This three-day introductory course -- an industry-oriented version of one taught to graduate students -- is meant for those with limited experience in geoscience, engineering and/or oil and gas commercial modelling. It is a practitioner’s tour of how risk and uncertainty in the industry is quantified and combined with petroleum economics to determine the intrinsic value of upstream exploration assets. No industry knowledge is assumed.
Learning Process & Outcomes
Course material, broken down into simple examples, is anchored around the quantification of Expected Monetary Value (EMV) -- “risked value” -- of an unexplored oil and gas target area, or prospect. We also discuss how prospects become economic “Reserves” ( a formal term).
Day 1: At the heart of petroleum valuation is an appreciation of uncertainty and risk. The course begins with a introduction to / refresher of uncertainty principals, and modelling them via “Monte Carlo” simulation. Basic statistics are explained more through pictures than formulas.
We then apply these in examples of how uncertainty is accounted for when estimating petroleum volumes, in the event of a discovery. In the process we help demystify some of the headline numbers from expert Reserve reports, which are required by law in many jurisdictions.
Day 2: We show how exploration prospect risk is calculated, to show how likely they are to be discovered at all. We then “marry” all these risks to basic discounted-value based petroleum economic modelling, to calculate EMV for a single prospect. On the way, we cover key topics, including economic limits, “above-ground” project risks, and discounting’s sometimes counterintuitive effects.
Day 3: Everything covered so far gets applied and “cemented” in a competitive bid round simulation, run on a custom Excel model. Teams get an investment “war-chest” of funds to use to bid for any combination of up to 8 exploration prospects, competing to craft portfolios with the highest EMV. The assets face an “obstacle course” of uncertainties. Prizes for winners!