Improving Exploration Investment through Risk Management, Uncertainty Recognition and Decision Analysis
Oil and gas exploration and production is a high risk, high cost and high reward industry. Investment analysis is becoming more complex with more challenging environments requiring non-standard innovative solutions. The depletion of the larger conventional onshore and shallow water reserves is driving the industry to deeper water as well as unconventional resources such as shale gas and coal bed methane or the development of fields previously considered non-commercial. Marginal fields are being re considered with the introduction of better resource definition methods such as 3D seismic or reduced development costs through the deployment of improved drilling methods such as multi laterals or horizontal completions.
Through innovation and higher commodity prices the industry has been able to recover hydrocarbons that were previously left in the ground. As a consequence of our ability to tackle new reservoirs with new appraisal and development techniques the risks are often increased and there are many uncertainties which cannot be adequately quantified. The result is greater vulnerability of many projects to fluctuations in commodity price, resource recovery and cost. As oil in particular is becoming more scarce and its relatively value increases, there is an increasing trend towards the appraisal and development of smaller fields with a rapid growth in the number of companies pursuing more less predictable mature and marginal assets within the region.
Risk and Uncertainty Concepts
- Understanding probability and statistics as well as uncertainty concepts
- Appropriate use of probability distributions
- Developing key probabilistic estimation skills
- Probabilistic reserves and resource estimation techniques
- Probabilistic cost estimation
- Estimating with uncertainty
- NPV calculation
- Estimating cost of capital for projects
- Expected value concepts
- Profit Investment Ratio
- Risk and uncertainty management principles
- Risk assessment and mitigation
- Financial Risk Analysis
- Incorporating risk management in decision making
Decision Analysis for Petroleum Exploration
- Fundamentals of decision analysis
- Decision trees, sensitivity analysis and simulation
- Monte Carlo simulation
- Value of information
- Real option valuation
- Application of Bayes’ theorem
- Prospect evaluation
Decision Analysis for Project Developments - Management, Planning and Execution
- Concept selection, planning and implementation
- Sub surface plan generation
- Surface facilities concepts and site issues
- Project timelines and critical path analysis
- Resource estimation
- Cost estimating techniques
- Commodity Pricing and Off take Variability
- HSE, labor and stake holder considerations
- Environmental and safety considerations
- Project permitting and government authority approvals
- Work place relations and local content
- NPV, Risk Reward. Profit and Investment Ratio, Tornado charts
- Project vulnerability analysis
- Resource distributions
- Cost estimation example
- Prospect evaluation including EMV
- Project evaluation
- Credibility of input data
- Limitation of methods
- Probability distributions in nature
- Valuation and decision analysis methods applied to unconventional projects
The ability to recognise, quantify and express uncertainty, risk and vulnerability are key skills for oil and gas professionals and decision makers that will be developed from this course.
Successful exploration, production and development relies on appropriate decision analysis in order to mitigate risks, cut costs, understand vulnerabilities and reduce time frames. In particular the application of risk and uncertainty techniques to the interpretation of geology, geochemistry and geophysics to evaluate exploration prospects and discovered resources is of significant importance.
This course will focus on enabling participants to understand and apply the tools and methods of identifying, quantifying and managing risks and uncertainties involved with prospect evaluation, resource assessment and project execution through the exploration, development and production life cycle.
Mastering these concepts and the learning of the methods of analysing and making risk based decisions is expected to result in improved evaluation and management of exploration projects. Those working on exploration, appraisal and development projects will find it relevant to attend this course.
Who Should Attend
This Course is intended for upstream professionals and management engaged in exploration prospect generation, prospect analysis, portfolio management, resource evaluation, project planning, project execution and project management.
Ian Tchacos is an oil and gas professional with a track record of generating value through his involvement in a range of petroleum projects from exploration through to development as well as value generating acquisitions and asset sales. He has been instrumental in building a number of high growth oil and gas businesses through strategic acquisitions as well as organic growth in a range of junior to mid-sized oil company environments.
His 30 year career has involved international experience in corporate development, strategy formulation, mergers and acquisitions, petroleum exploration and development as well as commercial negotiation, oil and gas marketing, corporate and energy finance.
Central to the success of these energy business activities has been risk based portfolio management, project evaluation and field development.
In his last executive appointment as Managing Director of Nexus Energy he was responsible for this company’s development from an onshore A$ 2 million micro cap explorer to an ASX listed top 200, A$ 1.2 billion market capitalised offshore producer and operator. Ian was directly responsible for initiating and developing risk based decision making as the basis for exploration, development and production investments.
Ian holds a bachelor of Mechanical Engineering and a graduate diploma in Chemical Engineering commencing his professional career as petroleum engineer with significant practical experience in exploration and energy developments. He then progressed to business development roles in organisations where he was responsible for exploration portfolio development as well as project evaluation, commercialisation and development.
Ian is currently executive chairman of an unlisted energy company, non executive chairman of two ASX listed companies and provides strategic, technical and finance advice to a number of other companies. He brings to a board and management team hands on expertise in asset value development, strategy formulation, operational and commercial risk management, portfolio development, corporate affairs, project finance and corporate governance.