Practice of Exploration-Production Contracts Economic Modeling

EAM/PCM

Who should attend?

  • To provide a practical understanding of the economic modeling of Oil & 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.
Audience :
  • Managers and executives involved in Exploration-Production activities who need to acquire a deep understanding of fiscal modeling for project evaluation.

Level : Proficiency

Course Content

  • CONTRACTUAL & FISCAL FRAMEWORK OF EXPLORATION-PRODUCTION

      • 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

      • 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

      • 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).
      • 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.

Learning Objectives

  • Upon completion of the course, participants will be able to:
  • explain the critical aspects of taxation and upstream contracts,
  • build advanced economic models for the economic evaluation of Exploration-Production projects,
  • analyze the economic results and carry out sensitivity analysis,
  • incorporate the geological risk and uncertainty in the economic evaluation of E&P projects.

Ways & Means

  • Case studies simulated on computers.