prospect appraisal and petroleum economics
Course Description
Business context: Assessing the economic value and overall risk of an exploration prospect or a development project is a key activity in the E&P business. On the basis of this project ranking is done and investment decisions are made. E&P professionals should be able to quantify the uncertainty in their prediction of the volumes of oil and gas in a structure, which is best expressed by a probabilistic statement: the expectation curve. A further awareness is needed of project economics in oilfield development, as well as understanding uncertainties of political, oil price, transport and market nature. This course will present the participants with a wider view, from translating prospect evaluations into probabilities of hydrocarbon volumes and into the monetary value of a wider prospect area, as well as the basics of development economics Course content: • The position of prospect appraisal and petroleum economics in the context of the E&P decision process. Brief summary of world-wide reserves • A recapitulation of descriptive statistics and of probability theory. Definition of relevant distributions. • Estimation and parametrisation of variables for prospect appraisal, including their uncertainties • Elementary Reservoir Engineering principles and reserve definitions • Principles of Bayesian statistics, and its application prospect appraisal. • Basic economics, different fiscal systems and Petroleum Contracts. • Development project economics and sensitivities to internal and external factors, project ranking criteria. • Decision analysis. Exploration economics based on Expected Monetary Value. Scenario development
Learning, methods and tools: The course uses an alternation between lecturing, paper and computer exercises. Hand-out material will at least comprise copies of presented slides.
Potential hand-out books: Risk and decision analysis in projects, by John Schuyler, 2nd edition, 2001 or Oil and Gas Exploration and Production, Reserves, costs, contracts, by IFP School, Technip 2004
Audience
Explorationists involved in prospect generation, team leaders, exploration managers, petroleum engineers involved in economic evaluation, as well as finance staff involved in investment in E&P projects
Prerequisites
Knowledge of Basic Petroleum Geology as related to Exploration. Knowledge of Basic Petroleum Economics is helpful but not required
Course Schedule
| 1 | : Introduction. Very brief history of oil industry and summary of world reserves. Basic probability theory and descriptive statistics, comprising conditional probability (Bayes), recapitulation of population/sample moments, (log)normal, chi-squared and beta distributions, stochastic variables. Cumulative probability curves and their interpretation |
| 2 | : Prospect evaluation, comprising assessment, estimation and description of distributions of prospect variables. Definition of uncertainties. Elementary reservoir engineering principles. Reserves definitions. Essentials of Monte Carlo and conditional simulation and interdependencies. |
| 3 | Basic economics, comprising discount rates, present and future values, interest, CAPEX and OPEX, fiscal systems and other external factors. Petroleum contracts & their economic effects |
| 4 | : Project economics, comprising cash flows, NPV, Rate of Return, PV Cash surplus, Discount Factors. Sensitivities and uncertainties, spider diagrams |
| 5 | : Decision analysis. Scenario’s. Exploration economics, EMV. Case history |
Instructor
Dr. Gerhard Diephuis
Instructors may vary based on location and schedule.
Classes
No classes are currently scheduled for this course.
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We will schedule a class for this course, when there are enough participants on the waiting list.