This course provides participants a complete view of the economic principles of the downstream sector as well as the methods necessary for the decision-making processes.
Public :
Professionals from the refining, the petrochemicals and the distribution sectors in a management position where they need to deepen their understanding of all the essential economic aspects as well as the management tools used in the oil downstream sector.
Level :Knowledge
Prerequisite :
Basic notions on Downstream and Refining.
Basic notions of Microsoft Excel.
Course Content
TECHNICAL-ECONOMIC FRAMEWORK OF THE OIL FLOW
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Duration : 2 Days
Fundamentals of supply and demand of crude oil and products
Refining supply: overcapacity, types and quantities produced.
Main issues: deep conversion, new product specifications, integration of petrochemicals, environment, etc.
Technical reminder of the main refining units: distillation, conversion, blending, etc.
Evolution of refining schemes.
Planning of supply, crude arbitrage, product quality, etc.
From monthly schedule to (daily) scheduling.
Refining costs and margins.
Optimization of margins from different units.
Case study: management of typical sequential constraints (delays, process problems, etc.).
Case study: Valuation of intermediate products from a FCC (Fluid Catalytic Cracking) unit.
MARKETS & CONTRACTUAL FRAMEWORK FOR PETROLEUM PRODUCTS
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Duration : 3 Days
Price determination: market equilibrium (supply/demand) and its implications, trade-offs
Main parameters influencing the price of a crude oil or the price of a petroleum product
Presentation of the physical and financial markets
Methodology and role of reporting agencies: Platt's, Argus...
Notion of product, benchmark crude
Maritime transport component and estimation of the cost of maritime transport (use of "worldscale")
Review of the main types of chartering (voyage, time charter, bareboat...)
Roles and responsibilities of independent inspection companies
On board binder
Organization of a trading room.
Roles and responsibilities of each "office" (front-office, middle-office, back-office)
Functional review (legal, audit...) of contracts, review of Incoterms
Negotiation and drafting of a contract
Main clauses and their implications: Operational (laycan, laytime, NOR, demurrage), Financial (payment terms, credit limit, L/C (letter of credit), silent cover...), Customs, fiscal, legal (safeguard clause, force majeure clause...)
GT&C's (General Terms & Conditions) and risk assessment of each clause
Follow-up of the contract
Case studies: Purchase/sale of crude oil and products; hedging strategies
LINEAR PROGRAMMING
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Duration : 2 Days
Linear equations, preparation of a matrix.
Objective function, profit maximization or cost minimization.
Optimization of refining operations: Simplex method, graphical interpretation.
Analysis of linear programming results: properties of the optimum, validity domain of the results, marginal costs.
Sensitivity analysis.
Case study: construction of a refinery model matrix (material balances, product specifications, energy balance, objective function, etc.); group work on the optimization of a refinery operation.
INVESTMENT PROFITABILITY STUDIES
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Duration : 3 Days
Value creation and cost of capital, cash flow, discounting principle and impact of inflation.
Difference between income statement and cash flow. Key performance ratios at the corporate level.
Development of cash flow schedules: differences between income statement and cash flow, taking into account taxation, impact of working capital requirements, valuation horizon.
Economic evaluation criteria: Net Present Value (NPV), Internal Rate of Return (IRR), payback time, financial exposure, profitability index. Impact on project profitability.
Introduction to risk analysis: Identification and consideration of risks (PESTLE analysis, risk premium), sensitivities ("Tornado", "Spider" graphs), scenarios.
Project financing and return on equity.
Case studies: Calculation of ROCE, ROE, cost of capital of an oil and gas company.
Impact of Working Capital on a Polypropylene plant project.
Isomerization vs. alkylation project.
Profitability of a hydrocracker project.
Sensitivity calculation of a refinery construction project.
Shareholder profitability of a pipeline gas transportation project with project financing.
SUPPLY CHAIN MANAGEMENT
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Duration : 3 Days
Supply chain fundamentals
Mechanisms of inventory management: specifics, types of flows, inventory diagrams, lead times, product seasonality, impact of specification changes
Technical aspects of storage and transportation: underground and overhead storage, inventory measurement, losses, facility security, pipelines, safety stocks
Economic aspects of the logistics chain: costs, role of warehouses, sizing, investments, maintenance, contracted transportation
General and contractual characteristics of maritime transport
REFINING & PETROCHEMICALS SYNERGIES
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Duration : 2 Days
Main petroleum products and petrochemicals: reminder of key specifications.
Refining schemes vs. petrochemical schemes.
HSE specificities of refining (H2S, etc.) and petrochemicals (product instability, etc.)
Synergies of utilities exchanges (H2, gas, fuel oil)
Synergies of supplies: ethane, LPG, naphtha, atmospheric gas oil, vacuum distillate
Product exchanges (pyrolysis, olefins)
Joint processing of aromatic cuts and pooling of services
Refining vs. petrochemical margins and costs: gains from synergies
Case study: economics of a refinery, a steam cracker and the integration of the two using some synergy points.
Learning Objectives
Upon completion of the course, participants will be able to:
Analyze the economic fundamentals of the energy scene, with an awareness of the importance of market dynamics and its impact on the downstream oil economy,
Explain the resource/output balances of the refining industry,
Design and use the management and optimization tools of a refinery to increase its productivity,
Understand the elaboration of oil contracts and their clauses,
Understand the meaning of the terms used in the contracts and their operational, legal and financial scope,
Estimate the economic values of the various intermediate or semi-finished products,
Evaluate the economic profitability of a project,
Set up a logistic scheme and master different supply modes,
Analyze the technical and economic aspects of a logistics chain,
Identify and analyze the possible synergies between refining and petrochemicals,
Explain the economic stakes and the main parameters influencing the profitability of these sectors.
Ways & Means
Numerous case studies and group exercises.
Use of spreadsheets and the Excel solver (especially for economic optimizations and cash flow schedules).
Learning assessment
Participants will be evaluated during the training through exercises and case studies.
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Coordinator :In-house or contracted IFP Training trainers having expertise and experience in the downstream sector.
To French entities : IFP Training is referenced to DataDock ; you may contact your OPCO about potential funding.
Please contact our disabled persons referent to check the accessibility of this training program : referent.handicap@ifptraining.com
IFPT Account
