The Fundamentals of Upstream Petroleum Economics & Risk Analysis


The course is suitable for delegates of all technical and commercial disciplines from oil and gas companies, governments, banks, legal and accounting organizations.


The primary aim of this course is to equip delegates with the necessary skills to:
- Understand the theory of petroleum economics based on discounted cashflow
- Calculate with confidence the key economic metrics used in investment decision making
- Appreciate the geological and engineering inputs to the cashflow model
- Understand oil and gas pricing
- Understand the principles and appreciate the diversity of worldwide fiscal systems
- Build Excel-based economic models in both a Tax/Royalty and Production Sharing Contract fiscal system
-Interpret the economic results and quantify the risks so as to put values to prospects, fields and companies
- The fundamentals of discounted cashflow including real vs nominal economics and the derivation of a company's hurdle discount rate
- The calculation and application of economic metrics NPV, EMV, IRR, Payback and DPIR for investment decision making
- The components of an oil or gas cash flow; revenue, tariffs, costs and pricing
- Global international fiscal systems: structure, comparisons, fiscal take
- Government and oil company perspectives and the role of the National Oil Company
- The financial structure and mechanisms of production sharing contracts including the calculation of cost recovery and profit oil splits
- Production Sharing Contract and Tax/Royalty model building workshop sessions.
- Incremental, project consolidation and ringfencing analysis
- Quantification of risk; both deterministic and probabilistic techniques including decision trees and Monte Carlo analysis
- Workshop session applying risk and a decision tree to make a drill or drop decision on an exploration prospect
- Delegates are provided with electronic copies of all model solutions and exercises at the end of the course

Learning Objectives

• Understand the theory of discounted cash flow analysis
• Know how to calculate the key economic metrics
• Learn about the key geological and engineering inputs to the economic model
• Appreciate the issues in oil and gas price forecasting
• Be able to build Excel based economic models
• Interpret economic metrics and quantify risks in order to value projects and make decisions
• Be able to select the optimum projects for your company



Number of Participants

Max 20


Excel: working knowledge

Software Used


Course Format

Classroom delivery with presentations, practical exercises and modelling workshop

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CGG GeoTraining offers the most comprehensive industry training based on years of practical experience acquired by our personnel.

Our proprietary courses are fully customizable and can be offered at a time and location convenient to you. Please request a course for more information.