Course Summary:

This engrossing four day course discusses how upstream oil and gas lifecycle costing ('cost forecasting') goes beyond cost estimation and cost engineering to provide a holistic, multi-disciplinary, full-life account of 'where the money goes' in this high-risk, high-reward, capital intensive industry.

The curriculum addresses the costing of long-life, capital-intensive upstream developments, both onshore and offshore, in the face of: uncertain and incomplete information; continually evolving technology needed to address production of ever more difficult resources (such as heavy oil, shale gas, and light tight oil); ever deeper, harsher and more remote environments; and political instability.  

Costing of all phases and all aspects of the entire asset (the oil or gas field) is considered, from acquisition, study, and exploration, through to production operations and decommissioning, including aspects which are often neglected, such as: operator's internal costs and operating tariffs.

The course concludes with discussion of fascinating topics that impact reliable costing, such as: human aspects (biases and irrationality), dealing with uncertainty, and why cost forecasts are so often wrong ('train wrecks').

Delivery of the training includes interactive costing exercises, using data and methods discussed during the programme.

Course Objectives:

• Better collaborate within multidisciplinary teams on field development planning tasks leading to investment decisions
• Give a comprehensive overview of the nature and magnitude of exploration, development, production and decommissioning costs
• Explain how to express lifecycle costings in cash flow and economic models
• Describe the challenges of upstream lifecycle costing, and dealing with uncertain and incomplete information

Course Outline

Upstream Oil & Gas Lifecycle Costing

• Aspects of the upstream oil and gas exploration, development and production industry.
• The asset (oil or gas field) lifecycle from acquisition and exploration, through to production and decommissioning
• Relationship to cost estimation and cost engineering
• Approaches to costing
• Bottom-up vs. top-down approaches
• Analog, benchmarking, parametric and cost metrics approaches
• Provision for engineering growth, contingency, unallocated provision, operator's reserve
• Types of cost: exploration; capital (capex), operating (opex) and decommissioning (abex)    

Upstream Oil and Gas Lifecycle Cost Components

• Description of the items (activities, services, wells, facilities) that add to lifecycle costs (so they mean more than just numbers in a spreadsheet)
• Illustrative costs for all components
• The parameters ('key-drivers') that most influence the cost of components
• Cost metrics and rules-of-thumb
• Building of a cost model    

Field Development Planning

• Introduction of the time element
• Time value of money, discounted cash flow, basic petroleum economics
• Cost, production, revenue, cash-flow profiles
• Building of an economic model    

The Wider Context

• Issues relevant to how costs are prepared, used and influenced
• Petroleum production licences and contracts
• Cost 'train wrecks' – when costs go out of control
• The wisdom (and cost) of front end loading (FEL)
• Current and future challenges to oil and gas production (and hence to costing)
• Human aspects (biases, irrationality, vested interest) that can skew costing
• Dealing with risk, uncertainty and incomplete information
• Decision making
• Regional and host-country factors, including productivity and local content issues