In azerbaijan, for shah deniz in 1996, the r factor is defined as cumulative profit oil plus recovered capital and financing costs divided by cumulative capital costs excluding financing costs. Rfactor and cumulative irr to the investor for the deep water oil project. In physical science terminology, energy is the capacity for doing work, e. Petroleum project economics and risk analysis workshop. Petroleum economics distance learning training course. Petroleum economics net present value internal rate of. Exploration geologic risk assessment and prospect evaluation. An overview of heavy oil properties and its recovery and transportation methods 573 brazilian journal of chemical engineering vol. Expanded basic petroleum economics training course. Oil and gas contracts utilizing r factors and rates of. Scribd is the worlds largest social reading and publishing site. Basic petroleum economics mai 2004 ppm 2nd workshop of the china case study 2 investment decisions investment decisions are among the most important decisions that a companygovernment can take capital intensive irreversible high riskuncertainty. Discount rates should be used for time value adjustments not risk adjustments.
Psas were regarded as acceptable because the government upholds national ownership of resources. He has 18 years of experience in petroleum finance. This book offers a comprehensive introduction to the economics of oil and natural gas extraction and production along with a detailed discussion of pricing, taxing, and markets of these most valuable commodities. The relationship between oil price and costs in the oil and gas industry. Petroleum engineering an overview sciencedirect topics. The journal of petroleum science and engineering covers the fields of petroleum and natural gas exploration, production and flow in its broadest possible sense.
The purpose of petroleum engineering is to examine, define, and implement methods and procedures for developing and extracting oil, gas and associated products so as to optimize profits and obtain a returnoninvestment that is commensurate with the risk incurred in making the investment. The study made use of a survey questionnaire administered through drop and pick later method. The 5 day training will reveal the fundamental aspects of upstream petroleum economics and risk analysis. Prepared for pesa may 2015 pesa petroleum equipment. However i wish it could be updated by the authors or other scholars interested in petroleum industries.
Uncertainty and risk analysis in petroleum exploration and. Discussion progresses from an introduction to the industry, through principles and techniques of engineering economics, to the application of economic methods. Petroleum economics and engineering crc press book this book explains how to apply economic analysis to the evaluation of engineering challenges in the petroleum industry. Economic and financial determinants of oil and gas. Pdf the economic structure of the petroleum industry differs strongly from. Petroleum industry personnel who would like to develop or increase their knowledge in basic economic analysis and profitability assessment economics is the primary link between decision making and profitable operations and it is one of the four pillars of the oil and gas industry the other three being geology, engineering, and. In a segmented chain, agreements set the price and level of economic rent achieved in each link may or may not be at arms length government may own one or more links of the chain and take economic rent where there is common ownership but different tax systems for each link, there are no. Petroleum refining and the prod uction of ulsg and ulsd october 24, 2011 page 2 2. Others around 2025% are based upon an r factor or ror system. Packed with realworld examples and case studies demonstrating how to calculate rate of return, discounted cash flow, payout period, and more, petroleum economics and engineering, third edition assists petroleum engineers, chemical engineers, production workers, management, and executives in sound economic decisionmaking regarding the design. This pdf is a selection from an outofprint volume from the national. Financial efficiency 427 incremental economics 428 well workovers 429 equipment replacement 431. An rfactor less than 1 would mean that costs have not been fully recovered yet. He has performed numerous upstream petroleum valuations of assets in africa, asia, europe, the former soviet union, the middle east and north america.
Introduction to petroleum economics is about the process of gathering project data, calculating whether a project should proceed and delivering recommendations. The certificate in petroleum economics is the ideal course for both individuals and corporate groups to develop this crucial knowledge. Geological survey editorial standards or with the north american stratigraphic code. Growing refining overcapacity has resulted in recent refin. Within north america, recent demand for refined petroleum products has been flat to declining and is forecast to continue on this path. Within north america, recent demand for refined petroleum. Annals of economics and finance 5, 127152 2004 economic reform and growth in china gregory c. Submissions will only be considered after payment of the submission fee via submissionstart. The author thanks the olin, sloan, and fletcher jones foundations for financial support.
Various factors which affect ongoing operating costs 426 technical efficiency vs. Exploration and petroleum production licences to any person or entity. It is motivated by the recent record increase and subsequent. Orlandi encyclopedia of life support systems eolss these shows structural characteristics, relations of strength, economic and political dynamics which cannot be immediately attributed to the traditional life cycle of an industry and which indeed can no longer be repeated. This purpose of this thesis is to form a general understanding on price formation of crude oil in the short and the long run. He would also like to thank glenn hubbard and john meyer for their useful comments on earlier. The objective of the journal of petroleum science and engineering is to bridge the gap between the engineering, the geology and the science of petroleum and natural gas by publishing explicitly written articles intelligible to scientists and engineers working in any field of petroleum engineering, natural gas engineering and petroleum natural gas geology. We encourage the submission of replication studies. Evaluating fiscal regimes for resource projects international. Petroleum economics is one of the most influential players in the world economy, so having a comprehensive understanding of this vital area is key for anyone working within the oil and gas or energy industries. The symbol i is to be used in all other cases and is that preferred by asa. This course will introduce a variety of fundamental petroleum economic principles including revenue, expenditures, fiscal systems, risk analysis, and investment analysis. Key issues include public participation in the contracting process, the economic fairness of the deal, the degree of integration of social and environmental concerns, and the extent to which the balance between economic, social and environmental considerations can evolve over often long project durations.
Upstream petroleum fiscal and valuation modeling in excel. Iranian petroleum contract ipc is a new model of upstream oil and gas fiscal. Numerous regulatory bodies around the world have developed regulations relating to the evaluation and external reporting of reserves. Review and cite petroleum economics protocol, troubleshooting and other methodology information contact experts in petroleum economics to get answers. Licensing and upstream petroleum fiscal regimes semantic scholar. Note the r factor is unaffected by operating costs. The united states asserts that iran is a state sponsor. Although the model is a highly simplified, it incorporates many factors and some of the key tradeoffs that would influence an investors investment behavior. Gerhard toewsaand alexander naumovb a oxford centre for the analysis of resource rich economies, department of economics, university of oxford b economics team bp january 2015.
Introduction to petroleum economics print and digital. Factor pricing slide 1217 unobservable factors for any symmetric jxj matrix a like bb. Gary colorado school of mines golden, colorado glen marcel dekker, inc. Rfactors therefore adjust the fiscal elements such as the profit oil.
Journal of petroleum science and engineering elsevier. Fuzzy value of npv calculated based on 7% error rates of price. Pdf economics modeling for petroleum exploration and. Fiscal systems measures and economic indicators 17 7. The letter r is retained for electrical resistivity in well logging usage. Rfactor, whereby a factor is calculated from cumulative revenue divided by cumulative costs and this ratio determines the split. Mitchell, editor iii facilities and construction engineering kenneth e. The training approach is based on principles of economic evaluation of petroleum related project with focusing on step by step developing economic models, determining economic indicators, evaluating and quantifying risks and uncertainties and making the right investment decision for the project. Introduction to petroleum economics society of petroleum. Engineering economics 42c discount factors and equivalence example feim. However, there are different ways to get the factor using the factors that are in the table. It discusses the science of petroleum economics, starting from squareone, the tools of the trade that petroleum economists use. Modeling the impact of taxes on petroleum exploration and.
The international collaborative program in petroleum economics and management is designed for students or professionals with degrees in science, engineering or social science business school, law, seeking indepth training to develop a commanding skill set in energy techniques, energy economics and management. The profit splits therefore tend to come in different tiers applying different splits. Reiss is associate professor of economics at the stanford business school and a faculty research fellow at the national bureau of economic research. Chow department of economics, princeton university, usa email. Factor pricing slide 124 factor pricing setup k factors f 1, f 2, f k ef k0 k is small relative to dimension of m f k are not necessarily in m fspace spanned by f. The petroleum industry is arguably the most influential and important industry in the world. Profit petroleum sharing wide range of mechanisms for sharing profit oil usually sliding scale with proxy for profitability. Spe member price usd 75 introduction to petroleum economics is about the process of gathering project data, calculating whether a project should proceed and delivering recommendations. The fiscal regime can be used to convert a governments policy into economic signals to the market, and. It is an excellent book because it considers all economic aspects of the petroleum industry. Petroleum refining at a glance petroleum refining is a unique and critical link in the petroleum supply chain, from the wellhead to the pump. Petroleum economics, risk and opportunity analysis. Estimation of the economic value of the predicted future production. Economic reform and growth in china annals of economics.
For instance, in the petroleum industry, managers are increasingly using decision analysis techniques to aid in making these decisions. Holstein, editor vi emerging and peripheral technologies. Oil and gas contracts utilizing r factors and rates of return. This book is a guide to the basic economics of petroleum production as practiced throughout the world. We present a simple model of petroleum exploration and development that can be applied to study the performance of alternative tax systems and identify potential distortions. The r factor was defined as the associates cumulative revenues divided by its cumulative costs. Uncertainty risk and opportunity analysis is a key component in the decision making process and in establishing appropriate fiscal designs and incentive mechanisms in the energy sector. The letter c is retained for electrical conductivity in well logging usage.
This course is an excellent introduction to the fundamentals of petroleum economics. Fiscal regimes, petroleum contracts, and natural gas. Our replication policy reflects this, and is applied in spirit rather than to the letter. The fg conversion is not given in the factor table.
Daily rate of production sometimes of profit production cumulative production rfactor cumulative revenues cumulative costs contractor rate of return. An attempt is made in all issues to balance the subject matter and to appeal to a broad readership. The major oil companies were initially opposed to this new contract form as they were reluctant to invest capital into an enterprise which they were not allowed to own or manage. Factors determining production no of wells plateau factor % production rate per well plateau production rate. Petroleum economics free download as powerpoint presentation. Types of fiscal regime in hydrocarbon exploration and production. Influence of economic factors on performance of project.
Fundamental petroleum fiscal considerations oxford institute for. An rfactor is the ratio of cumulative receipts from the sale of petroleum to cumulative expenditures. It covers everything you need to know about the economics behind the petroleum industry, in very simple language. Pdf petroleum economics, risk and opportunity analysis. Ppm expert visit indonesia, december 69, 2004 2 why economic modeling. Ken kasriel is a senior petroleum economist with rps energy, london.
Policy issues congressional research service summary the islamic republic of iran, a resourcerich and laborrich country in the middle east, is a central focus of u. An economic analysis kirsten bindemann oxford institute for energy studies wpm 25 october 1999. It is important to factor in the realities of obsolescence bargaining into energy investment decisions. Petroleum economics provides an overview of the key financial and economic means of project performance provides a set of risk assessment tools including sensitivity, scenario, decision tree and mote carlo simulation analysis introduces the participant to stakeholder analysis frameworks to identify stakeholder groups and their concerns. Petroleum economics net present value internal rate of return. Sometimes all oil and gas activity is reserved to a state company mexico.
What factor will convert a gradient cash flow ending at t 8 to a future value. Feb 17, 2015 new york basel tm petroleum refining technology and economics fourth edition james h. The questionnaire was pretested for validity and reliability with 10 management staff. Ror or r factor systems can be made much less susceptible to manipulation i by using continuous functions rather than stair steps, ii for r factors, by using ratios that are insensitive to operating costs, which are easier to manipulate in the production phase than development costs, and iii by using functions with relatively low slopes, ie avoiding very large changes in shares for any small change in profitability metric. Chapters 2 and 3 provide background material on, respectively, the stages of an oil and gas. A higher factor would have a split more favourable to the state. On the side of the producing countries there are economic and political complexities. Petroleum refining at a glance petroleum refining is a unique and critical.
Guidelines for the evaluation of petroleum reserves and resources 3 petroleum reserves and resources are important to both companies and countries. In this sense, the petroleum industry is a classic case of uncertainty in decisionmaking. The 5 days sophisticated training course in petroleum economics is an entrylevel course designed to bridge gaps in your knowledge and give you true business advantage. Arnold, editor iv production operations engineering joe dunn clegg, editor v reservoir engineering and petrophysics edward d. Miller, in standard handbook of petroleum and natural gas engineering, volume 2, 1996 the purpose of petroleum engineering is to examine, define and implement the methods and procedures for developing and producing oil, gas and associated products so as to optimize profits and return on investment. New york basel tm petroleum refining technology and economics fourth edition james h.1454 1081 74 765 1446 1422 1280 770 290 692 323 1493 1435 152 211 395 948 101 1548 712 818 635 773 986 818 1485 1042 1011