An Introduction to Upstream Petroleum Economics & Risk Analysis

4 days 6-9 Dec 2016, London UK £3,995.00 + VAT* Download brochure Add to basket

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We are currently in the midst of one of the deepest downturns in the upstream industry in recent years. Challenging times are ahead for those looking to invest capital and grow their companies in this environment.

Petroleum Economics is all about the allocation of scarce resources….investment capital is certainly that scarce resource at the moment. In this environment, have you been asking the following questions in your organisation?

·         Which are my most profitable upstream assets?

·         Which regions of the world offer the best returns?

·         Which are the most fiscally attractive parts of the world?

·         How can we compare upstream projects to ensure capital is optimally utilised?

·         What is the breakeven oil price and minimum economic threshold?

·         If we could negotiate a 20% cost cut from our suppliers how does that impact the overall economics of the project?

This course will provide a through insight into the world of upstream petroleum economics and risk analysis to address these questions and many more.

By attending this highly interactive and practical course you will:

  • Understand the theory of upstream petroleum economics based on discounted cashflow
  • Calculate with confidence the key economic metrics used in investment decision making
  • Appreciate the geological and engineering inputs to the cashflow model
  • Understand oil and gas pricing and forecasting
  • Appreciate the diversity of fiscal systems worldwide
  • Build Excel-based economic models in both tax/royalty and production sharing contract fiscal systems
  • Interpret the economic results and quantify the risks so as to put values to prospects, fields and companies
  • Select the optimum projects and development options for you company

Course overview:

This practical training course will enable delegates from all technical and commercial disciplines to understand the theories and methods used to value oil and gas projects. The four-days will reveal the fundamental aspects of upstream petroleum economics and risk analysis. Through computer-based exercises, participants will construct economic models, incorporating relevant cash flow data for case study projects and scenarios.

Delegates will be provided with electronic copies of all workshop solutions and examples, and a comprehensive hard copy course manual

No prior knowledge of petroleum economics or the upstream industry is required. Delegates should ideally have some knowledge of Microsoft Excel ™ and bring a laptop loaded with Microsoft Office™ to the course.



We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

Tim James

Tim has extensive oil and gas industry knowledge having worked in various economic, finance and commercial roles over nearly 20 years.

Tim, a qualified Chartered Management Accountant, is currently Principal Economist in Robertson’s Petroleum and Reservoir Engineering Group based in Wallingford, Oxfordshire, UK. He has experience of fiscal jurisdictions and the commercial environment globally having undertaken numerous economic assignments ranging from the evaluation of farm in opportunities, licence round fiscal bidding advice and Competent Persons Reporting through to full corporate acquisition valuations.

He is an experienced economics trainer to the oil industry, national oil companies and governments running regular petroleum economics, fiscal and risk courses globally.

Prior to joining Robertson, Tim worked for Premier Oil in both their Pakistan and UK offices for nine years. A variety of project, commercial, asset management and finance roles covered areas such as field valuation for development, acquisitions and disposals, building economic models in both Microsoft® Excel and Merak PEEP®, management of budgets, statutory financial reporting and crude sales and marketing. 




Central London Hotel Venue

All courses are held at four or five star venues in Central London, Zone 1. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.

Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.

Related Courses


We can bring this course to your company's office.

If you simply want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

We produce learning solutions that are completely unique to your business. Our tailored learning solutions are designed specifically for your organisation’s needs.

We’ll be here to support you every step of the way. From the initial consultancy through to evaluating the success of the full learning experience. We'll ensure you get the maximum return on your training investment.

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Day 1


  • Objectives of undertaking an economic analysis
  • What makes the oil and gas industry different?

Discounted cashflow

  • The time value of money, compounding and discounting
  • Discount rate, discount factor and discount method
  • The cost of capital and the hurdle discount rate

Capital budgeting techniques

  • Undiscounted methods (PIR, payback, exposure)
  • Discounted methods (e.g. NPV, IRR, DPIR)
  • Valuing an asset, making development and investment decisions

Oil and gas asset net cashflow – project components

  • Reserves, production and sales profiles
  • Tariff income
  • Capital, operating, transportation and abandonment costs
  • Working interests, carried interests, ORR’s & NPI’s

Day 2

Oil and gas asset net cashflow – economic components

  • Inflation, cost escalation, real versus nominal cash flows
  • Oil and gas prices
  • Interest rates and exchange rates

Oil and gas asset net cashflow - taxation and government take ccomponents

  • Production sharing contracts
  • Royalty and taxation systems
  • Risk service and other systems
  • Calculating royalties, taxes, cost recovery and profit oil splits

Oil and gas asset net cashflow determination

  • Oil company (investor) net cash flow
  • State oil company net cash flow
  • Government net cash flow

Upstream economics workshop: the taxation case study

  • Introduction to the European gas field, taxation based case study
  • Establishing the economic model framework, structure and calculation flows
  • Understanding the taxation structure and algorithms
  • Determining the field, economic and fiscal data and building the input decks
  • Step by step construction and audit of the taxation model
  • Running the economic cases and evaluating the results
  • Summary and closing remarks

Day 3

Upstream economics workshop: The PSC case study

  • Introduction to the West African oil discovery, PSC based case study
  • Establishing the economic model framework, structure and calculation flows
  • Understanding the PSC fiscal structure and algorithms
  • Determining the field, economic and fiscal data and building the input decks
  • Step by step construction and audit of the PSC model
  • Running the economic cases and evaluating the results
  • Summary and closing remarks

Day 4

Advanced petroleum economic techniques

  • Aggregation and consolidation analysis
  • Ring-fences
  • Incremental analysis

Discrete economic ssolutions

  • Sensitivity analysis
  • Spider and tornado diagrams

Probabilistic economic solutions

  • Expected value and decision tree analysis
  • Farm-in and farm-out analysis
  • Exploration prospect portfolio management

Continuous economic solutions

  • Risk versus uncertainty
  • Distributions and central limit theory
  • Monte Carlo simulation

Exploration prospect valuation workshop

  • Calculation of the prospect minimum economic reserve
  • Establishment of the prospect commercial reserves distribution
  • Construction of the risk tree of all outcomes
  • Determination of the geological and commercial chance of success factors
  • Calculation of the success case expected value and the prospect EMV
  • Drill or no-drill decision?

Course summary and close

Why us

We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.

We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:

  • Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
  • Track record – we have delivered training solutions for 95% of worlds’ top 100 banks and have trained over 250,000 professionals.
  • Knowledge – our 150 strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
  • Reliability – if we promise it, we deliver it. We have delivered over 20,000 events both in person and online, using simultaneous translation to delegates from over 180 countries.
  • Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 96% on service and 95% on product