Mini MBA: Understanding Petroleum Industry Dynamics

Mini MBA: Understanding Petroleum Industry Dynamics

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Course overview The petroleum industry comprises three key sectors that utilise crude oil, natural gas and natural gas liquids through the supply chain. These sectors are as follows: The upstream that comprises exploration, development and production activities The midstream that comprises transportation of petroleum liquids and gases via pipelines, terminals and marine, rail and road tankers The downstream that involves trading and manufacturing of products through refining and petrochemical processes and the distribution of these products to the various consuming markets Crude oil and natural gas together currently account for 59% of global primary energy demand. Not only do oil and gas re…

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Course overview The petroleum industry comprises three key sectors that utilise crude oil, natural gas and natural gas liquids through the supply chain. These sectors are as follows: The upstream that comprises exploration, development and production activities The midstream that comprises transportation of petroleum liquids and gases via pipelines, terminals and marine, rail and road tankers The downstream that involves trading and manufacturing of products through refining and petrochemical processes and the distribution of these products to the various consuming markets Crude oil and natural gas together currently account for 59% of global primary energy demand. Not only do oil and gas represent important commodities but they are also at the centre of economic activity of societies. They have primary strategic and political significance. The modules focus on the key elements of the petroleum supply chain. The course has appeal to attendees from both technical and non-technical backgrounds. However, emphasis is given to the commercial and economic drivers that impact the supply chain. The key activities, processes and terms are presented in clear and jargon-free language that will enable attendees to gain a rapid understanding of the key functions of the supply chain. The topics are reviewed using PowerPoint presentations, video clips and case studies and interspersed with short exercises and quizzes that will reinforce your understanding and knowledge base. Topics covered: Review of the current petroleum markets; oil and gas supply and demand, future global trends Key concepts and processes in exploration, development and production International fiscal systems, IOCs, NOCs and geopolitics The emergence of expanding natural gas markets, future growth trends, global trade through LNG, inter-regional trade through long distance pipelines, gas to power markets Global trading markets for oil, gas and refined products; physical and derivative markets Transportation logistics, costs and tariffs; marine tankers, pipelines, rail, river and road Refining and petrochemical manufacturing processes; cost, prices and margins The petrochemical industry Major gas export supply chains; LNG and pipeline operations with case studies, trends and risks Key gas market sectors; industrial, residential, commercial, gas to power petrochemicals Non-conventional petroleum - future impacts on global markets? Benefits of attending Gain a greater insight of the activities of the supply chain Understand the prices, costs, and margins in each of the sectors Recognise the future trends and risks for the petroleum industry Comprehensive understanding of all sectors of the petroleum supply chain Understanding processes, logistics, costs, margins and pricing Familiarisation with key performance indicators Who should attend Corporate planners Senior oil and gas managers Investment bankers Fund managers Investment analysts Media analysts and commentators Government agencies
Day 1 The upstream - exploration, development and production Current status of the petroleum markets; facts, statistics and trends Forecasts for expanding global oil demand against decreasing supply. The ‘peak oil’ challenge The origin and global distribution of oil and gas reserves and production. Petroleum quiz Petroleum reserves: definitions, recovery factors and production profiles The key exploration and production technologies; seismic and drilling Oil and gas field developments Exercise: Planning an offshore drilling campaign in West Africa. Case study: The development of a major offshore oilfield. Improving and enhancing petroleum recovery Price volatility, costs and margins in upstream activities Exploration and production (E&P) fundamentals Exploration process; geological, geochemical and geophysical analysis & interpretation Seismic acquisition and processing Exploratory drilling Field appraisal and final investment decisions Feasibility, FEED and EPC (CAPEX) Production operations and operating expense (OPEX) The E&P company business model Field production curve - cash flow curves for projects Cash flow model for E&P companies The "Hopper" model; examples from Shell and BP Strategy - areas of focus- core areas Day 2 International Fiscal Systems - Petroleum Contracts, IOCs, NOCs, Geopolitics The Midstream - Transportation, Distribution and Storage and Crude Oil Characteristics & Trading Government/ investor relationships Historic evolution of relationships between host countries and foreign investor Global case study examples Economic rent and the change of fiscal terms Roles and relationships of IOCs and NOCs Factors that impact investment decisions Government fiscal terms & agreements with investors Contrast between host government and investor objectives Structure of fiscal contracts Tax/royalty (concession) agreements Production sharing agreements (PSCs) Other service agreements (example: Iraq) Examples of fiscal split between host government and investors in each contract type Case study: An Algerian example of production-sharing contracts. Geopolitics Petroleum as a strategic commodity Energy security issues Resource nationalism, expropriation Terrorism Crude oil supply from wellhead to market Marine and pipeline transportation, costs and tariffs Transportation and international commercial terms (Incoterms) Netbacks Crude oil market characteristics and dynamics The global oil market; supply and demand-key players OPEC, Non-OPEC Crude oil characteristics, variations and price differentials Impurities in crude oil; sulphur, metals and salts The changing global crude oil slate Benchmark crudes; global reference markers Day 3 Crude Oil Trading, The Downstream - Refining, Petrochemicals and Market Distribution Crude oil trading Trading hubs Global Benchmarks and references The physical market; term and spot The derivative markets; forwards, futures, hedging and arbitrage Case study: Brent spot crude sales to a Rotterdam refinery Case study: Urals crude oil supply through the Druzhba pipeline system The refining process; technologies, costs and margins Refined products: commodities (gasoline, diesel, naphtha and kerosene and specialties (waxes, lubricants)) Refineries & petrochemical plants, processes, performance indicators and trends The crack spread Optimising yield and crude oil selection Petrochemical feedstock and products Case study: refining hubs; contrasts of costs, prices and margins between U.S Gulf Coast and European ARA refineries. Global competition, the new super-refineries The current divestment of refineries by IOCs The pure-play refiners Case study: refinery margins at a Rotterdam refinery Petroleum products, specification, distribution and trading The current global petroleum products picture The key refined products; gasoline, naphtha, diesel and jet kerosene “White” and “Black” products Market hubs; ARA,Med, NYH Market dynamics; trading the products Price drivers Swaps and arbitrage Global product tradeflows Storage, distribution and supply logistics Exercise: choosing crude oil supply for a Gulf coast refinery The petrochemical industry The petrochemical processes; feedstocks, base chemicals, end-user products, global trends and risks, case study examples Quiz: refinery and petrochemicals. The fuel retail markets: de-integration of the supply chain, changing and evolving market conditions, marketing economics Day 4 Natural Gas and Gas Liquids Fundamentals - Characteristics, Gas Processing and Specification, Trading and end-user Markets Commercial Contracts in Oil & Gas Investments Non-conventional petroleum Defining the natural gas downstream market Overview from wellhead to end-user markets Natural gas; occurrence and characteristics Major holders and suppliers of natural gas Value considerations Specification, units and thermal value Correlation/indexation to crude oil prices Gas processing and specification Regional Variations in specification Calorific value/commercial value considerations Impurities and inerts-elimination processes Gas transportation pipelines and LNG The LNG supply chain-principles, processes and costs LNG case studies from liquefaction to regasification LNG trends and risks Pipeline processes, technology and costs, case studies. Natural gas trading markets Hub references Indexation to crude oil prices in specific markets Price formation- price-makers and takers Physical and derivative markets Case study: The U.K gas market Global trends in gas markets. Increased fungibility; from regional to global markets Exercise: Purchasing gas for an electricity utility Non-conventional petroleum Oil sands, shales, bitumen and ultra-heavy oil (UHO) Shale gas and coal bed methane Global impact of non-conventional petroleum The nexus of commercial contracts in oil & gas investments Oil & gas project contractual structure – from investors perspective Contractor interrelationships Recognition of risk and reward in contracts, examples Course summary and close
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