How do you update petroleum economics assumptions based on feedback?

Taking feedbacks after building an economics / petroleum model will only serve as a learning process on the performance of the already built economics model. Reinventing the wheel is always dicey. 99.9% of all the reasonable feedback and assumptions are made before generating the petroleum economics. All the technical team that gives an input into building the economics model serves as a strong stakeholder and source of feedback. Thank you.

Petroleum economics depends upon oil price and oil price is affected by geopolitical situations, wars, oil output cuts, supply and demand etc.

One thing that I have found that it will be helpful is that conducting research studies during and after project management, will help the oil and Gas industry to overseeing the upcoming projects and Investment in the sector for the development of the importance of green energy for the new generation, in order to increase and help the development of science and technology studies

Updating petroleum economics assumptions based on feedback is essential for making accurate financial decisions in the petroleum industry. Feedback can come from various sources, such as actual production data, market trends, technological advancements, and sometimes even changes in regulations.

Petroleum economics has some driving factors like oil or gas market price, upstream facility development and operation costs, internal oil and gas finding costs, local and international regulation compliance costs, and most importantly the reserves in place and their economic production over the life of the facility or overall field development. No one can put any fixed numbers to these factors and therefore these factors are put in the ranges with year by year estimation of contributing factors. In the end, each field development or upstream company economics would be driven by multifactorial algorithms.

The company needs to analyze feedbacks from various angles including geopolitical perspective, as mentioned above. For project involving huge investments, companies should consider engaging independent experts that can analyze the inputs and provide assessment that should be suitably factored in to project economics.

There is direct and indirect impact . The direct impact needs to be added to the project and the indirect impact needs to be added to your process

Economic models are built based on assumptions, which means that they are dynamic and therefore must be adjusted continuously to replace assumptions with real data. When you constantly update your economic models with real data, you can obtain much more realistic projections.

It is very important to keep reviewing the assumptions, especially, the ones that are related to the external factors. External factors can throw unexpected situations during the implementation of the project. For example, for pipeline projects traversing '00s of kilometers there can be unexpected situations re: right of way. Also, there can be protests from environmental groups, even legal hurdles put up by the local bodies. The Transmountain pipeline is a classic example in this regard. Delays and subsequent abandoning of Keystone Expansion Pipeline is another classic example.

A common problem in communication between the project engineer and the project economist is the engineer's complaint that the economist has ignored some of his or her reserves. Reserves are end of asset life cumulative production that can be economically produced, preferably at a specified hydrocarbon price. An economic model will truncate a production profile and decommission the asset in the first time period in which operating costs exceed revenues. A cumulative production profile theoretically producible at zero operating cost therefore includes resources which are not reserves. The communication needs to consider the role of the operating cost (and the hydrocarbon price).

Any direct feedback needs to impact the project directly and the the initial assessment of the severity needs to be corroborated with the final impact

Communication is key however please communication in the priority of the dependency which means those who are depending on your output as their input as they will have to change considerably without any new knowledge / information on their model. This is where most of the PM make mistakes. They communicate up first

First of all changes should be continually assessed and evaluated, and impacts thereof should be communicated in a timely manner. In certain cases, the changes can be hugely significant, e.g., cost escalation due to new situations not considered earlier in assumptions. Changes may not be just cost escalation, or design change, it may also involve even cancellation of the project (e.g., KXL project mentioned in the previous section. Not only should the change s be communicated in a timely manner, they need to be communicated to concerned stakeholders. If all the concerned stakeholders are not informed of changes, there can potentially be significant impact on the project economics and the project itself.

Any changes in the assumptions you are responsible to update shall be well documented and shared with other stakeholders, not just the resulting economic outputs and potential recommendations to trigger a new decision on the project you analysed with updated assumptions.

Changes communicated "upwards" involve project specific assumptions such as costs and production rates in each time period modelled. Changes communicated "downwards" involve corporate assumptions on hydrocarbon prices and taxation and specification of the economic indicators to be calculated and the detail of how this should be done. An interesting response to a change in the external environment occurred in 1986. Saudi Arabia used netback pricing to collapse the oil price and punish other OPEC producers for over production against quotas. After insisting on project payback first within 1 year and then 6 months an oil major developed: Loss of project NPV caused by 1 year delay divided by cash flow gain in Year 1 resulting from 1 year delay.

Important thing to note in this context is that changes need to be understood in a holistic manner, in the big picture format, and implemented. In many instances it has been seen that silo or small picture approach led to serious negative impacts on the project. Not only the project risk register should be regularly updated, it should be discussed with all the project stakeholders with risk mitigation plans and their impacts (cost, time, resources).

Oh, so important to database every single range-constrained assumption, measurement, and external influence. Each record should have two names——your easy-to-process variable or constant name, and then a really descriptive name that is easy for stakeholders of multiple disciplines to comprehend. Advances in IT and AI have enabled processes whereby “the answer” is available in near-real time, along with tightened range constraints for generating multiple forward-looking scenario options.

Results should be promptly communicated with recommendations. Clear decision making process is necessary when and how any significant change in project economics evaluation with updated input assumptions trigger any new decision on the project, whether to continue, postpone or stop it, or make it ready to divest, or acquire some more working interest in it if its status changed so within the project portfolio.

Clear decision making process is necessary when and how any significant change in project economics evaluation with updated input assumptions trigger any new decision on the project within the organisation, whether to continue as is, to alter, postpone or stop the project, or make it ready to divest, or acquire some more working interest in it if its status changed so within the project portfolio.