Petroleum Economics and Fiscal Modeling
Understand how oil and gas companies value upstream assets – exploration acreage, undeveloped discoveries, producing fields – and make decisions whether to invest or not.
This highly practical and experiential three-day programme will empower you to:
- Understand how key project assumptions – production, prices and costs – are modeled in the oil and gas industry
- Learn what various economic indicators – like NPV, EMV and IRR - actually mean
- Examine how assets at different stages of their life are valued in investment decisions, including the application of risk analysis to exploration opportunities
- Review the vast array of fiscal and contract terms employed by governments around the world for oil and gas projects and identify trends in the evolution of fiscal terms
- Work with the spreadsheet models to understand how different fiscal terms are included in the cash flow analysis and evaluate the impact of the terms on project economics
- Compare the pros and cons of different fiscal terms from both investor and government perspectives
- Participate in a negotiation of fiscal terms, based on the knowledge learned, and supported by the spreadsheet models developed, on the course.
- Explore how the various fiscal systems applied around the world impact upon these values and decisions.
What is the programme about?
Develop your knowledge to understand how oil and gas companies measure the economic value of assets and the impact of fiscal terms on those values. Gain ‘hands on’ experience of combining key project assumptions and fiscal terms in spreadsheet models, to generate values for different assets. Consider how government and investors will consider the same fiscal terms very differently – and negotiate a fiscal deal!
Our expert trainer draws on his extensive knowledge gained from over 25 years of modelling, analyzing, negotiating and advising on fiscal terms to advance your practical knowledge and skills.
This practical and interactive programme is designed for all those involved in the oil and gas industries either within, new to or supplying to, who would like to broaden their knowledge including:
- Geoscientists and Engineers and other technical specialists
- Petroleum Economists
- Commercial Managers and Contract Managers
- Business Development
- Asset Managers
- New Venture Managers
- In-house Legal and Private Practical Lawyers
- Analysts within the financial services sector
- Finance Personnel
- Directors Functional Specialists
Establish the attendees’ backgrounds and their objectives from the course
Establish the course framework, nature of exercises and ultimate deliverables
Understanding Petroleum Economics
Introducing the spreadsheet model
Inputting key variable assumptions: oil/gas production, prices, costs
Generating revenue and cash flows
Development investment indicators
Meaning and calculation of Net Present Value, IRR, etc.
Generating indicators in the spreadsheet model
The importance of the timing of cash flows
Exploration investment indicators
Adding risk factors and calculating Expected Monetary Value (EMV)
Establishing the project value (before government gets involved)
Conducting sensitivity analyses
Understanding Petroleum Fiscal Systems
Adding basic fiscal terms to the spreadsheet model
The concept of Government Share (or Government Take)
The impact of Government Share on the investment indicators
‘Progressive’ and ‘regressive’ fiscal systems
The main types of fiscal systems – similarities and differences
Where, when and why are different fiscal systems applied around the world
Understanding the different tax bases and which fiscal terms are used to target these
Understanding the different methods of establishing fiscal rates and which fiscal terms use these
National oil company equity participation and its impact on project economics
‘Ring-fencing’ rules and stand-alone versus incremental project economics
Comparison of different fiscal systems in the region
Changing and Negotiating Fiscal Terms
Discussion of how, when and why fiscal terms change over time
Establish a fiscal model, based on one of the region’s country’s terms
Conduct sensitivity analysis on key fiscal terms and examine the impact on project economics
- Agree fiscal terms for a hypothetical upstream project
- Delegates will be allocated to ‘government’ and ‘investor’ teams
- Teams establish their priorities for the negotiation, drawing on Module One knowledge
- Teams prepare opening fiscal positions, drawing on Module Twoknowledge
Have attendees’ objectives been met?
Were they able to negotiate successful fiscal ‘deals’?
What will they do with their new knowledge and skills back in the workplace?
"The practical exercise was most useful and interesting element - very helpful in bringing together the theory with the reality."
Dates & Locations
This course is only available as a custom course tailored for your business, contact us to discuss your requirements.