What important financial considerations should you know as a petroleum engineer?

1. Capital budget. What allowance were you given 2. Tax incentives 3. Costs for each subdiscipline 4. OPEX costs 5. Land and surface agreements Those are the top things I could think of for now.

It is crucial for petroleum engineers to accurately forecast the potential revenue from oil and gas reserves. This involves analyzing production rates, market conditions, pricing trends, and estimating the economic viability of the project.

Oil & Gas Project will generally focus these categories of key item: - Capital Expenditures - Drilling Costs - Facility Costs - Operating Expenditures - Tax Regime Risks have to be evaluated for each category.

Como ingenieros de petróleo, los proyectos más interesantes son aquellos en los que se impulsan desarrollo de reservas, la evaluación de reservas, más allá de un tema geológico y de yacimientos, tiene una alineación importante con la economía y rentabilidad de los desarrollos. Para un ingeniero de petróleo no es sólo importante entender la complejidades de los yacimientos, los cuales deben explotarse mediante una adecuada gerencia integrada y que en definitiva todo debe tributar a la explotación integral pero con buenas economías, muchas veces la toma de decisiones para un ingeniero de petróleo se asocia a temas económicos, por lo tanto es parte fundamental de nuestra formación

En un ambito como el petrolero donde el mejor uso de los recursos y capital es cada vez mas vital, la evaluacion de proyectos brinda herramientas valiosas no solo para determinar la viabilidad y rentabilidad de los mismos sino tambien su impacto individual y adecuado ranqueo en una cartera de proyectos. Igualmente, debe considerar su fortalezas oportunidades a cubrir, debilidades y amanazas a tomar en cuenta incluyendo impactos medioambientales.

Development contracts in oil and gas industry define the legal business and working relationships that exist between companies that explore for an produce oil and gas, and the goverment agencies or private parties that own the mineral rights. It onvolve several players and stakeholders: oil and gas companies; integrated service companies; goverment, etc Depending of the development contract: Concessionary Agreements (Rotalty-Tax Systems) or Contractual Systems (PSC, Service and Association) define the rights, obligations of the state and of the investors, the ownership of natural resources and the fiscal regimes, parameters necessary for the economic model

Each country has its own flavors and ways to determine the taxation and royalties, assuming everywhere is same, may lead you to mistakes and losses.

As a petroleum engineer, financial consideration will be a key consideration whether to invest in a project anywhere in the world. Valuation of Reserves and Resources is heavily impacted by the taxation & royalties regime, a Concession in a marginal oil asset may be more attractive mid-term investment compared to a PSC or Service Contract in large oil asset depending on the terms in taxation & incentives offered.

Here's how the revenue distribution varies between the Production Sharing Contracts (PSC) and Tax & Royalties fiscal regimes: Production Sharing Contracts (PSC): The government and the oil company share the production.Initially, the oil company recovers its costs from the produced oil or gas (cost oil). The remaining production (profit oil) is then split between the government and the company according to agreed terms. Tax & Royalties: The oil company pays taxes and royalties to the government.Taxes are typically based on the company's profits.Royalties are usually a percentage of the total production, regardless of profitability.

E&P projects have grown in complexity in the last few decades. Production Sharing agreements were introduced 60 years ago and continue to be modified. Certain cost items are tax deductible, some are not. Watch this space, read the contract carefully. Risk contracts were introduced adding different layers to how service and E&P companies interact with governments. Taxation for those might look very different to Concessionary or PSC systems. Royalties originally were part of the concessionary regimes, but since then, they were introduced in certain PSCs (e.g. Vietnam) and abolished in some regimes (e.g. UK and Norway). Tax: Watch what the UK government did with the EPL (windfall tax 2022). Moving the tax from 35% to 75% almost overnight.

Asset Integrity management is essential part of Oil and Gas industry. Without dedicated focus and strategic approach assets life span can be reduced significantly and lead to loss of investment and trust of shareholders.

A petroleum engineer should focus on maximizing asset value while minimizing operational and financial risks. This involves strategic investment in exploration and production technology to enhance recovery rates and reduce costs. Regular asset performance reviews are crucial to identify underperforming assets and opportunities for optimization. Risk management strategies, including hedging against price fluctuations and diversifying assets, are vital. Additionally, engineers must stay informed about environmental regulations, ensuring compliance to avoid fines and reputational damage. Lifecycle management of assets, from acquisition through decommissioning, is also key, aiming for operational efficiency and cost-effectiveness at every stage

Petroleum engineers should be knowledgeable about risk management strategies in the oil and gas industry. This includes assessing and mitigating risks associated with exploration, drilling, production, and market volatility. Understanding insurance options and implementing safety measures is also important.

In addition to wells, reservoirs, pipelines, facilities, equipment, and personnel, effective data management is a critical asset for petroleum engineers. Preserving and organising historical field projects data save time and money. Treating data as a strategic resource enhances efficiency in the oil &gas industry.

Long-range plans are a great tool to assess what are the cross-functional plans for an asset over its life and assess whether they are aligned with corporate plans and don't clash with each other (e.g. whether the Wells team ordered the right long leads on time for the delivery of production agreed between subsurface and commercial). Also, it is a powerful tool to assess synergies such as the use of the same rigs for well campaigns, the use of similar contractors for services, etc.

Market prospecting is essential to the understanding of the supply and demand and its relevance to the industry. Further, it supports prevailing analysis on economical vitality.

It is very important that a Petroleum Engineer knows the basic Petroleum Economics and Decision Analysis, and how to apply them on all projects and activities, be it drilling of new wells, Non-rig and Major rig workovers, etc. With good market analysis applied to activities, one can get current and future outlooks of such activities. This can also be supported by good sensitivity Analysis using Tornado chart, Design of experiments etc.

Oil industry has been characterized by volatility which caused by booms and recessions driven by the supply-demand balance oil process and investment decisions Crude oil and petroleum products are global commodities, and as such, their prices are determined primarily by supply and demand factors Oil and gas prices react to a variety of geopolitical and economic events, but the extent and duration of the impacts are not predictable. Framing the future in terms of options helps to identify and quantify key issues and potential risks. Sensitivity and simulation analysis are essential to understand the impact of each variable

Try to use the latest market data for your forecast, but understand that sometimes requiring changing an assumption such as oil price might trigger an unwanted long process to update your forecast. Sitting on corporate or management, you should assess whether 3-5$/bbl change on assumption trig a review on your plan. Avoid overcomplicating things. Learn when to dry a line on sand and live with this. Once you put data on a spreadsheet it is already vintage data. Live with that and manage uncertainty.

From a market analysis standpoint, a petroleum engineer should consider oil price volatility, influenced by geopolitical tensions, supply-demand dynamics, and technological advancements. Understanding the capital-intensive nature of the industry is crucial, with a focus on project viability and breakeven costs. Awareness of regulatory changes and environmental concerns is also vital, as they can impact project costs and public perception. Additionally, keeping abreast of innovations in alternative energy sources is important, as they may shift the market demand. A comprehensive view of these factors is essential for sound financial decision-making in the petroleum sector

One skill that will be separating the individual amongst the crowd is "the skill to acquiring the new skill" - hard or soft. Transformed from I to T finally to V shaped professional, and becoming compatible to the assignment on various role and organization is very critical for the career progression.

If you aspire to a career in management, you likely will need exposure to finance and commercial matters. Try to understand the concepts in those areas early on and if the opportunity to have an assignment on that arrives, take it.

Career development holds significance not only for individual professionals but also for the entire team. Proficiency in financial knowledge is crucial for effective communication and mutual understanding within the team, enabling members to speak a common language. In the realm of Petroleum Engineering, collaboration is paramount, and engineers seldom work in isolation on any given project.

To developed you career you need to work on your self and improve your knowledge and inter new challenges, by getting courses related to your experience

You always need to have career prospects enhanced by picking your study in candidates whom you need to keep training to gain knowledge and to eventually take over your job as this will open the gates for you to move on or move upwards both of which will come as career advancement

Certainly, possessing geopolitical awareness as a petroleum engineer is advantageous, given its impact on the financial aspects of the oil and gas industry. Additionally, having expertise in hedging and a keen understanding of commodities further enhances one's financial acumen in this field.

Petroleum economics?is about how oil and gas activities are driven by?economic?considerations, and how the values are shared. Anyone working with the?petroleum?sector needs to understand some fundamentals of its?economics: - Reserve and reservoir/field characteristics have huge influence on economics and cash flow - To justify exploration projects and development wells To value asset for adquisition or divestment - Corporate budgeting and goverment reporting - Workover justification, equipment purchases and investor reporting.

Considero que los ingeniero petroleros una vez que tienen clara su su línea de carrera (producción, yacimientos, perforación, etc) deben de tomar un MBA o máster en finanzas para realizar análisis de proyectos más efectivos. Uno de los errores de los ingenieros es capacitarse en esta área solo cuando están llevando a cabo categorías administrativas, pero son consideró que debe de ser algo en lo que trabaje el Ingeniero Petrolero por las fuertes cantidades de inversión que se pierden al tener mal análisis de proyectos.

*Investment Decisions: Participate in decision-making processes related to investment in new technologies, equipment, or projects. Evaluate the financial impact and potential returns on investment. *Oil and Gas Price Trends: Stay informed about global trends in oil and gas prices. These trends directly influence the financial health of the industry, job opportunities, and project viability. *Risk Management: Identify and assess risks associated with petroleum projects. Develop strategies to mitigate risks and protect financial interests. * Financial Reporting: Work closely with financial professionals to ensure accurate and transparent financial reporting. Compliance with accounting standards is crucial for maintaining financial integrity.

Carefully analysis about macroeconomic trends and external changes could improve risk analysis in preliminary steps when project need to consider contingency budget and this determination maybe result on a positive results for the future