Petroleum Risk Analysis & Portfolio Management

Course Introduction
Risk and uncertainty are fundamentally embedded in the exploration and production business – arguably there is nobusiness development without risk – yet the distinction between risk and uncertainty is often confused, and attempts toeffectively manage risk and uncertainty are often poor in the industry.
This 3-day workshop offers participants the opportunity to explore these challenges, including hands-on application of industry-standard tools and techniques to assess realistic scenarios and associated data. The essential commercial drivers are held in perspective at all times.
The course commences with a brief overview of the critical Business Environment factors within which all Energy industries operate, with pointers to major sources of market uncertainty impacting potentially massive investment decisions. Focus then shifts from the macro-economic, towards the realm of individual project commitments typical of the upstream petroleum sector, outlining key areas of uncertainty within the principal cashflow components. This leads
on to various aspects of cashflow analysis and a brief review of the range of key economic and financial indicators at both project and corporate level, including the broad impact of various forms of taxation.
Risk and uncertainty definitions are clarified and linked to definitions of common financial indicators. Common methods of quantifying uncertainties and risks are then described, from simple parametric methods to probabilistic simulations leading to the use of Decision Tree Analysis to analyse problems. These tools are then applied to technical issues over the field life cycle, from exploration risking to the quantification of value of information during field appraisal
and on to production forecasting using both deterministic and probabilistic methodology. Human factors involved in identifying risk and quantifying uncertainties are explored, from the preferences implicit in utility theory to the behavioural heuristics which commonly lead to bias in technical judgement.
Risk diversification principles and associated Portfolio Management theory are described on the final day, with some pointers as to how this might find practical application within E&P decision-making. The course concludes with a multifaceted case study in which ‘management teams’ will have the opportunity to assess a range of asset-related risks, and propose mainly qualitative resource allocation solutions – including several political issues.