Risk Analysis Prospect Evaluation and Exploration Economics

The course assumes basic or no previous knowledge of uncertainty, risk analysis, or decision analysis; although preliminary to intermediate knowledge of exploration, production, and development of the oil and gas fields is required. Advanced knowledge is a plus.

The course is designed for professional petroleum industry personnel. Both upstream and downstream industry workers will benefit from the workshop. Fundamental risk and decision analysis tools will be thoroughly covered and their applications and implementations will be explained. Case studies and strategy developments utilizing traditional and non-traditional techniques will be the exercises during the workshop. Monte Carlo simulator is used for risk analyses. 

Course Objectives

The objective of this course is to develop the expertise of petroleum industry engineers and scientists in the area of risk/uncertainty analyses and their relation to decision making process within the petroleum industry arena and related economies. This approach improves their skills to utilize all available information about the hydrocarbon accumulation and other related economic tools in depicting a realistic projection of the oil & gas ventures worth with a sharp eye on the chance of business success. It will also provide an overview of the methodologies, philosophies, data required, interpretations and procedures employed to reach specific goals.

Learning Outcomes

After completing this course, participants will understand the uncertainties surrounding the petroleum industry and the consequent magnitude of the risk taken to invest in this vibrant industry. They will learn how to identify, quantify, and analyze risk parameters contributing to risking any of the decisive key economic indicators, such as NCF, IROR, Pay Out Time, Maximum Exposure, Maximum Surplus, STOIIP, GIIP, Revenue, RF, CAPEX, OPEX, Oil & Gas Prices, etc. Also, they will be comfortable using at least one of the commercial risk analysis simulators (Monte Carlo): @Risk, Crystal Ball, etc.

Both upstream and downstream professionals would benefit from this workshop, in addition to all management levels. 

Day 1

• Petroleum Industry Overview
• Economic Equation
• Implications of Uncertainty, Risk Analysis, and Decision Analysis
• Risk Versus Uncertainty
• Investment Decision Making
• RQP
• Phases of a Typical Risk Analysis Petroleum Project
• Utilization of Monte Carlo Simulator
  • Identifying the Risk
  • Checklist of every risk identified
  • Quantifying the risks
  • 3X3 Matrix
  • Theoretical Background to quantifying Risks
  • Risk Distributions

Day 2

• Types of Distributions Used for Risk Analysis
  • General guide to when to use which distribution
• Historical Data versus Expert Opinion
• What is correlation?
  • Quantifying Correlations
• Separating Risks Out
• Issues to Consider When Evaluating Risks with Experts
  • Experts’ Reluctance to Provide a Distribution
• Group Dynamics of Quantifying Risks
  • Psychological Factors
• Risk Analysis
  • What is Monte Carlo Simulator?
  • Influence of Uncertainty and Risk Analysis on Model Design
  • Non-Logic Scenarios During Modelling Process
  • Set-up Distributions in the Spreadsheet
  • Number of Iterations Required?
  • Latin Hypercube Sampling
  • The Random Number Issue
  • Identifying Significant Risks
• Crystal Ball Sensitivity Function
• Simple Sensitivity Function
• Enhanced Sensitivity Analysis
  • How to Reduce and control the Risk for new fields/brownfields

Day 3

• Presenting Results
• Graphical Form
• Statistical Measures
• Laymen’s Terms of Risk
  • Beyond Presentation
  • Categories of Generic Risks
• Economic Indicators
  • ROI (Rate of Return)
  • IROR (Internal Rate of Return)
  • NPV (Net Present Value)
  • Economic Yardstick
  • POT (Payout Time)
  • Minimum Bailout Period
  • Financial Ratio
  • Book Profit
  • Book Rate of Return
  • The Concept of Utility
• Net Cash Flow Analysis
  • Cash Flow Diagram
  • Petroleum Industry Project Net Cash Flow Components
  • Petroleum Industry Cash Flow Spreadsheets
  • Establishment of Production Profile
• Exploration Stage (before drilling)
• Appraisal Stage
• Development Stage
• Plateau Stage
• Post Plateau Stage (DCA)
  • Additional Cash Flow Consideration
  • Taxation
  • Effect of Inflation
  • Modeling Escalation of Prices Under Inflation
  • Energy Price Modeling
  • Reserves Definitions and Implications
  • Case Studies & Applications

Day 4

• Decision Analysis
  • Cumulative Frequency Distributions
• Single Value Parameters of Distributions
• Measures of Central Tendency
• Measures of Variability
  • EMV (Expected Monetary Value)
• Steps to Calculate EMV
  • Decision Tree
• Steps to Use Decision Tree Analysis
  • Petroleum Fiscal System
• Petroleum Industry Contracts and their Mechanisms
  • Concession Type Contract
  • Production Sharing Type Contract
  • Service Contract
• Reserves Definitions

Day 5

Case Studies and Applications