Project Economics, Risk and Decision Analysis
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Project Economics, Risk and Decision Analysis Course
Introduction:
The Project Economics, Risk, and Decision Analysis training course provides comprehensive coverage of economic analysis case setup, encompassing various factors such as recoverable reserves, production profiles, commodity prices, and project costs. Participants will learn to estimate essential components like CAPEX, OPEX, taxes, royalties, transportation, depreciation, before-tax (BTAX) cash flow, after-tax (ATAX) cash flow, and international fiscal regimes (production sharing agreement and concessionary system).
The course begins by exploring fundamental parameters like inflation, interest rates, and the time value of money, which are essential for economic analysis. These concepts are then translated into profitability indicators that serve as crucial metrics for investment evaluation. The course emphasizes bridging the gap between theoretical concepts and their practical applications, ensuring participants understand both the theory and its limitations.
Participants will gain a deeper understanding of the vast amount of information involved in economic analysis, expanding their knowledge beyond their previous expectations. Additionally, the course places significant emphasis on utilizing Excel's financial functions for effective analysis and decision-making.
Course Objectives:
By the end of the Project Economics, Risk and Decision Analysis training Course, participants will be able to:
- Learn how to reduce exposure and mitigate risks in projects and handling uncertainty
- Clarify concepts such as: time value of money, cash-flow models, capital budgeting, IRR, NPV, income producing investments.
- Maximize the return on investments by good decision making processes based on the commercial viability of projects
- Improve your decision process, investment and opportunity analysis
- Practice the hands-on experience in building your own economic evaluation models and solving case study-based examples
Who Should Attend?
Project Economics, Risk and Decision Analysis training course, is ideal for:
- Planning managers
- Project managers
- Analysts • Commercial managers
- Economists • Government officials
- Geologists • Business advisors
- Asset managers • E&P managers
- Product managers
Course Outlines:
Introduction
- Why economic evaluation
- Objective of the course
- Capital expenditure plans
- Basic process of economic evaluation
Inflation
- Inflation defined
- Types of inflation
- Consumer price index
- Risk Factors (Simple Illustration)
Interest
- Simple interest
- Compound interest formula
- Nominal & effective interest rate
The Time Value of Money
- Equivalence
- Interest tables
- Future value of present sum
- Present value of future sum
- Future value of ordinary annuity and annuity due
- Present value of ordinary annuity and annuity due
- Project financing
- Loan amortization schedule
Spreadsheet Applications
- Excel’s financial functions for equivalence
- Excel’s financial functions for loan amortization
Problems & Solutions
Before-Tax (BTAX) Cash-Flow
- Cash-flow (CF) defined
- Gross revenue (GR)
- Basic data requirement
- Forecasting product stream
- Dependence of Capital
Expenditure (CAPEX)
- Economies of scale
- CAPEX during production
- Breakdown of Operating
Expenditure (OPEX)
- Develop rules of thumb for OPEX
- Gas processing flow diagram
- Typical oil production facilities
- Sample before-tax cash-flow
- Schematic of typical cash-flow
Cost Estimation
- Project cost management
- Various types of costs
- Cost estimation tools and techniques
- Level of cost estimates
- Dependence of cost estimates
- Criticality of cost estimates.
After-Tax (ATAX) Cash-Flow
- ATAX cash-flow additional variables
- Depreciation methods
- Sample After-Tax Cash-Flow
Weighted Average Cost of Capital
- Capital Asset Pricing model (CAPM)
- Cost of equity and cost of debt
- Weighted average cost of capital