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 a low price environment, more challenging environments and changing regulatory trends 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 reconsidered 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 multilaterals or horizontal completions.
As a consequence of the need to tackle new reservoirs with new appraisal and development techniques in more challenging operating environments the risks are often increased and there are many uncertainties which are difficult to quantify. The result is greater vulnerability of many projects to fluctuations in commodity price, resource recovery and cost.
Topics CoveredIntroduction – Current Environment and Industry Trends
- Business, financial and energy markets
- Technical, social and environmental trends
Key Probability and Statistical Concepts
- Understanding probability and statistics as well as uncertainty concepts
- Appropriate use of probability distributions
- Use of distributions for resource and cost estimation
Exploration Project Economics and Evaluation Measures
- Cash flow analysis and net present value calculation
- Cost of capital, valuation and profitability measures
- Expected monetary value (EMV) concepts
- Credibility of input data and limitation of methods
- Risk and uncertainty management principles
- Risk identification, risk assessment and mitigation
- 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
Prospect risk analysis and valuation
- Assessing the probability of prospect success
- Historical versus actual success rates
- Monitoring and improving predictive performance
- Prospect evaluation using EMV
Exploration portfolio valuation and management
- Risk and risk aversion in exploration
- Performance of exploration portfolios
- Exploration portfolio management
- Matching play and portfolio attributes to business strategies
- Assessment of exploration performance and finding costs
- Methods for acquiring petroleum rights
- Joint ventures, acreage swaps and farm outs
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 ASX listed company, Executive Chairman of a non-listed Energy company and provides strategic, technical, marketing and finance advice to a number of other companies. Ian also provides oil and gas related professional training on the subjects of economics, investment and portfolio analysis, commercial negotiation, gas marketing, production forecasting, decision analysis and strategy.