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
  • Auditors
  • Directors Functional Specialists


 


Day 1


Introduction

  • 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

 

Day 2


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

 

Day 3


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


Negotiation Task

  • 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
  • Negotiate!


Wrap-up Session

  • 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?


 

Course Categories

Course Testimonials

"The practical exercise was most useful and interesting element - very helpful in bringing together the theory with the reality."

Tony Hawkins, Commercial and Legal Manager Sterling Energy Ltd

Delivered by

Barry has been in the oil and gas industry for over 30 years, both in the public and private sect

Dates & Locations



This course is only available as a custom course tailored for your business, contact us to discuss your requirements.