Petroleum Economics & Investment Decision Making - Techniques and Applications - December 1, 2009

PETROLEUM ECONOMICS AND INVESTMENT DECISION MAKING
- TECHNIQUES AND APPLICATION - (From Conventional to Modern Methods)

A three day, hands on, Excel-based Course,
with Harvard Business Case Study

COURSE OVERVIEW

This course will:
- learn the basic of economic/financial evaluation techniques as well as the practical implementation of these techniques to petroleum project assessment in Indonesian PSC Regime
- enable participants to identify and quantifying risk using sensitivity and scenario analysis and Monte Carlo Simulation
- learn how to asses the value of information and value of flexibility in managing the uncertainty of the petroleum project
- bring participants up to date on recent development in project modeling and evaluation using Real Option Valuation (ROV) techniques.

More information about the content of the course, please visit http://ExploreRealOptions.com/

WHO SHOULD ATTEND

This course is ideal introduction for Engineers, Geologist, Economist, Finance, Asset and Project Manager who want to learn from conventional to advance project evaluation methodologies in petroleum industry.

KEY BENEFIT

At the end of the course participants will:
- appreciate that static expected DCF NPV is not enough to measure the whole value of a petroleum project.
- discover the project value include the value of managerial flexibility to adjust their action to take full advantage of upside potential value of a project and to minimize the downside risk of a project by learning from new information and flexibility strategy to response the uncertainty of a project in the future.
- have acquired the skills to identify, model and evaluate the petroleum case in Indonesia using all available techniques (conventional to modern approach).

COMPUTER REQUIREMENTS

As the course is Excel-Based, it would be highly desirable if participants could bring with them their own laptop computer

TRAININIG CONTENT

This course will be divided into three major categories:

I. Basic Economic/Financial Evaluation
- Overview of project economics in Indonesian PSC regime
- Role of Project Evaluation

II. Common Techniques and Application for Economics Evaluation in Petroleum Project
- Discounted Cash Flow (DCF) Analysis
o Time value of money: discount rates and period
o DCF criteria of value: NPV, IRR, pay back period
- Sensitivity and Scenario Analysis, Spider and Tornado Diagrams
- Monte Carlo Simulation
o The “expected” base case
o Probability distributions of inputs and result distribution of possible outputs
- Decision Tree
o Expected Monetary Value of exploration Program
o Value of Information
o Value of Flexibility

III. Modern Techniques and Application for Economics Evaluation in Petroleum Project
- Overview of Real Options Valuation (ROV) method
- Some Approaches in Real Options Methodology
o Binomial Lattice in development and exploration program
o Financial Options Analogy (Closed Form Solution) from Paddock, Siegel and Smith’s model for undeveloped reserve
o Latest Development of Real Options Method – Modern Asset Pricing (MAP) using forward pricing and comparing with DCF approach.

CASE STUDY TO BE DISCUSSED
1. Valuation Undeveloped and Unexplored Reserve
2. Making Decision in Exploration Field
3. Bidding PSC Blocks
4. Harvard Business Case Study :
a. Penzoil vs Texaco
b. MW Petroleum

TRAININIG MATERIAL
1. Extensive set of course notes detailing valuation concepts, numerical calculations and practical valuation examples.
2. Excel Spreadsheets Model for valuing petroleum projects in PSC regime.
3. Super Lattice Solver software (Trial Version) for Binomial Real Options Valuation
4. Book of “A New Era of Project Valuation and Investment Decision Techniques” written by Nuzulul Haq (http://explorerealoptions.com/books/)

FACILITATOR

Nuzulul Haq, is a Strategic Planning Analyst. He was graduated from Bandung Institute of Technology (ITB) in 1996, and completed his master of management in Faculty of Economics, University of Indonesia in 2001. His career started as engineer in multinational companies and joint with planning and economics group in Oil and Gas Company after he finished his master degree in financial management. His expertise focus on technical to business integration for improved asset investment decision making using portfolio and optimization study, Econometric forecasting modeling, risk analysis, real options / market base valuation.
His technical papers had been presented in International Energy Economics Association (IAEE) Conference in Perth (2008), Berlin (2006) and Zurich (2004). He created http://ExploreRealOptions.com/ to promote Real Options methodology to assist business practitioners in Indonesia for making investment decision in the uncertainty condition.