Economic Risk Analysis for Petroleum Projects

INTERNATIONAL TRAINING ON ECONOMIC RISK ANALYSIS FOR PETROLEUM PROJECTS

COURSE BACKGROUND

The petroleum industry, characterized by its capital-intensive nature and inherent uncertainties, demands rigorous economic analysis and robust risk assessment for every investment project. Business decisions, from small-scale ventures to mega-projects, hinge on a thorough understanding of financial feasibility and the quantification of potential risks. Traditional deterministic approaches often fall short in capturing the full spectrum of variables that influence project outcomes.

ECAS Institute offers this online course to provide a comprehensive methodology for performing economic risk analysis, specifically tailored for petroleum and industrial projects. We address the critical need for advanced decision-making tools by focusing on the Monte-Carlo simulation technique, demonstrated through the use of Crystal Ball software in Excel.

This training uses a real-world example of an oil and gas investment project to illustrate economic calculations and risk assessment. Participants will gain practical skills in applying statistical and probability methods to make optimal investment decisions. Furthermore, the course, complemented by a free e-book, serves as a practical guideline for project investment decisions, embodying a blend of practical approaches and theoretical backgrounds in project management.

COURSE OBJECTIVES OF THE TRAINING

Upon completion of this course, participants will be able to:

1. Perform economic evaluation for petroleum and industrial projects using the Monte-Carlo simulation technique.
2. Effectively utilize Crystal Ball software within Excel for risk assessment.
3. Apply decision tree analysis to evaluate project alternatives.
4. Conduct a comprehensive economic study with risk assessment for various types of projects.
5. Understand how modern and advanced techniques in statistics and probabilities contribute to optimal investment decisions.

WHAT YOU WILL LEARN

This online course presents the way and methodology to perform economic risk analysis for petroleum projects and industrial projects in general. You will learn:

• How to use Monte-Carlo simulation technique by using Crystal Ball from Oracle under Excel sheet for risk assessment.
• An applied example of this simulation for an oil and gas investment project to present economic calculation and how to calculate the risk of the investment.
• The application of this general simulation technique for any risk assessment.
• The best methods of taking decisions with simple economic parameters, and how multinational companies approach decision-making.
• Statistics and probabilities methods with modern and advanced techniques for optimal decision-making.
• The attendees will receive a free e-book about “Business Project Investment: Risk Assessment & Decision Making,” which serves as a guideline methodology for project investment decisions.

DURATION AND PROGRAM

This is an online course designed to provide a comprehensive understanding of economic risk analysis for petroleum projects. The program will combine theoretical explanations with practical demonstrations using Crystal Ball software and a real-world oil and gas investment project example. The detailed program structure and access to the free e-book, “Business Project Investment: Risk Assessment & Decision Making,” will be provided upon enrollment.

TARGET PARTICIPANTS

This course is designed for professionals across various roles within the energy and industrial sectors who are involved in project management, analysis, and decision-making. This includes:

• Project Engineers
• Project Managers
• Project Services and Site Managers
• Senior Managers and Decision-Makers
• Petroleum Engineers or any discipline aspiring to management level roles.

TRAINING MODULES

The course is structured to provide a clear and progressive understanding of economic risk analysis, from foundational concepts to advanced simulation techniques and their practical application:

No	Module	Details
1.	Economic Analysis Fundamentals	This module introduces the basic principles of economic analysis as applied to investment projects, setting the stage for understanding project feasibility. The key topics include: Time value of money: Present Worth, Future Worth, Annual Worth. Investment appraisal techniques: Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period. Cash flow diagrams and project cash flow estimation. Sensitivity analysis and its limitations. Introduction to project feasibility studies.
2.	Statistical Tools for Risk Analysis	This module covers the essential statistical concepts necessary to quantify and understand uncertainty in project variables. Measures of central tendency (mean, median, mode). Measures of dispersion (variance, standard deviation). Correlation and covariance. Introduction to uncertainty and risk in project evaluation.
3.	Probability Distributions	This module delves into various probability distributions commonly used to model uncertain project inputs, crucial for simulation-based risk assessment. The key topics include; Discrete vs. continuous probability distributions. Common distributions: Normal, Uniform, Triangular, Lognormal, Beta, etc. How to select an appropriate probability distribution for a given variable. Understanding probability density functions and cumulative distribution functions.
3.	Monte-Carlo Simulation Concept	This module introduces the theoretical foundation and practical application of the Monte-Carlo simulation technique for robust risk assessment in projects. The key topics include; What is Monte-Carlo simulation and why it’s used in risk analysis. Steps involved in performing a Monte-Carlo simulation. Defining uncertain inputs and output variables. Interpreting simulation results: probability of success, range of outcomes. Advantages of Monte-Carlo over deterministic methods.
4.	Crystal Ball Software Application	This module provides hands-on training on using Crystal Ball, an Oracle add-in for Excel, to perform Monte-Carlo simulations for economic risk analysis. The key topics include: Introduction to Crystal Ball interface and functionalities. Defining assumptions (input variables) and forecasts (output variables) in Crystal Ball. Running simulations and setting simulation parameters. Analyzing and presenting simulation results (e.g., certainty reports, sensitivity charts, overlay charts). Practical application to the provided oil and gas investment project example.
5.	Practical Example and Decision Making	This module culminates in a detailed, real-world oil and gas investment project example, demonstrating the entire process from economic calculation to risk assessment and decision-making. The key topics include: Step-by-step economic calculation for an oil and gas investment project. Identifying key uncertain parameters in the project (e.g., oil price, production rate, CAPEX, OPEX). Setting up the Monte-Carlo simulation for the project using Crystal Ball. Interpreting the risk profile of the investment (e.g., probability of positive NPV, distribution of IRR). Practical example of using a decision tree in conjunction with simulation results for strategic choices. Guidelines and tips for making informed business decisions based on risk analysis.

TRAINING STYLE

The modules will be taught through PowerPoint presentations, and lectures and will include a case study/field visit, breakout sessions, case studies and other interactive discussion components.

The course will also include a few guest speakers, both in person and via Zoom and other online learning platforms for overseas speakers. This provides useful real-world insights alongside the more theoretical aspects of the course.

The conference faculty shall consist of experienced decision makers, as well as practitioners and representatives from established educational and research institutions active around climate change, engineering and international development. Throughout the course, theoretical presentation of concepts will be moderated and more group discussions and plenary engagements will be optimized. PowerPoint presentations will be made by facilitators and resource persons, to highlight key concepts before embarking on group work.

GENERAL NOTES

• Training manuals and additional reference materials are provided to the participants.
• Upon successful completion of this course, participants will be issued with a certificate.
• We can also do this as a tailor-made course to meet organization-wide needs. Contact us to find out more: info@ecasiafrica.org.
• Payment should be sent to our bank account before the start of training and proof of payment sent to: info@ecasiafrica.org.

ABOUT ECAS INSTITUTE

The ECAS Institute designs and delivers independent and targeted training, research, and consulting services. Our work focusses on climate change and resilience building, carbon markets, renewable energy, nature-based solution, biodiversity conservation, agriculture and food systems, We are located in Nairobi Kenya and work across the African region. We have implemented training and research assignments in Kenya, Tanzania, Uganda, South Sudan, Somalia, Malawi, Rwanda, Congo, and South Africa. Globally, we have supported our partners from the UK, Denmark, Italy, Sweden, Germany, and USA.