Asia Pacific University of Technology and Innovation

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 Asia Pacific University of Technology and Innovation

Objective of the course:

1) Introduce the concept of supply and demand,
pricing and marketing practice of oil and gas.
2) Understand cash flows associated with oil and
gas projects
3) Petroleum economic feasibility studies during
the exploration and development stage.
4) Incorporate risk analysis into petroleum
economic study.
5) Provide fundamentals of international
petroleum contracts

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Consist 6 modules:
1) Energy supply and demand
2) Oil Resources
3) Natural Gas Resources
4) Petroleum Economic
5) Risk and Uncertainty in Decision Making
6) Petroleum Contract - PSC, service
contract, concession service

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 Asia Pacific University of Technology and Innovation

WHY DO ECONOMIC EVALUATION?

Purpose of Economic Evaluation Your Deliverables

• Bidding to National Oil Companies to • Advise management/decision

secure new petroleum acreages makers on the economic merit of
the project:
• Farming-in into existing acreages
–monetary value and return to the
• Unitization agreements
company
• Sale and exchange of petroleum
–understanding of the impact of
assets
each major economic parameter
• Project financing in the form of loans on the decision
• Propose new fiscal terms to National –selection of optimal development
Oil Companies options
• Evaluation of changes in –recommendation of of fiscal
governmental regulations which affect terms and/or negotiation
petroleum sector parameters

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What is economics

Picture the following scenes:

• The Rentz family is tired of paying rent
every month to the landlord. Should they
buy their own home?
• The young entrepreneurs who started
scour.com, an interest search engine for
video and music, have been offered $4
million for a 51% share in their company.
Should they accept the offer?

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 Asia Pacific University of Technology and Innovation

• The Federal reserve board is meet in in

KL. Should the board cut interest rate?

• What do the people in these scenes have

in common?
• Each group or person will make a decision
and each decision will require some
economic reasoning.

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Economics is the study of the choices made

by people when there is scarcity, that is, when
there are limits to what they can get.

Scarcity is situation in which resources are

limited in quantity and can be used in different
way. Because resources are limited, we must
sacrifice one good or service for another.

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 Asia Pacific University of Technology and Innovation

Micro & Macro Economy

• Microeconomics : the study of the choices made by consumers,
firms and government and of how their choices affect the market
for a particular good or service. It looks into similar issues, but
on the level of the individual people and firms within the
economy. It tends to be more scientific in its approach, and
studies the parts that make up the whole economy. Analyzing
certain aspects of human behavior, microeconomics shows us
how individuals and firms respond to changes in price and why
they demand what they do at particular price levels
• - labor cost, admin cost, capex, opex, net cash flow,…etc

• Macroeconomics : The study of the nation’s economy as a

whole. It looks at the total output of a nation and the way the
nation allocates its limited resources of land, labor and capital in
an attempt to maximize production levels and promote trade and
growth for future generations,
• – Gross domestic product (GDP), inflation, interest rate control
by national bank, tax rate, monetary policy...etc.

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Petroleum Agreements/ Fiscal

Arrangement

2 major categories
1)Concession
2)Contractual system- service contracts
& PSC

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 Asia Pacific University of Technology and Innovation

references

Al-Sahlawi, M. A. 1992. Petroleum

Economics and Engineering. Second
edition.CRC press
Hannesson, R. 1998. Petroleum Economics:
Issues and strategies of oil and natural
gas prodcution. Quorum.

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Assignment

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 Asia Pacific University of Technology and Innovation

END OF LESSON

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