PETROLEUM PROJECT
ECONOMICS & RISK ANALYSIS

Introduction to Petroleum Economics

The fundamentals of economics: background of and its application to the oil and gas industries.

Energy Project Risk and Uncertainty

Identifying and quantifying energy projects risks and uncertainty into project analysis; using statistical measures to quantify risk; two key risk assessment methods: scenario analysis and sensitivity analysis.

Event Identification

Identifying “trouble spots” that threaten the organization’s ability to generate profit and value. Using event inventories, target risk-return profiles, risk tolerance levels, and event tracking processes.

Probability Theory and Quantitative Analysis

Introduction to probability theory, including probability density functions, overview of typical probability distributions and definition of key terms; applying probability theory in decision analysis with emphasis on concept of expected value.

Decision Tree Analysis

Applying a structured method for investment decision analysis; understanding the implications of different sets of decisions; identifying areas to reduce risk and understand economic opportunity cost of capital; identifying implications of various forms of contracts; analyzing implications of incremental project decisions.

Risk Assessment

Prioritizing trouble spots by likelihood of occurrence and potential impact. Using likelihood / impact tables, inherent / residual risk charts, and “heat” maps.

Risk Response

Assessing the organization’s ability to respond to trouble spot “flare-ups” on paper and in reality. Using avoidance, sharing, reduction, and acceptance practices, as well as portfolio analysis techniques.

Monte Carlo Simulation

Extending the decision tree analysis framework for situations that include continuous probability scenarios; identifying power and limitations of simulations, emphasis placed on relevance of expected value; Crystal Ball commercial software used to model risk in financial model.

Field Development, Reservoir Performance and Surface Facilities

Formation evaluation; estimating reserves; field development; inflow performance; surface facilities design for both onshore and offshore operations; integrated reservoir management; enhanced recovery.

Managing Energy Price and Volume Risks: Futures and Hedging

The history of energy price risk management; physical, forward and futures markets; typical futures market transactions; hedging, swaps and options; volume risk management; weather derivatives.

Portfolio Theory and Real Options

Introduction to and discussion of Real Options and Portfolio Optimization, two other key methods used extensively today by many oil companies to evaluate project opportunities; understanding how a collection of investments can decrease overall risk in the portfolio.