activities and stages leading to the FID. Studies to be performed to reach that goal. Stage-gated project management process. Interaction between various disciplines involved in the project.

  • DYNAMICS OF FEL 1 & FEL

      • FEL 1: Prefeasibility stage:
      • Objective of preliminary studies and appraisal requirements. Preliminary scheme and technical feasibility. Preliminary schedule and cost estimates. Economic, safety, environment and stakeholders issues.
      • FEL 2: Feasibility stage:
      • Objective of conceptual studies. Screening of alternatives and confirmation of feasibility. Key parameters definition and various technical options. Concept study content and concept selection criteria. Pre-project or pre-FEED study content and output. Field development plan, project economics and execution principles. Pre-requisites for launching the FEED or Basic Engineering. Case study.

  • DYNAMICS OF FEL 3 & FID

      • FEL3: basic engineering and development stage:
      • Project scope definition and integration management. Work breakdown structure for an Oil & Gas field. Scope of the basic engineering package. Reference documents needed and validation process. FEED activities, deliverables and organizations. Company and contractor execution plans.
      • Final Investment Decision:
      • Project sanction. Typical project organization. FEED contract types. Managing changes to the scope baseline. SOR (Statement Of Requirements) modifications.
      • Key field development planning and FEL issues to keep in mind.

Learning Objectives

  • Upon completion of the course, participants will be able to:
  • conduct field development feasibility studies,
  • build and develop project options scenarios,
  • define scope for project (front-end) estimates,
  • identify costly projects,
  • produce project development plans.

Ways & Means

  • Several case studies are used to illustrate the E&P decision process and the various issues of front-end development studies.