Course Objectives

The course will enable participants to apply a structured approach to project justification, investment appraisal and decision making in the upstream petroleum business



Who Should Attend?

Those with little or no previous project investment appraisal experience



Prerequisite Course

None



Course Overview

Basic concepts

Identifying project cash flows and sources of information

How to calculate the Accounting Rate of Return (ARR)

Project payback. Net present value (NPV). Internal rate of return (IRR)
and the cost of Capital. Profitability index (PI). Strengths & limitations
of each method

Project ranking - how to choose the best alternative

How to optimise expenditure

How to deal with inflation

Taking account of taxation

Accounting measures vs. Economic measures

Understanding other financial criteria for decision making. Balancing short
term vs. long term business objectives

Economics, risk and decisions - decision to points are risk points

Decision points for oil fields and gas fields. Risk & probability
definitions and concepts. Risk identification, measurement & management.
Forecasting as risk management. Assumptions, sensitivities & risk
premia

Exploration and appraisal decisions, uncertainty, risk and exposure Monte Carlo Simulation

Economic models and spreadsheet design
Development decisions
Work scope definition and options. Decommissioning economics & risks. Cost
estimating and Contingencies. Financing options. Construction contracts

Further development decisions and economic cut off

Preparing convincing project proposals

Post project appraisal

Learning Goal

Upon completion of the course, participants should be able to:

apply economic and risk management evaluation tools for the oil & gas project proposals

identify and quantify key uncertainties during field development and full life cycle economics

calculate the economic and financial viability of expenditure proposals projects under risk conditions

develop a structured approach to measuring, managing and combating commercial risk

assess the ranking of alternative projects

prepare convincing project proposals in a way that will win management, partner and government approval

improve project and business outcomes

Course Materials

Course notes