International Gas Markets and Trading

International Gas Markets and Trading

Monday 12 July 2021

  • Duration: One Week
  • City: Madrid
  • Fees: Classroom: 4700 GBP / Online: 2350 GBP

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Introduction

This course covers the dynamics of the gas industry. The gas market section provides general industry overview, nature of natural gas, the global market place, estimating gas reserves, petroleum resources management system, development and economics of shale gas, and impact of shale gas on LNG market.

The Course provides setup of economic analysis cases, including the estimation commodity prices, project costs – CAPEX, OPEX, taxes, royalties, transportation, depreciation, before-tax (BTAX) cash-flow, after-tax (ATAX) cash-flow, international fiscal regimes (production sharing agreement and concessionary system).

The course starts with the basic required parameters of inflation, interest, and the time value of money. These concepts are then transformed into profitability indicators. Last but not the least, the profitability indicators are then used to make investment decisions. The emphasis of the course is to bridge the gap between theoretical concepts and their practical limitations.

The Course objective

  • Understand the dynamics of gas market, monetization of shale gas and impact of shale gas on LNG imports
  • 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:

Planning managers –  Oil & gas engineers –  Project managers –  Analysts –  Commercial managers 6. Economists –  Government officials –  Geologists –  Business advisors –  Asset managers –  E&P managers –  Product managers

Course Content

Day 1:

  • General Industry Overview
  • The Nature of Natural Gas
  • The Global Market Place
  • Estimating Gas Reserves
  • Development & Economics of Shale Gas
  • Shale Gas Development
  • Impact of Shale Gas on LNG Market
  • Shale Gas Development Costs & Economics
  • Evaluation of New UG Plays
  • Problems & Solutions

Day 2:

  • Why economic evaluation
  • Typical oil & gas company objectives
  • Inflation
  • Types of inflation
  • Consumer price index (CPI) – USA
  • Italian consumer price index
  • Interest
  • Simple and compound interest
  • Nominal and effective interest.
  • The Time Value of Money
  • Risk factors (simple illustration)
  • The time value of money
  • Interest table
  • Future value of present sum
  • Present value of future sum
  • Future value of ordinary annuity
  • Future value of annuity due
  • Present value of ordinary annuity
  • Conditions of annuity
  • Spreadsheet Applications
  • Problems & Solutions

Day 3:

  • Before-Tax (BTAX) Cash-Flow
  • Cash-Flow (CF) defined
  • Forecasting cash-flow
  • Brainstorm session – identifications
  • Basic data requirements
  • Forecasting product stream
  • Revenue stream components
  • Cost elements
  • Before-tax net cash-flows
  • Natural gas processing
  • Typical oil production facilities
  • The history of oil price
  • Capital (front end) costs
  • Breakdown of facilities’ cost
  • Economies of scale
  • Capital costs during production
  • Breakdown of OPEX
  • Develop rules of thumb
  • Transfer pricing
  • Types of cost estimates
  • Dependence of cost estimates
  • Gross revenue
  • Sample before-tax cash-flow
  • Schematic of typical cash-flow
  • After-Tax (ATAX) Cash-Flow
  • After-Tax – additional variables
  • Depreciation types
  • Straight line depreciation
  • Declining balance depreciation
  • Declining balance with switch to straight line
  • Sum-of-the years digits depreciation
  • Depreciable asset lives
  • Sample after-tax cash-flow
  • Spreadsheet applications
  • Problems and Solutions

Day 4:

  • Capital Budgeting Techniques
  • Decision yardsticks/profitability indicators
  • Payback period
  • Discounted payback period
  • Net present value calculation
  • Misuse of NPV
  • Internal rate of return (IRR)
  • Limitations of IRR
  • Multiple rates of return
  • Economic solution for projects with multiple IRR
  • Profitability index (PI)
  • Unit technical cost (UTC)
  • Long-run marginal cost of gas
  • Cash-Flow Discounting Frequency
  • Funds flow and discounting frequency
  • Common cash-flow & discounting frequency
  • Spreadsheet functions Discrete probability distributions
  • Cost of Capital and Cash-Flow
  • Cost of capital relationship
  • Defining cash-flows
  • Equity cash-flow (ECF)
  • Free cash-flow (FCF)
  • Capital cash-flow (CCF)
  • Combining cash-flow and WACC
  • Netback Value & Pricing
  • Netback value (NBV)
  • Base year and ROR approach
  • LRMC approach
  • Indexed netback pricing
  • Sample gas netback from LNG
  • Problems & Solutions

Day 5:

  • International Petroleum Economics
  • Global energy consumption
  • Why collaboration
  • The need for collaboration
  • Parties to upstream agreement
  • Typical contract terms
  • Contractual arrangements
  • Fiscal systems
  • Concessionary system’s cash-flow
  • Production sharing system
  • Dynamic terms of contracts
  • Main objectives of these contracts
  • Investment Selection Decision Making
  • Types of investment decisions
  • Investment decision-making (screening)
  • Investment decision-making
  • Revenue producing investments (NPV)
  • Revenue producing investments (IRR & PI)
  • NPV/IRR conflict
  • Incremental investment analysis
  • Ranking investments (non-mutually exclusive)
  • Ranking investments under budget constraints
  • Service producing investments
  • Service producing investments (unequal life)
  • Lease versus buy decision-flow
  • Introduction to Decision Analysis
  • Detailed Case Study
  • Problems & Solutions
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