Course Details
Course Outline
5 days course
General Industry Overview
- The Nature of Natural Gas
- The Global Market Place
- Estimating Gas Reserves
- Development & Economics of Shale Gas
- Shale Gas Development
- Impact of Shale Gas on LNG Market
- Shale Gas Development Costs & Economics
- Evaluation of New UG Plays
- Problems & Solutions
Why economic evaluation
- Typical oil & gas company objectives
- Inflation
- Types of inflation
- Consumer price index (CPI) – USA
- Italian consumer price index
- Interest
- Simple and compound interest
- Nominal and effective interest.
- The Time Value of Money
- Risk factors (simple illustration)
- The time value of money
- Interest table
- Future value of present sum
- Present value of future sum
- Future value of ordinary annuity
- Future value of annuity due
- Present value of ordinary annuity
- Conditions of annuity
- Spreadsheet Applications
- Problems & Solutions
Before-Tax (BTAX) Cash-Flow
- Cash-Flow (CF) defined
- Forecasting cash-flow
- Brainstorm session – identifications
- Basic data requirements
- Forecasting product stream
- Revenue stream components
- Cost elements
- Before-tax net cash-flows
- Natural gas processing
- Typical oil production facilities
- The history of oil price
- Capital (front end) costs
- Breakdown of facilities’ cost
- Economies of scale
- Capital costs during production
- Breakdown of OPEX
- Develop rules of thumb
- Transfer pricing
- Types of cost estimates
- Dependence of cost estimates
- Gross revenue
- Sample before-tax cash-flow
- Schematic of typical cash-flow
- After-Tax (ATAX) Cash-Flow
- After-Tax – additional variables
- Depreciation types
- Straight line depreciation
- Declining balance depreciation
- Declining balance with switch to straight line
- Sum-of-the years digits depreciation
- Depreciable asset lives
- Sample after-tax cash-flow
- Spreadsheet applications
- Problems and Solutions
Capital Budgeting Techniques
- Decision yardsticks/profitability indicators
- Payback period
- Discounted payback period
- Net present value calculation
- Misuse of NPV
- Internal rate of return (IRR)
- Limitations of IRR
- Multiple rates of return
- Economic solution for projects with multiple IRR
- Profitability index (PI)
- Unit technical cost (UTC)
- Long-run marginal cost of gas
- Cash-Flow Discounting Frequency
- Funds flow and discounting frequency
- Common cash-flow & discounting frequency
- Spreadsheet functions Discrete probability distributions
- Cost of Capital and Cash-Flow
- Cost of capital relationship
- Defining cash-flows
- Equity cash-flow (ECF)
- Free cash-flow (FCF)
- Capital cash-flow (CCF)
- Combining cash-flow and WACC
- Netback Value & Pricing
- Netback value (NBV)
- Base year and ROR approach
- LRMC approach
- Indexed netback pricing
- Sample gas netback from LNG
- Problems & Solutions
International Petroleum Economics
- Global energy consumption
- Why collaboration
- The need for collaboration
- Parties to upstream agreement
- Typical contract terms
- Contractual arrangements
- Fiscal systems
- Concessionary system’s cash-flow
- Production sharing system
- Dynamic terms of contracts
- Main objectives of these contracts
- Investment Selection Decision Making
- Types of investment decisions
- Investment decision-making (screening)
- Investment decision-making
- Revenue producing investments (NPV)
- Revenue producing investments (IRR & PI)
- NPV/IRR conflict
- Incremental investment analysis
- Ranking investments (non-mutually exclusive)
- Ranking investments under budget constraints
- Service producing investments
- Service producing investments (unequal life)
- Lease versus buy decision-flow
- Introduction to Decision Analysis
- Detailed Case Study
- Problems & Solutions
