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Fundamentals of Petroleum Economics course content

The petroleum industry is one of the most influential players in the world economy. Given the
large scale of capital investment required for most petroleum projects, it is important that
investment decisions are based on a thorough analysis of variables and uncertainties.
This course provides a thorough, practical introduction to the techniques used within the
petroleum industry to value projects, assets and companies.
The material covered commences with general discounted cash flow principles and progresses
through to the more sophisticated simulation and real options approaches. It also addresses issues
specific to the oil and gas industry such as fiscal systems, risk analysis and competitive bidding,
providing you with the knowledge to answer questions such as "How will it work?", "What is the
cost?" and "What is the return/profit?"

The petroleum industry is one of the most influential players in the world economy. Given the
large scale of capital investment required for most petroleum projects, it is important that
investment decisions are based on a thorough analysis of variables and uncertainties.
This course provides a thorough, practical introduction to the techniques used within the
petroleum industry to value projects, assets and companies.
The material covered commences with general discounted cash flow principles and progresses
through to the more sophisticated simulation and real options approaches. It also addresses issues
specific to the oil and gas industry such as fiscal systems, risk analysis and competitive bidding,
providing you with the knowledge to answer questions such as "How will it work?", "What is the
cost?" and "What is the return/profit?"
During the course you will study:
Cash Flow Components and Economic Indicators

Why petroleum economics is required to make investment decisions

Distinguishing cash flow from income and profit

Sources of revenue and cost

Treatment of capital expenditures (capex)

Depreciation methods and their objectives

Operating expenditures (opex) and their fixed, variable and marginal components

Discounting and time-value considerations

Manipulating the present value and future value formula

Inflation, real and nominal (money-of-the-day) values

Capital budgeting and capital efficiency

Weighted-average cost of capital (WACC) and discount rates

Factoring in historic (sunk) costs into cash flow analyses

Valuing incremental investments

Economic indicators and yardsticks used to rank asset values (NPV, IRR, MIRR etc.)

Hurdle and minimum acceptable rates of return

Annual worth and annuity calculations for lifecycle costing

Discounted payback, financial exposure and breakeven analysis

Project lifecycles, optimum economic life and multi-year cash flows

Upstream Petroleum Economics

How cash flows through upstream companies and assets

Oil and gas price forecasting

Petroleum reserves categories and their valuation

Oil and gas production profiles and decline forecasts

International fiscal designs and systems

Regressive and progressive royalties and taxes

Mineral interest and concession agreements

Production sharing contracts and agreements (PSCs and PSAs)

Cost recovery mechanisms, depreciation, depletion and amortisation (DD&A)

Producer, government and joint venture partner takes: shares of revenues and costs

Loss carry forwards, limitations upon them including ring fences

Farm-out, farm-in and joint venture relationships and terms

Working and carried interests: paying, revenue and earning components

Project finance and evaluation of equity and debt-supported cash flows

Leveraging projects with debt and establishing debt repayment schedules

Capital cost budgeting, estimating and monitoring

Achievement analysis and earned value in project management

Midstream and Downstream Petroleum Economics

Oil and gas transportation options and their economics

Pipeline and facility tariffs: levelised, incremental and rolled-in options

Rate building methodologies to establish facility tariffs

Liquefied natural gas (LNG) shipping economics and netback calculations

Underground natural gas storage (UGS) economics

Gross product worth (GPW) of refined products and crack spreads

Cost and revenue components associated with refineries

Gross, semi-variable, and net refinery margins and net cash values

Petroleum product distribution logistics and economics

Gas to liquids (GTL) economic issues

Gas to power: combined cycle gas turbine (CCGT) economics

Retail fuel margins

Significance of non-fuel and convenience store revenues in retail fuel site economics

Managing and Mitigating Uncertainty and Risk

Definitions of risk and uncertainty

Seeking and valuing upside opportunities

Risk versus reward and risk capacity

Applying probabilities to quantify uncertainty

Sub-surface risks impacting the upstream sector

The need to evaluate a wide spectrum of above-ground risks

Geopolitical risks and opportunities

Environmental, community, safety and security issues

Holistic approach to risk analysis

Quadruple bottom line approach: integrating financial, societal, safety and environmental

Expected value concepts and calculating expected monetary values (EMVs)

Hedging strategies to mitigate market and price risks

Valuing derivatives (futures, swaps and options)

Sensitivities, Simulations and Decision Analysis

Deterministic versus probabilistic methodologies

Establishing ranges and cases to test base case assumptions

Spider diagrams and tornado charts

Decision trees: static and dynamic models

Decision models, game theory and guidelines to provide flexibility

Establishing probability distributions to represent uncertainty

Selecting and sampling appropriate distribution types

Representing distributions in cumulative frequency terms

Monte Carlo simulation techniques

Statistical analysis and interpretation of simulation results

The importance of graphics in presenting simulation results

Real options methodologies and valuations

Perceptions of risk, overview of utility theory and avoiding bias

Valuing Petroleum Assets, Portfolios and Companies

Asset valuation process: fair market value, probability and risk

Risk adjustments when valuing petroleum reserve categories

The portfolio approach to asset and corporate management

Portfolio characterisation, balance and diversification

Asset portfolio theory, efficient frontiers and feasible envelopes

Asset correlation dependency and risk

Optimising portfolio combinations and risked values

DD&A calculations integrating reserves, production and capital cost information

Factors driving petroleum merger, acquisition and divestment valuations

Free cash flow and business valuation methods

Analyst and balance sheet approaches to valuing listed companies

Inputs and outputs required for corporate valuation models

Deferred considerations in acquisition and divestment deals

Effective valuation of debt, price hedges and tax synergies in acquisitions and

Competitive bidding: theory, practice, risks and pitfalls

Upstream Petroleum Economics Using Excel

Principles of Petroleum Economic Analysis
Overview Basic Principles for Economic Analysis
Ingredients for an Economic Evaluation - Objectives and recurring themes; generating a cash
flow forecast, time value of money, understanding the analysis scope and purpose, project
Economic Analysis Procedure How to start, what to consider, where to go to get the
appropriate information and estimates as inputs.
Developing a Cash Flow Prediction Investments (such as capital expenditures and operating
expenses), revenue (from selling production at a price), timing issues.
Time Value of Money Defining and understanding the role of discount rate, investigate the
effects of varying discount rate.
Economic Metrics Net present value (NPV), internal rate of return, payout, profit to investment
measures, finding and development costs, and other appropriate metrics.
Fiscal Regime (Tax Royalty)
Examples and Exercises Interspersed Throughout the Day
Petroleum Economics Applications
Multiple Potential Investments Ranking projects, considerations of constraints and business
objectives, formulating fair-comparison models.
Multiple Potential Investments Portfolio considerations and complexities.
Probability of Success Geologic, mechanical, commercial how to incorporate them in our
Incorporating Risk Factors Chance of success, qualitative risk, how risk affects ranking
projects, how risk affects portfolios.
Correlation and Dependency Recognizing dependency or correlation among ventures, projects,
or wells, and why we must consider this in our business economics.
Beyond Deterministic Economics An introduction to stochastic (probabilistic) economics and
the rational for applying this methodology.
Examples and Exercises Interspersed Throughout the Day
Final Comprehensive Exercise - Valuation Case Study

Fundamentals of Petroleum Economics

Programme overview

A practical Energy Training course enabling delegates from all technical and commercial
disciplines to understand the theories and methods used to value oil and gas prospects. The one
week training will reveal the fundamental aspects of upstream petroleum economics and risk
Benefits of Attending

At the end of the programme, participants will be able to:

Study upstream petroleum economic discounted cash flow evaluation


Understand the derivation, calculation & application of economic metrics

Learn the components of an oil/gas field cash flow

Evaluate investment opportunities in exploration, development & production

Construct production sharing contract, tax & royalty concession models

Learn about international fiscal systems

Understand uncertainty & risk in exploration & economic evaluation

Programme outline

Introduction: World oil and gas industry

Fundamentals of production and end-use characteristics

The evolution of the oil and gas industry

The price of oil

Future issues

Upstream Petroleum Economics, Risk & Fiscal Analysis

Course Overview

Given the volatility in oil prices today, the economic evaluation of an upstream oil and gas
investment is essential. Business decisions involving asset acquisitions, lease-buy assessments,
exploration drilling options, oil and gas field development, equipment purchases, and fiscal
negotiations all require detailed economic analysis.
The course will cover cash flow analysis, deriving and understanding economic indicators and
detailed probability and fiscal analysis. These are vital components of the evaluation of
investments in todays international upstream oil and gas industry.
This 3 day course is a practical petroleum economics course that will provide participants with a
complete understanding of the use of the techniques of economic analysis and risk analysis as
currently practiced in the oil and gas industry. Participants will receive a thorough understanding
of the context of economic analysis as well as practical instruction and an appreciation of the
analytical techniques used. Along the course, participants will be engaged in exercises and
examples to reinforce their understanding of the concepts learned.
Course Objectives:

GAIN a thorough understanding of oil & gas economic evaluations

IDENTIFY the main components and CONSTRUCT cash flow projections for your
upstream projects

DETERMINE key elements and determinants involved in making oil and gas
investment decisions

UNDERSTAND and APPLY economic indicators to assess oil & gas industry projects

QUANTIFY and MANAGE uncertainty and risk faced in upstream business decisions

APPLY Monte Carlo Simulation and other statistical methods in risk analysis to
exploration and production investments effectively

UNDERSTAND, EVALUATE and MODEL both fiscal and production sharing contract
terms worldwide

Specially Designed for:


Reservoir Engineers

Production Engineers

Petroleum Engineers

Planning and Development Analysts/Executives

Commercial Analysts/Executive/Managers

Business Planners/Analysts/Executives/Managers

Production Sharing Executives/Managers

Project Executives/Manager

Petroleum Economists

General Managers

Finance and Account Executive/Managers

Course Outlines
Aims and scope





Worldwide fiscal terms





Discussion of the main components and relative importance of components of cash flow for oil
and gas investments (production, price, revenue, operating costs, capital costs, abandonment
costs and fiscal costs). Oil and gas price forecasts and the treatment of price forecasts in net cash
flow analysis.
[EXERCISE]: Delegates exercise in preparing a net cash flow projection.

How net cash flow projections are critical in determining economic life and reserves. The effects
of oil price, costs and fiscal terms on reserves estimates.
[EXERCISE]: Delegates exercise in determining economic life and estimating reserves.
How cash flow is distinguished from profit. The role of depreciation. When we use cash flow
and when we use profit.
How tax is incorporated into cash flow projections. The basic rules for calculating tax
worldwide. The effect of tax on field development decisions. Loss carry forward and the effect of
different petroleum tax regimes.
[EXERCISE]: Delegates exercises in calculating tax and demonstrating the effects of
different tax regimes.
Cash Flow and Production Sharing Contracts (PSC)
The basic economic distinction between tax regimes and production sharing contract regimes.
How to make cash flow projections for production sharing systems worldwide. Cost recovery
and profit sharing arrangements.
[EXERCISE]: Delegates exercises in cash flow analysis with different PSC terms.
The treatment and mistreatment of sunk costs in cash flow analyses and petroleum property
acquisitions. Discussions of the effects of sunk costs.
How to inflate the components of cash flows. The conventions and the jargon.


[EXERCISE]: Delegates exercise in generating cash flow incorporating inflation.

The distinction between real and nominal cash flows. Fiscal drag and the problems associated
with taking short cuts to derive real cash flows. Common misunderstandings in the use of real
cash flows.
[EXERCISE]: Delegates exercise in preparing real and nominal net cash flows.
Coverage of








[EXERCISE]: Delegates exercise in preparing depreciation schedules



The need to measure net cash flow projections with single indicators. The indicators used in the
oil and gas industry.
The importance of time.
The time value of money. Compounding and discounting. Using a discount factor table and
measuring the effect of time and discount rate. Discounting a cash flow projection and
calculating NPV. Understanding the meaning, uses and features of NPV. Valuing petroleum
properties using NPV. Preliminary discussion of choosing discount rates
[EXERCISE]: Delegates exercises in calculating NPV and demonstrating its features.
The distinction between deflating and discounting and between real and nominal discount rates
and NPVs. Dealing with the pitfalls of using real NPVs.
[EXERCISE]: Delegates exercises in calculating real and nominal NPVs.
The definition and application of IRR. Calculating the IRR.



[EXERCISE]: Delegates exercises in calculating IRR.

Multiple IRRs when, how often and how they arise. How the NPV and IRR measures can give
conflicting results and how to resolve this. The effect of project delays and the use of IRR.
[EXERCISE]: Delegates exercises in calculating multiple IRRs and seeing how they arise
and how to interpret them.
Calculation and use of payback and discounted payback indicators. The use of discounted
payback in petroleum fiscal regimes. Problems with payback.How compound payback is used in
[EXERCISE]: Delegates exercises in calculating simple and compound payback for tax.
Calculation and use of CPI. The use of CPI in oil companies and petroleum fiscal regimes.
Capital rationing. Problems with CPI.
[EXERCISE]: Delegates exercises in calculating CPIs and their application in some PSCs

Accelerated production example.

[EXERCISE]: Delegates exercise in incremental economics and the effects of fiscal terms.
Optimising field development and determining reserves.
[EXERCISE]: Delegates exercise in optimising field development and assessing reserves.
Lease-buy decision example.
[EXERCISE]: Delegates exercise in lease-buy economics and the effects of fiscal terms.
Analysing the sensitivity of investment decisions to variations in input parameters. Interpreting
sensitivity diagrams. The pitfalls in using sensitivity analyses for oil industry investment
[EXERCISE]: Delegates exercise in preparing sensitivity analyses and using them for
investment decisions.
Defining and using probability distributions. Means, standard deviations, levels of confidence.
Industry standard reserves definitions and classifications.
[EXERCISE]: Delegates exercise in preparing probability analysis.
Making estimates under uncertainty in the petroleum industry. Combining uncertain variables
and issues with adding reserves, adding costs and analysing economics.
[EXERCISE]: Delegates exercises in combining uncertain oil industry variables.
The mechanics of Monte Carlo simulation. Choosing probability distributions. The pitfalls of
Monte Carlo simulation and how to avoid them. Reserves estimation using Monte Carlo
simulation. Investment decisions using Monte Carlo simulation.
[EXERCISE] : Delegates exercises in deriving and using probability distributions of oil in
place, NPV and reserves using spreadsheet Monte Carlo simulation.
The definition, meaning and examples economics for oil and gas exploration drilling decisions.
Expected value (EV) versus probability of success lines. Using EV to compare drilling and

farmout decisions. The effects if fiscal terms and common problems with using EV. Choosing
probabilities of success. Valuing properties using EV.
[EXERCISE]: Delegates exercises in the economics of drilling, farming out acreage and
the effects of fiscal terms.
Analysis of example PSCs and fiscal terms in the Asia-Pacific region. Evaluating the severity of
fiscal terms. How the fiscal components work. How certain fiscal terms can distort oil and gas
project investment decisions. How to avoid potential investment distortion in the design or
negotiation of fiscal terms. Examples for Indonesia, Malaysia, Thailand, Vietnam and Australia.
[EXERCISE]: Delegates exercises in showing the structure and dynamics of example fiscal
regimes in SE Asia.
The economic comparison of fiscal terms across the world - severity and efficiency.
The above is a guide to the topics covered during the course and the approximate timing of the
topic. The presenter reserves the right to make modifications to these depending on the
delegates background and experience and the progress of the course.
Course Overview

Advanced upstream petroleum economics describes the philosophy, process, and methods
underlying upstream economic evaluation of capital investments under different categories of
risk and uncertainty and risk attitudes of decision makers. The short course facilitates a thorough
understanding of all the necessary concepts of capital investment evaluation, capital budgeting,
and investment decision criteria available and techniques for making rational economic decisions
in the oil and gas industry under risk and uncertainty.

Topics covered include deterministic measures of profitability; applications of expected value

concept, decision tree and expected utility functions in decision analysis; spreadsheet stochastic
modeling tools and Monte Carlo simulation process and applications in the oil and gas industry.

Key Course Content includes:

Future Global E&P outlook

Overview of Measures of Profitability

Exploration Risk Analysis Methods

Stochastic Modeling of Profitability

Monte Carlo Simulation Applications

Specially design for:

Petroleum Economists

Petroleum Engineers

Planning Officers and Managers

Business Analysts and Managers


Oil & Gas Financial Consultants

Legislative Staff

Independent Operators

Advanced Upstream Petroleum Economics

Course Outline
Day 1 - Economic Decision Tools and Investment Criteria

Review economic decision tools to evaluate projects, understand what investment criteria really
mean, and know which criteria to use to make rational economic decisions on best investment
options; practice building spreadsheet cash flow economic models to characterize the economic
factors inherent in different petroleum fiscal arrangements
Petroleum economic evaluation fundamentals NCF concepts / time value of money / DCF
Petroleum economic evaluation fundamentals fiscal arrangements overview/ review economic
Review of expectations and feed back
Syndicate Exercise -- Build and analyze economic evaluation spreadsheet models fifiscal
Day 2 - Understanding the Basic Language of Risk and Uncertainty
Learn to calculate and use descriptive statistics in business decisions, know common probability
distributions and use them to express judgments about risks and uncertainties; use built-in
capabilities of a spreadsheet application to generate descriptive statistics and solve various
problems associated with probability calculations and probability distributions
Basic principles of probability and statisticsmeasures of central tendency, measures of
Basic principles of probability and statisticstypes of distribution curves and interpretations
Review of expectations and feed back
Syndicate Exercise -- Descriptive statistics and probability analysis using Excel spreadsheet
Day 3 - Risk and Uncertainty Analysis Methods and Applications
Review approaches to risk and uncertainty analysis and the advantages and disadvantages of
each method; apply these methods to manage risk and uncertainty; apply add-in software
package to quantify probabilistic treatment of uncertainty in decision making in terms of
expected value and to solve decision analysis problems
Expected value approach and decision tree analysis definitions, calculation, meaning &

Expected utility theoryincorporating risk attitude, utility function, decision criteria and
Review of expectations and feed back
Syndicate Exercise -- Spreadsheet applications using excel add-in to solve decision analysis
problem examples
Day 4 - Monte Carlo Modeling Process and Simulation Analysis
Learn simulation modeling for Monte Carlo applications using spreadsheets. Understand how to
use commercial spreadsheet simulation add-ins to achieve simulation modeling analysis of
uncertainties and risks
Risk and uncertainty analysis using simulationoverview, process, modeling & applications
Monte Carlo simulation spreadsheet modeling tools, analysis and interpretations of simulation
Review of expectations and feed back
Syndicate Exercise -- Spreadsheet applications using excel add-in software packages (Group
Day 5 - Monte Carlo Simulation Applications in the Oil and Gas Industry
Develop skill to understand the process of using probabilistic spreadsheet models for Monte
Carlo simulation for risk and uncertainty analysis. Apply spreadsheet simulation modeling tools
to characterize business decision parameters subject to risk exposure.
Spreadsheet probabilistic modeling and simulation analysis of royalty and tax contract examples
Spreadsheet probabilistic modeling and simulation analysis of contractual system examples.
Review of expectations and feed back
Syndicate Exercise -- Risk and uncertainty analysis in the petroleum industry using excel add-in
(Group Practicum)

Fundamentals of Upstream Petroleum Economics and Risk

Who should attend:

This is a practical course that will enable delegates from all technical and commercial disciplines
to become familiar with the theories and methods used to value oil and gas prospects, discoveries
and fields in the international petroleum industry

The course covers the fundamental aspects of upstream petroleum economics and risk analysis
through a variety of lectures and workshop exercises. The practical application of theory via
computer-based workshops allow participants to construct economic models, incorporate
relevant cash-flow data and draw conclusions to aid decision-making.

This course will cover the following:

Develop knowledge of upstream petroleum economic discounted cash flow

evaluation methodologies

Become familiar with the derivation, calculation and application of economic

metrics such as NPV, EMV, IRR, Payback and PIR

Learn about the components of an oil or gas cash flow

Evaluate investment opportunities in exploration, development and


Incremental and project consolidation analysis

Lean about international fiscal systems

Understand government and oil company perspectives

Understand the financial structure and mechanisms of production sharing

contracts including the calculation of cost recovery and profit oil splits

Construct production sharing contract and tax & royalty concession

spreadsheet models

Understand practices to quantify uncertainty and risk in exploration, reserves,

costs and economic evaluation

The application of risk in the evaluation of exploration prospects

Introduction to Strategic Management in Exploration and

Who should attend:

The course will be valuable for all those in E&P who are interested and involved in strategic
decision making. These can be general- and functional managers and planning managers, who
need a good grasp of modern concepts of strategic management in terms of:

tools and techniques to be used.

developing plans to realize the aims and purposes of the organization.

developing strategies to adequately respond to the forces in the outside


contributing and participating valuably in the strategic decision making



Purpose of strategic management is to ensure that an organisation knows where it is going to, and
how it is going to get there. This must be based on a realistic understanding of the business
environment and how the organisation must change to be in shape for tomorrow.
Strategic management requires us to make sense of complex and dynamic situations in the
Upstream part of the Oil and Gas business where the emphasis lies in getting access to increasing
volumes of HC's on a regional or global scale. It requires an organisation which has the desire
and the capability to adept and therefore to change.

Introduction to strategy

E&P business environment

Strategic analysis


Strategic Decisions

Managing value in E&P

Performance measurement

Balanced scorecard

Roadmap to determine the strategies

During the course the participants will be focusing on topics such as; Strategic Analysis (i.e. to
identify key questions to evaluate and understand the industry and market around you), Visioning
(i.e. to understand the capabilities of your enterprise, creating a vision), Decisions, Creative
thinking, Managing Value, Performance measurement (i.e. value drivers, key success factors and
performance indicators) and Balanced Scorecards. Appropriate case studies and exercises will
clarify the theory.

Introduction to Upstream Economics

Who should attend:

The course is designed to be at an introductory level for those new to the subject of petroleum
economics. It is suitable for personnel from all technical and commercial disciplines.

This two-day course provides an introduction to the theories and practices of upstream petroleum
economics. Delegates will learn how to value oil and gas fields on a standalone basis using the
discounted cash flow methodology. Additionally delegates will see some more advanced
economic and risk analysis techniques in operation. International petroleum fiscal terms are
discussed to enable the delegates to apply the valuation techniques globally.

This course will cover the following:

Develop knowledge of upstream petroleum economic discounted cash flow

evaluation methodologies

Become familiar with the derivation, calculation and application of economic

metrics such as NPV, EMV, IRR, Payback and PIR

Learn about the components of an oil or gas cash flow

Evaluate investment opportunities in exploration, development and


Incremental and project consolidation analysis

Learn about international fiscal systems

Understand government and oil company perspectives

Understand the financial structure and mechanisms of production sharing

contracts including the calculation of cost recovery and profit oil splits

Understand practices to quantify uncertainty and risk in exploration, reserves,

costs and economic evaluation

Petroleum Project Management

Duration: 5 days

This course will cover the fundamentals of project management within the context of the
Petroleum Industry through a combination of presentations and software-based project
management exercises.
The course will be divided into two main parts:

Project Definition: The specification of the project.

Project Implementation: The launch, management and closure of the project

Project definition

The project definition comprises the following main components:

The Project Proposal
The project Proposal is the starting point for any project management
process. It is the document within which the background to the project is
outlined, the needs identified, the aims and objectives specified, the methods
and deliverables defined and the resource requirements and timescales set.
The Workflow
The fundamental framework of the project definition is the workflow, which
comprises a series of interlinked tasks, each of which must be clearly defined.
This project definition provides the project baseline against which the success
or failure of the project will be measured.

Task Descriptions: What is the task and why are we doing it?

Task Precedence - PERT Charts - defining the order of the tasks.

The Timeline
Once the project workflow model has been defined, durations can be
assigned and the timing of the project can be modelled.

Assigning Task Durations

Modelling the timeline - GANNT Charts

Identifying the Critical Path (resource and deadline critical)

Optimising without compromising

Resource Allocation
Once the timeframe is set, the resources can be allocated. This is typically a
balancing act with only finite resources available and deadlines pressing.

E.g. Staff, Materials, Software Licences

Analysing resource allocations - resolving resource conflicts

Provision for on-the-job training

Uncertainties and Risks

The primary purpose of the project management method is to foresee the
unforeseen and plan for it. The risks can be defined and the impacts
evaluated to understand the potential impact on the critical path and the
project deadline
Project Approval
The final step prior to project implementation is the approval process
whereby the project owners and sponsors approve the plan and give the go
ahead for project launch.
Project implementation

There are four main elements to the project implementation cycle. These will be covered in turn,
as outlined below.
Pre Launch
Several issue may need to be covered pre-launch, for example, are their any
training needs for staff to prepare them for the upcoming projects? Other
possibilities will be discussed.
Project Launch
This section will look at the key issues that should accompany the project
launch, for example:

Team introductions

Data requests

Establishing reporting procedures

Project Management
The project management process entails continual updates to the project
model. Various real life scenarios will be considered and various methods for
managing changes considered.
Project Closure
The final delivery of the project objectives should be followed by a project
evaluation session, which ensures that lessons are learned, both positive and
negative, and captured for future projects.
Exercises and software solutions

The entire process of project definition through to project closure will be followed using a
software-based project example, undertaken in teams. This will provide the maximum
opportunity to experiment with scenarios and evaluate sensitivities to different project

Economic Aspects of Upstream Petroleum Taxation and

Royalty Systems
Who should attend:

The course is designed for those working in the upstream industry who are not familiar with
taxation and royalty systems and require either a working or practical knowledge of the financial
mechanics and economic aspects of the contracts. Whilst it is suitable for delegates from all
technical and commercial disciplines, some background knowledge in upstream economics
would be an advantage.

The mission of this two day course is to provide an understanding of:

How taxation and royalty systems operate and their differences to production
sharing contracts

The range and diversity of fiscal terms applied globally in taxation and royalty

How to model and calculate the participant cash flows and economic metrics
for a taxation and royalty system

How technical and commercial personnel can contribute to better economic

analysis and decision making in countries operating with taxes and royalties


This course will cover the following:

An Introduction to Upstream Petroleum Fiscal Systems


Field and Profit Taxes

Corporate Income Taxes

Capital Allowances

Tax Ring Fences

Sliding Scale Fiscal Mechanisms

Other Taxes, Burdens & Bonuses

The Economics of Taxation & Royalty Systems

Taxation & Royalty Economics Workshop

Petroleum Economics Integrated with Decision and

Uncertainty Analysis
This unique course combines the fundamentals of petroleum economics and fiscal modelling
with deterministic and probabilistic risk techniques. It draws on the strengths of two
consultancies, Fugro Robertson based in Wallingford, UK and Decision Frameworks based in
Houston, USA. These companies have been training delegates worldwide for a combined 20+
The primary aim of this course is to equip the delegates with the necessary skills to:

Understand the theory of petroleum economics based on discounted cashflow

Calculate with confidence the key economic metrics used in investment

decision making

Appreciate the geological, engineering and pricing inputs to the cashflow


Understand the principles and appreciate the diversity of worldwide fiscal


Build Excel-based economic models, in both a Tax/Royalty and Production

Sharing Contract fiscal system

Discover the benefits of tornados, decision trees and cumulative probabilities


Gain new insights and confidence from your use of uncertainty data

Identify key risks and uncertainties for your projects

Develop an appreciation for the value of information

Make better recommendations and improve the quality of your decision


The course is unique in its field: delegates will gain tangible skills to take back to their
workplaces; economic model building integrated with practical decision and uncertainty analysis
. This will be achieved over the five days with a mixture of theory, question and answer, case
studies and hand-on practical workshop sessions.At the end of the course, delegates will be
provided with fully functioning economic models which, as well as being useful valuation tools,
will act as a memory jogger in future economic analyses or commercial negotiations in which the
delegates are involved. In addition, delegates will be given 30-day evaluation licenses to TreeTop
and DTrio software so they can continue to work their problems and prove utility of these
concepts within their workplace.
The course is suitable for delegates of all technical and commercial disciplines from oil and gas
companies, governments, banks, legal and accounting organisations.

Petroleum Systems Modelling

This module forms part of the Postgraduate Diploma in Applied Petroleum Geoscience course
that is jointly run by Fugro Robertson and Royal Holloway, University of London. The module is
5-10 days in duration and can be taken along with 5 others over a 3 year period to count towards
the validated programme.
For further information about the programme view the website: or
telephone: +44 (0) 1492 581811.
Petroleum systems modelling is a technique that allows you to reconstruct the
burial and temperature history of a sedimentary basin through time and to
understand source rock maturation and subsequently hydrocarbon expulsion and
migration. Various factors influence the petroleum system and it is imperative to
understand their evolution through time. With this knowledge the burial and thermal
histories can be calculated and used to assess generated and migrated
hydrocarbons as well as migration pathways and reservoir properties.

Learning Outcomes:

By the end of the course students will have a thorough understanding of:

The principles of reservoir and basin modelling

The factors that control petroleum systems in basins

Data required to construct models

Fluid flow in the subsurface

Heat flow within basins

The main approaches to modelling and the differences between 1D, 2D and
3D models

Students will also have the ability to:

Construct burial and thermal histories of basins

Determine fluid migration pathways

Determine source rock maturity

Carry out 1D modelling

Construct 2D, 2D and 3D models of basins

Course Content:

Modelling requirements

Petroleum system elements

Conceptual model

Calibration data

Heat flow

Source rock definition and kinetics

Fluid flow

1D modelling

Model building

Burial history

Heat flow history

Temperature calibration

Development of source rock maturity

Sensitivity analysis

2D & 3D modelling

Model building

Model calibration

Hydrocarbon migration

2D modelling

Drainage area analysis

Closure size and identification

Fill and spill history

Five core modules (30 hours each)

International Economics (For STF and SCTF students only)

Explores the economic relationships between nations; international trade relations and benefits;
the effects of barriers to trade and income distribution; trade policy; and international monetary
relations. The significance of external influences on fiscal and monetary policy, the balance of
payments and the theory and evidence of exchange rate determination all form part of this
module, which also looks at the response of the exchange rate to monetary and other shocks, and
examines the case for fixed exchange rates.

Energy Economics (For ETF students only)

This module provides the fundamental knowledge of energy market economics, upon which the
rest of the degree is built. The aim is to provide the student with an energy-specific toolkit, which
will allow him/her to understand the broader economic concepts and issues in this sector,

before dealing with the detailed business and finance issues which are covered in the other three
energy-specific modules.
Topics covered include: hydrocarbon supply and demand; microeconomic organisation of oil,
natural gas, coal and electricity markets; renewable energy; climate change and other energy
policy issues.

Managerial Accounting
Introduces the principles of accounting and finance in business and the main techniques in
management accounting, planning and control. Covers the interpretation and use of annual
reports and accounts, financial and ratio analysis, and their use for managerial decision-making,
and budgetary control systems.

Principles of Finance
As a first course in finance, addresses the key issues involved in valuing assets and liabilities on
the basis of their future earning power. Students are introduced to the problems involved in
specifying risky future earnings and the appropriate rate at which to capitalise them. Payoff
asymmetry is examined, and options are valued with the help of both the binomial and BlackScholes models.

Quantitative Methods
Following the induction course, it covers descriptive and inferential statistics, as well as
regression analysis techniques. Develops skills that are essential for other modules and the
dissertation and is designed to ensure relevance to everyday business problems.

Shipping Economics* (For STF students only)

Focuses on the operational environment of the bulk-shipping sector. Subsequently discusses
extensively the microeconomic structure of the four main markets (freight, second-hand,
shipbuilding and demolition) in dry bulk and tanker shipping, together with the operational
characteristics, international regulations and policies which affect these highly competitive,
volatile, but nevertheless exciting industries. Continues with an introduction to liner and
container shipping economics and concludes with a discussion of the principles of modern
supply chain logistics, of which bulk shipping forms an integral part.

Supply Chain Economics (For SCTF students only)

Sets the foundations for understanding the industry by outlining its basic economic structure and
organisation in a series of lectures. Topics for discussion include the significance and role of
transportation in society; transport demand parameters; |the regulatory framework and transport
policies; transport geography and physical location; and the issues raised by vehicle and
infrastructure provision. In the spirit of the international scope of this course, examples will be
drawn from several regions around the world, with particular emphasis on Britain, Europe and
developing countries. Concludes with a series of lectures introducing the concepts of logistics
and supply chain management.

Oil & Energy Transportation & Logistics (For ETF students only)
This module will equip students with the tools necessary to think skilfully and maturely, but also
independently on matters relating to the oil and energy transportation business and industry.
Students will develop an understanding of the economic structure of the tanker shipping industry,
LNG and LPG shipping, and pipeline and land transportation networks. Students will also
develop an understanding of the industry's cost structure and how prices are set and revenue is
earned by tanker, LNG, LPG and pipeline companies.
*Sponsored by Thanassis and Marina Martinos

Five core modules (30 hours each)

Advanced Quantitative Methods

Builds on the knowledge acquired in Quantitative Methods in Part one and focuses on skills
required for advanced analysis in areas such as risk management and forecasting.

Corporate Finance
Builds on the subject matter learned in Principles of Finance in Part one and focuses on the
decisions undertaken by the modern industrial corporation, with respect to such areas as
expansion, restructuring, capital formation and acquisitions. Applying theoretical concepts to
case studies, the student will extend his or her ability to formalise, structure and analyse capital
expenditures and investments, including how they are financed and how the risks thereby arising
are managed. Topics include mergers and acquisitions; restructuring; investment banking; cost of
capital; and the use of futures and options to manage risk.

Financial Markets
Covers the global economic and financial environment within which business corporations
operate. Globalisation and integration of markets for debt, equity and risk management have
created new opportunities in the capital formation process, but pose great difficulties in
navigating successfully. Where should capital be raised? How does one manage the risks from
certain currencies and certain sovereign regions? In the context of the globalisation of capital
markets, considers the structure, functions and performance of financial markets on an
international basis and how they facilitate real economic activity; and the role of institutions
operating as global intermediaries within these same markets.

International Commodity Trade (for STF & SCTF students only)

Discusses the theory and practice behind the development of modern patterns of trade, focusing
on the world's major bulk commodities, such as grains, petroleum, and ferrous and non-ferrous
ores. Considers in depth the distinctive microeconomic characteristics of key commodities, such

as storability, perishability and seasonalities; pricing mechanisms and methods of adjustment; the
role of key producers and key markets in shaping market conditions.

Global Supply Chain Management (for SCTF students only)

Building on the knowledge gained in Supply Chain Economics, this module studies the process
of planning, implementing and controlling the efficient, effective flow and storage of goods from
point of origin to point of consumption.Using, inter alia, computer-based simulation exercises,
discusses such topics as supply chain management, inventory control, multimodal transport
management, global distribution, and quality and value in logistics. Case studies are used
throughout to illustrate the planning of integrated transport systems, and also to strengthen an
appreciation of logistics as a strategic tool. Visits by industry leaders illustrate best practice,
affording the opportunity for discussion of timely issues.

Shipping Investment and Finance* (for STF students only)

The skills developed in both Principles of Finance and Corporate Finance are applied to the
shipping industry while introducing several new and important concepts to develop the ability
and the analytical tools to make rational shipping investment and finance decisions. Making
extensive use of case studies, areas covered include the fundamental principles of shipping
investment and finance; vessel investment and disposal markets; investment feasibility studies;
bank credit policy, bank credit analysis and proposals; other sources of shipping finance such as
shipyards and capital markets; and risk management in shipping.

Oil & Energy Trading and Economics (for ETF students only)
This module prepares you for a career in the oil and energy industries. It consists of a
combination of the following key aspects of the energy industry. Petroleum - Exploration,
production history and cost; Basic hydrocarbon chemistry; Refining economics; Effect of
product quality and the environmental issues. Energy - Geopolitcal role of oil, gas and coal;
Supply and trading patterns and economics; Demand structure and inter relationship of the
energy markets; The role of finance, Price risk management and controls.You will progress from
an understanding of the exploration and development of oilfields to the economic exploitation of
the energy markets through refining, gas distribution and power generation, to marketing and
trading and the role of finance throughout the supply chain. The integration with the other
aspects of the course will lead to an understanding of short term trading, project financing,
shipping economics and the use of systems and instruments to risk manage the process both in
the short and long term context

Power Markets (for ETF students only)

This module covers in some detail the power generation sector and supplements (and expands)
the material covered in the Oil & Energy Trading module. The aim is to provide the student with
a deeper understanding of the power markets, from generation, to pricing and all other pertinent
issues. It also aims to put renewables in context, as their output feeds directly into these markets
and supplements (or perhaps competes with) conventional hydrocarbons.Topics covered include:
power generation from exhaustible and renewable sources; transmission, distribution, metering;

regulation, liberalisation and climate change issues; market structures for electricity; pricing,
risks and their management.
Five electives (18 hours each)
One elective and a Business Research Project

You may choose from a wide variety of electives. For example:

6 Sigma for Managers

Air Transport


Commodity Derivatives & Trading

Container and Intermodal Transport

Dry Cargo Chartering

E-commerce and IT

Empirical Finance

Energy & Weather Derivatives

Equity Investment Management

Finance in Emerging Markets

Fixed Income Analysis

Forecasting Investment Markets


International Banking

Marine Insurance

Mergers, Acquisitions and Divestments


Project Finance

Retail Supply Chain Management

Risk Management

Shipping Innovation*

Shipping Law

Shipping Risk Management

Supply Chain Finance

Supply Chain Modelling

*Module sponsored by the American Bureau of Shipping (ABS)

Research Methods module

This compulsory module trains students to undertake independent research either in the context
of a single organisation or by using third-party sources. It provides the necessary tools and skills
to initiate, research and write up a business project and includes training in research
methodology, availability of data sources, project writing, time-management and presentation
skills. These skills will be invaluable to students in their future career whether or not they choose
to complete a project.

Introduction to Energy Trading and Hedging

Course Outline
I. The Stage
Let's set the stage by reviewing the basics of energy trading markets, players, tools and
techniques. Is it a good business? We'll look at the history of energy trading, starting with the
pre-futures market days to today's world. Significant differences; significant opportunities.

II. Energy Market Structure

We'll discuss the three main energy sectors: oil, natural gas and electricity. As we try to
understand the risk and reward for trading in each sector, we'll look at and discuss why each of

these sectors is at different levels of commoditization and the types of trading that occur in each
area. Which players dominate which sector and why? Which sector has the most profitable
trading opportunities? How does the international market play into the three US sectors? Why
should you select one trading sector over the other?

III. Behavior of the Market and Participants Philosophy and Psychology

Before moving into other technical tools and techniques, let's pause to get a better understanding
of market behavior. Following trends, contrarian theory, interpreting the news, waves, fear and
greed are just a few of the things that make traders react. We'll discuss the philosophy and
psychology of traders, and point out some no-nonsense rules that should be a part of everyone's
trading repertoire to successfully compete in fast-moving and highly volatile markets.

IV. Money Management

We all know the three most important things about the real estate market are location, location,
location. The three most important things about trading are money management, money
management, and money management, topped with discipline. We will end the first day with a
litany of the rules and approaches that work when trading any commodity in any market. The key
to successful trading is longevity. One needs to be in to win it.

V. A Few Approaches That Work for Energy

This session will continue where the previous session left off and discuss some of the major
techniques that work well for the various energy markets. Some trading tools and techniques
work better than others for the various energy markets. We'll look at each one by one using real
energy examples showing successes and failures. We will explore the various timeframes
normally traded day trading, overnight trading, and medium to long-term trading.

VI. Time to Create Some Trading Systems

Is it possible to improve your results by combining indicators/techniques? The answer is yesin
a carefully and objectively designed and tested system. Several excellent software programs exist
on the market that allow the user to develop and back-test any combination of classical indicators
and indicators currently used in the market, as well as allowing users to develop their own
market indicators. This session will look at a few basic systems and discuss how they performed
in various energy trading situations.

VII. A Walk Down the Risk Management Path

The session will detail the design of a typical risk management program covering the corporate
policies, procedures, board resolutions, FASB 133 requirements and checks and balances
required that meet the most diligent auditor's requirements. These steps are a pre-requisite to
understanding the various tools and techniques that are normally employed to manage risk. We
will also discuss the three big questions of risk management: What is the company's risk profile?
What percentage of the business do we hedge? How far forward into the future do we go? These
questions are difficult, but not impossible.

VlII. Understanding the Terminology, Tools and Techniques of Energy Hedging

The journey will start with a historical overview of the development and characteristics of all of
the markets and tools used for energy hedging the what, why, who and how. There are three
toolbags in the risk management arsenal: physical purchasing methods, regulated futures
markets, self-regulated over-the-counter markets. This session sets the stage and presents a
macro view of all of the tools available to your risk manager.

IX. Identifying Energy Price/Margin Risk

To effectively manage risk you have to identify and quantify the risk. Using typical fictional
companies that operate at each level of the infrastructure, this session will identify and quantify
their risk. Each attendee will fall into one or more of the categories providing them with the
knowledge to now identify and quantify their own risk. This is absolutely the first step in
building an effective and long lasting risk management strategy.

X. Self-Regulated Instruments OTC Derivatives Tool Bag

This is the third tool bag in the hedger's arsenal, and it is growing by leaps and bounds. The
individual instruments, size of the contracts and electronic exchanges are making these
customized instruments very cost-effective tools for hedging. This session will discuss hedging
examples using various types of swaps, who the players are, and how to get started.

XI. Keeping All Your Options Open

If you originally thought options were not a viable tool, you will be surprised to see how
functional and easy it is to incorporate them into your risk management portfolio. There are only
two types of options, and two things you can do with each. There are four elements that go into
the cost of an option. This session will bring it all together and provide effective option strategies
using both options on futures and OTC swaptions to hedge your price and margin risk.

XII. Let's Put It All Together

Using a techno fundamental model, this session will describe a non-discretionary method to
answer the main risk management questions. How much do I hedge? How far forward do I
hedge? What instruments do I use? What techniques do I use? In addition to presenting the
workings of the model, this session will also go over various hedging examples using the results
of the model.

Oil Industry Economics From Wellhead to Gas Pump

Understand the economic principles necessary to navigate
the volatile waters of the international and domestic oil
The oil industry is complex and international, with economics driving every aspect and every
decision. This course delves into the detailed economics of oil, from the moment the first drop of
crude is extracted, to its final consumption by end customers around the world. You will leave
this course able to understand the myriad normal everyday economic decisions from both
strategic and tactical perspectives, allowing you to immediately bring larger context to your
decision-making skills as soon as you return to work. Here are some of the areas given focus in
the course.
What you will learn in Oil Industry Economics

Exploration and producing economics

The economics of gathering and/or temporarily shutting in oil

Economics of gathering oil

Economics of moving oil to the manufacturing sector from all major methods: truck, rail,
pipeline and ever-increasing waterborne

Economics of the new freight markets

Basic refining economics of various types of refiners and refineries.Refinery economic


Economics of various crudes

Netback analysis

Cracks and beyond

Economics of various export refiners

Economics of moving refined products to spot markets by various methods: truck, rail,
pipeline, barges and ocean-going vessels

Economics of moving products to wholesale & retail levels

How the economics relate to various pricing methods at each level

Economics of storing crude oil

Economics of storing refined products

All about the economics of crude oil arbitrage trading

Macro economics of worldwide energy complex

Current geopolitical factors and internal determinants impacting price

Immediate Benefits of Attending This Course

Oil Industry Economics is the fastest and most comprehensive path for getting up to speed on the
oil landsape. From manufacture and distribution to market factors and retail use, our training is
guaranteed to deliver the industry knowledge you need quickly. These following benefits are
valuable as soon as you return to work:

Get a complete birds-eye view of the global oil market

Understand market and cost factors that impact oil price throughout every step of its life

Get comfortable discussing trading and hedging topics

Learn to spot opportunities for profit that exist throughout each phase of oil production
and delivery

Go back to work with the competence and confidence to operate knowing you have the
most up-to-date knowledge available in the field

Upstream Oil and Gas

Learn the fundamentals of planning, developing and

optimizing the production of an oil or gas reservoir.
This training course leads attendees through thirteen sessions of material covering exploration
through appraisal, reserves recognition, development and production to the sales transaction
point. Key terminologies and concepts are developed using numerous examples. Attendees will
learn fundamental petroleum geology and exploration principles which provide the foundation
for drilling, reservoir development and production concepts. At each step we will consider the
differences between on and offshore activities and conventional and unconventional resources.
The course is taught in a format that reveals the economics and risk management decisions that
are inherent in the industry. Actual examples from the oil and gas industry are used to illustrate
decision processes. A high-level view of the technologies employed by the industry gives even
the non-technical attendee a feel for the business. Ample time is provided for Q&A and
interaction with the instructor with 30-plus years of industry experience.
What You Will Learn
Learn about: crude oil and natural gas formation; petroleum geology; geoscience tools that image
the subsurface and measure rock properties; managing exploration risk and the economics of
exploration; how geologists and engineers estimate the size of the discovery; why appraisal
drilling and petrophysics saves investment dollars; what proven, probable and possible mean to
the oil and gas professional; how the industry develops a field for production; what techniques
are used to optimize recovery from the reservoir over its lifetime; and finally what must be done
to oil and gas before it leaves the surface facilities.
Special focus on:

The four requirements for an oil and gas reservoir

Land lease acquisition and obligations of the operator

Exploration program planning and goals

Geologic risk and how it is quantified

Drilling and how a well is planned

Vertical vs. directional vs. horizontal drilling choices

The importance of appraisal work

What are the key issues in determining how a field is developed

Definitions of proven, probable and possible volumes

Reservoir engineering to optimize the recovery

Special techniques to recovery more oil, i.e., waterflooding, miscible gas injection,
polymer-surfactant injection and thermal processes

Where petroleum economics impacts the discovery-appraisal-development-production


The theory of peak oil production why prices are going upward

Fundamentals of Petroleum

Learn the entire petroleum process from crude production

to refinery in order to better understand its impact on cost
and eventual pricing at the pump.
In this petroleum industry training course, you will explore the entire petroleum complex, from
crude production to the refinery down to the pump. You'll understand the complexities of one of
the world's most exciting and dynamic industries.

What You Will Learn:

Crude Oil:
Exploration to production, and the refining process from basic distillation to complex
Pipeline Transports and U.S. Spot Markets:
We'll cover trading in the intermediary markets and the critical role these components
play in the downstream infrastructure.
Wholesale Markets and Exchanges:
We'll highlight everything from proprietary additives to the exchange agreements
between oil suppliers used to keep our nation supplied.
The Retail Landscape:
We'll examine the players, trends, brand value, and margins -- all of the pricing
components that make up a street price in any given market.
Special focus on:

The key elements of downstream oil supply, wholesale, and retail

Flow from the refinery to the street

Refinery basics

Critical price benchmarks

Basics of trading and risk management

Major U.S. energy policy

Valuation of refined products

Spot market; Wholesale rack market, Retail landscape

Deal strategy, structure, traditional and non-tradition purchasing

Key players

Fundamental pressure on price and supply

Technical pressures on price

Political pressure on price

Latest analytical tools, analysis, data and software systems


Pipeline transport and U.S. spot markets in the intermediary markets and the critical role
these downstream components play in the infrastructure

Wholesale markets and exchanges, from proprietary additives to the exchange

agreements between oil suppliers used to keep our nation supplied

Retail landscape. Examine the players, trends, brand value, margins, and pricing
components that make up a street price in any given market

Branded vs. unbranded trends, plus the emerging role of hyper-marketers

New boutique and alternative fuel trends