Downstream Economics & Management


Who should attend?

  • 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


      • 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.

      • 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 - 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.

      • 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 - 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
      • Benchmarking: performance indicators, operational optimization, economic optimization.
      • Case study: Analysis of a company's supply chain.

      • 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.


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 :