Introduction

Economics drives the entire oil & gas producing industry. Almost every decision is made on the basis of an economic evaluation. Oil & gas operating company develops petroleum economics to justify risk and return of investment of its projects.

Therefore, it is important for professionals who are involved in Field Development Planning and Portfolio Planning to understand the fundamentals of petroleum economics for investment decision, how projects are selected and how development concepts are selected. While each country has its unique economic policies, Malaysia has been applying Production Sharing Contracts as the guidelines for operating companies and to manage the resources responsibly.

This masterclass has been developed to help professionals on the subject and offers 2 levels of courses:

  1. Fundamentals of Petroleum Economics (3 Days)
  2. Advanced Petroleum Economics (3 Days)

Learning stage and need of each professional might be different, thus this programme is designed to give flexibility where delegate is able to choose to attend either single course or complete masterclass (2-in-1).

Learning Outcomes

By the end of the course, delegate will be able to:

  • Understand how every major NOCs and IOCs evaluate projects, decide which development option is chosen for FDP, valuation of assets and how risk are mitigated.
  • Comprehend economic indicators used and how they are presented to top management for decision making.
  • Recognise how current Malaysia’s R/C and sliding scale (Deepwater) PSCs work.
  • Understand the value drivers in the PSC and the key to maximising the contractor’s value from the PSC.
  • Appreciate the fundamental of Portfolio and Portfolio Optimization.
Who Should Attend

Front-end engineers, geologist, reservoir engineer, managers, planners, lawyers, and those involved in Field Development Planning project teams and Portfolio Planning.

Course Methodology
  • Workshop style
  • Lectures with exercises using spreadsheet
  • Group activities
  • Case studies
  • Q&A
Course Outline
Overview

This course uncovers the fundamentals of petroleum economics for investment decision, how projects are selected and how development concepts are selected.

Objective

This course is designed for professionals involved in E&P business to understand how economics is used to support and influence management investment decision. In addition, it helps professionals to understand both sides, national Oil Company (NOC) & on the opposite side, International Oil Company (IOC), aspirations and limitations and how it affects the working relationship between both parties.

Learning Outcomes

By the end of course, participants will be able to understand how every major NOCs and IOCs evaluate projects, decide which development option is chosen for FDP, valuation of assets and how risk are mitigated. Economic indicators used and how they are presented to top management for decision making.

Course Outlines
  • Why petroleum economics
  • Cash Flow – underlying principle to petroleum economics evaluation
  • Cash Flow in different type of petroleum contracts
  • Concession
  • Production Sharing Contract (PSC)
  • World Wide Fiscal system
  • Malaysian PSC and its evolution
    • PSC Flow Mechanism
    • Cost Recovery
    • Profit Sharing
      • Sliding Scale
      • Production Based
      • Threshold volume Based
    • Profitability Based (Revenue over Cost (R/C)
    • Net Cash Flow (Tax on profit Only)
  • Tax
    • Taxation concept
    • Capital Allowance
    • Net Cash Flow ( Tax based on Entitlement – Cost Recovery + Profit)
    • Optimizing tax OPEX vs CAPEX
  • Comparison of NCF based on different taxation basis
  • Cost Escalation
    • Real Term (RT) vs Money Of the Day (MOD)
  • Time Value of Money
  • Profitability Indicators
  • Risk Analysis/Mitigation
    • Sensitivity Analysis
    • Exploration Economics
  • Course wrap up
Overview

This course discusses intermediate to advanced petroleum economics with real life practical examples with focus on Malaysia current Production Sharing Contracts.

Objective

This course is the continuation of Fundamentals of Petroleum Economics concentrating on Incremental Analyses which is how projects evaluation are actually done day to day by both NOC and IOC. It also aims to help delegates to understand basis of Portfolio Analyses and Optimization. Spreadsheet model will be provided and will be used to perform portfolio optimisation exercises in this course.

Learning Outcomes

By the end of course, participants will be able to:

  • Recognise how current Malaysia’s R/C and sliding scale (Deepwater) PSCs work.
  • Understand the value drivers in the PSC and the key to maximising the contractor’s value from the PSC.
  • Appreciate the fundamental of Portfolio and Portfolio Optimization.
Course Outlines
  • Stand Alone versus Incremental project analyses.
  • Project Basis vs Consolidated Contract Area Basis (as per PSC)
  • Why Stand alone economics is not accurate and Incremental Analyses is the only accurate analyses.
    • Incremental Sliding Scale PSC analysis
    • R/C PSC Incremental analysis.
  • Buy vs Lease for R/C PSC
  • Explaining some unexpected results due to incremental effect.
    • Incremental “Reserves” higher than project reserves
    • Result at higher price worse off than lower price
    • Entitlement number goes down even though higher price is used in valuation.
  • Portfolio Analyses
    • Optimizing Portfolio
    • Efficient Frontier
    • Difficulties/Limitations in doing Portfolio Analyses
  • Course wrap up
About Expert Trainer

Your expert trainer is a Petroleum Techno Commercial Professional with 28 years of experience in the upstream Oil & Gas industry. He has worked in both National Oil Company (NOC) and International Oil Company (IOC). The experience has given him a balanced view of the aspirations of both sides and he believes both sides needs to understand this to ensure a successful relationship in the implementation of a petroleum contract.