policy introduction
TRANSCRIPT
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Petroleum policy and resource management:
Overview and
int roduct ion
to the course
Erik Jarlsby, Ph.D [email protected]
Photo: BP
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Petroleum policy and resource management:
Overview and introduction to the courseErik Jarlsby, Ph.D
1. The challenge: Managing petroleum resources
2. The course: Contents Overview
3. You & the course: The learning experience
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Petroleum Policy & Resource Management: Introduction
Petro leum .........
An exhaustible natural resource A key input to modern society
▲ Deep underground▲ Generated over many million years
▲ Finite quantities *)
▲ Unevenly distributed in the world
*) Subject to definitions, discoveries, technology
► A source of energy
► High consumption in developedeconomies
► Also a raw material (plastics etc)
► Creates environmental concerns
Photo BP
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Petroleum Policy & Resource Management: Introduction
The petroleum industryGetting oil & gas from reservoirs to users
Photos BP, Shell
And manymore ...
”Downstream”: Making oil & gas useful Transport - Refining - Retailing - (Petrochemicals)
”Upstream”: Oil & gas out of the ground Exploration - Development - Production - Decommissioning
Who:Large and small petroleum firms
State owned and non-state petroleum firmsUpstream, downstream and integrated petroleum firms
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Petroleum Policy & Resource Management: Introduction
Exploiting petroleum can create affluence ..........
Norway’s Government
pension fund global: US$ 749,596,814,007September 4, 2013
Stavanger
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Petroleum Policy & Resource Management: Introduction
.... but petroleum can also be accompanied by misery
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Petroleum Policy & Resource Management: Introduction
Resource management gone wrong: Many pitfalls
▼ Loss of lives and value through disasters
▼ Environmental damage through accidents and low standards
▼ Armed conflict triggered by resources
▼ Misappropriation of value through corruption and power abuse
▼ Imbalanced appropriation of valuebetween (foreign) enterprises and nation
▼ Wasted expense through poor investmentdecisions
▼ Wasted resources through inefficient operations
▼ Short-lived benefits: Boom and bust
▼ Erosion of the non-petroleum manufacturing base
▼ Loss of opportunity through failure to attract investment
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Petroleum Policy & Resource Management: Introduction
Cursed by resources ?
United States Japan
Bangladesh
Nigeria
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Benefits
Oil & gas
resources
Commercial
profit
Regulatory management (Government)
Business m anagement (Companies)
Develop-
ment Production
Tail End
and
Abandon-
ment
Licensing
and
Exploration
The value chain of petroleum exploration and production
What are we trying to do in the petroleum business ?
Lasting benefitsfor society
Natural and social ENVIRONMENT
Natural and social ENVIRONMENT
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Petroleum Policy & Resource Management: Introduction
Two important premises for PETRAD’s courses:
Resources are no curse.
Properly managed, petroleum brings lasting benefits to the nation.
Authorities and enterprises both have important roles in petroleum.
An industry governed by regulations and markets
PROFIT-SEEKINGENTERPRISES
NATIONAL AUTHORITIES
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Petroleum Policy & Resource Management: Introduction
Rising to the challenge: The need for insight
The petroleum value chainThe natural resources & what industry does with them
Conditions for creating economic value
Resource managementSecuring benefits for the nation
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Petroleum policy and resource management:
Overview and introduction to the courseErik Jarlsby, Ph.D
1. The challenge: Managing petroleum resources
2. The course: Contents Overview
3. You & the course: The learning experience
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Petroleum Policy & Resource Management: Introduction
COMMERCIALPERSPECTIVE
NATIONALPERSPECTIVE
Petroleum policy and resource management:
Converting resources in the ground to economic and social wealth.
Our aim:
Enable participants to make professional contributions toregulatory or commercial endeavours concerning hydrocarbon resources
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Petroleum Policy & Resource Management: Introduction
Objectives for the course in Petroleum Policy and Resource Management
The main objective of the course in Petroleum Policy and Resource Management is to strengthen the
participants’ capabilities for contributing to the effective management of petroleum resources in a
context which involves commercial enterprises, national authorities and civil society. The course aimsto enable participants as follows:
1) Understand the petroleum value chain in terms of the main activities required to find, produce
and sell petroleum.
2) Understand the key responsibilities of national authorities and commercial firms for petroleum
activities in a modern regulatory framework.
3) Understand the essential geological conditions of petroleum resource formation.
4) Understand the processes of licensing and development planning in national petroleum resource
management.
5) Understand the essential requirements for protecting people’s health, safety and security, and
protecting the environment from the potential negative impacts of petroleum operations.
6) Understand the common methodology for assessing the economic attractiveness of petroleum
activities, including the implications of fiscal terms and uncertainties.
7) Understand common contracts for licensing petroleum rights to commercial firms.
8) Recognise the main impacts of petroleum activities on society and the requirements for
transforming petroleum resources into lasting benefits for society.
9) Contribute effectively to solving complex tasks in a multi-disciplinary team context.
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Petroleum Policy & Resource Management: Introduction
The course is structured to follow the petroleum project life cycle
DOWNSTREAM BUSINESSES:
Marketing and
utilisation of oil and
gas
Capabilities and human resources
Policy and context
Regulatory management (Government)
Business m anagement (Companies)
Develop-
ment Production
Tail Endand
Abandon-
ment
Licensingand
Exploration
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Petroleum Policy & Resource Management: Introduction
DOWNSTREAM BUSINESSES:
Marketing and
utilisation of oil and
gas
Capabilities and human resources
Policy and context
Regulatory management (Government)
Business m anagement (Companies)
Develop-
ment Production
Tail Endand
Abandon-
ment
Licensingand
Exploration
Our two courses emphasize different parts of the value chain
Emphasis of the ”Policy” course
Emphasis of the ”Operations” course
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Petroleum Policy & Resource Management: Introduction
Licensing and
exploration
LICENSING: Establishing rights & conditions to exploit petroleum
EXPLORATION: Identifying petroleum resources
- A process involving sovereign power & petroleum firms
- Result: Rights and obligations
- Applying techniques: Seismics, drilling, data interpretation
- Result: Information (Basis for decisions on further investment)
Regulatory management (Government)
Business management (Companies)
Develop-
ment Produc-
tion
Tail End
and
Abandon-
ment
Licensing
and
Exploration
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Petroleum Policy & Resource Management: Introduction
Understanding
the undergroundWhat is down there ?
What kind of rock structures ?
How did the rocks develop over 500 million years ?
How & where could petroleum have been formed ?
Where can petroleum be trapped ?
What limits the extent of petroleum ?
Will the rocks release petroleum ?
How can we get valuable information at affordable cost ?
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Petroleum Policy & Resource Management: Introduction
Offshore exploration:
Drilling a well ....
... may easily cost $50 million
Information is the object of exploration: Essential & costly Combine techniques: Improve chance of success at affordable cost Balance risk & reward in the licencing process
... often >80% probability of non-discovery (not finding anything worth producing)
... is necessary for any petroleum development to proceed
Implications:
&
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Petroleum Policy & Resource Management: Introduction
Some lecture topics on exploration
Petroleum generation, basin formation and reservoir description: How hydrocarbon resources are formed in the underground.
Play analysis, resource assessment and exploration strategies:
Methods for assessing the resource potential.
Resource reporting, analysis and prognosis: Keeping track of resources
Prospect evaluation: Analyzing exploration data.
Exploration economics: Assessing potential value vs risk and cost
Introduction to GeoX: A computer program which you will use for the case work.
Data management: Important considerations for managing valuable information from exploration.
P t l P li & R M t I t d ti
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Petroleum Policy & Resource Management: Introduction
COMMERCIALFIRMSNATION
LicensingEstablishing rights to explore for petroleum
Balancing the interests of nation and firms
National interests: ATTRACT capable petroleum firms
MAXIMIZE value of resources
APPROPRIATE benefits for nation
PROTECT societal interests
Firms’ interests: ACCESS to valuable resources
MAXIMIZE economic value to firm
BALANCE risk & potential reward
ALLOCATE resources globally
P t l P li & R M t I t d ti
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Petroleum Policy & Resource Management: Introduction
Lecture topics on licensingand related regulatory framework
PRODUCTION SHARING CONTRACT
THIS CONTRACT is made and entered into this 15th day
of October, 1999, by and between the Government of
Eureka, acting through the Ministry of Energy (hereinafter
called Government) , and Elephant Oil Eureka (hereinafter
called Contractor), a corporation duly organised and ....existing under
Production sharing agreements and other petroleum contracts: Awarding petroleum rights by contractbetween Government and firms.
Oil company strategy for resource acquisition: A case study on Centrica in Norway
OILSIM: A team game simulating a licensing and exploration process.
Determining factors in exploration investments: Understanding what is important for the oil firms
Pre-licensing preparations: Acquiring information on the underground before grainting petroleum rights tofirms.
Promotion: Marketing your country’s oil potential to international companies
Licensing strategy and process: Agreeing petroleum rights between State and firms
Negotiating petroleum rights: Aligning the interests of State and petroleum firms
P t l P li & R M t I t d ti
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Petroleum Policy & Resource Management: Introduction
DevelopmentInstalling the facilities to produce
Must perform the key production functions:
WELLS to access hydrocarbons in underground; injection for pressure management
PROCESSING to transform the wellstream into oil & gas that can be exported
OFFTAKE; bringing the products to market (pipeline and/or ship terminal)
SUPPORT FACILITIES: Supply logistics, safety, environmental protection, quarters, ....
Regulatory management (Government)
Business management (Companies)
Develop-
ment Produc-
tion
Tail End
and
Abandon-
ment
Licensing
and
Exploration
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Petroleum Policy & Resource Management: Introduction
Tampen area development (Norway)Illustration: StatoilHydro
Petroleum development:Some challenges
Often multi-billion $ projectsIncreased contractor costs in recent years
Choice of concepts:- Strategy for high recovery of reserves
- Fast or extended production profile ?
- Gas processing & utilisation
- Stand-alone or linked with other developments ?
- Where to locate terminals, pipelines, ....
Complex decision and approval processes
Project execution & contracting strategy
Petroleum Policy & Resource Management: Introduction
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Petroleum Policy & Resource Management: Introduction
Pipeline construction onshore. Photo: Gassco
Lecture topics on development
Introduction to petroleum development and operations
Plan for development and operations: Authorities’ perspective
Introduction to the management of large petroleum projects
Procurement of goods and services
Natural gas: Applications and markets (2 lectures)
Overview of the petroleum downstream sector
Petroleum markets and price developments
Introduction to project economics
Introduction to petroleum company finances
Evaluating petroleum projects
Decision support under uncertainty
National equity participation and Local content
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Petroleum Policy & Resource Management: Introduction
ProductionRealize the value
Protect lives & environment
Some challenges: Extracting value from the underground
Conducting safe & efficient operations
Maintaining facilities for the long haul
Additional or modified developments
After completed production: Remove and restore
Regulatory management (Government)
Business management (Companies)
Develop-
ment Produc-
tion
Tail End
and
Abandon-
ment
Licensing
and
Exploration
Petroleum Policy & Resource Management: Introduction
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Petroleum Policy & Resource Management: Introduction
Ekofisk field installations, NorwayPhoto: Leif Berge / StatoilHydro
Lecture topics on production and
abandonment
The Operations course covers these issues more fully
Introduction to petroleum field operations
Decommissioning, removal and clean-up
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Petroleum Policy & Resource Management: Introduction
Capabilities andhuman resourcesThe capacity to perform
Lecture topics:
Regulatory management
Business management
The value chain
Capabilities and Human Resources
Policy and context
Industry relationships: Employers, trade unions and authorities
Capacity building in the petroleum sector
Management skills: Working with people, making presentations
Team development: Preparing to work in teams for the course
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Petroleum Policy & Resource Management: Introduction
Context and regulatory managementThe wider context – The ground rules
Regulatory management
Business management
The value chain
Capabilities and Human Resources
Policy and context
1.1 Global energy perspectives: International energy sector developments; dilemma of energy
and climate.
1.2 Petroleum sector policy: The challenge of achieving lasting benefits; resource
management; contents of petroleum policy.
1.3 Petroleum legislation: The legal structure of national petroleum governance.
1.4 Petroleum sector organisation: The structure of public institutions for managing petroleum
resources.
1.5 Licencing regime and fiscal regime: Systems for granting rights for petroleum operations
and for sharing the value of petroleum between State and firms. 1.6 Financial management and integrity: State management of revenues from petroleum.
Managing the macro economic impact. Efforts to prevent corruption.
1.7 Safety management: Regulatory and business management of safety, risk assessments
1.8 Environmental management: Environmental policy considerations, legal framework and
governance, risk analysis, oil spill contingency, EIA, SEA.
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Petroleum policy and resource management:
Overview and introduction to the courseErik Jarlsby, Ph.D
1. The challenge: Managing petroleum resources
2. The course: Contents Overview
3. You & the course: The learning experience
Petroleum Policy & Resource Management: Introduction
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Petroleum Policy & Resource Management: Introduction
The course consists of ....
Classroom lectures Listen actively Your questions, comments Practices Focus
Case work A simulated challenge of
resource management andexploation assessment
Excursions and events Challenge & learning reviews
Petroleum Policy & Resource Management: Introduction
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5 Human resources
4 Production
3 Development
2 Exploration & licencing
1.6 Governance in the petroleu1.6 Governance in the petroleum1.6 Governance in the petroleum s
1.6.2 Revenue Management
Petroleum Policy & Resource Management: Introduction
1.8.3 Evaluating petroleum projects
1.8 Petroleum project econonomics
Each lecture ... ... is part of a module ... ... which are organised into
5 main sections of the course
1 Policy and Main Framework
In addition: Case work, excursions country presentations, events
The Policy and Operations courses have similar modules
but different lectures. Some lectures are common.
Lectures programme structure
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The 3 levels of skillObjectives for each module
1 = CapabilityStudent to have the knowledge required to perform independent professionalwork on the subject matter.(Additional on-the-job exposure may be required before the student can fullyassume responsibility for work results.)
2 = Understanding
Student to be able to identify, describe, evaluate and discuss the implications of the subject matter in a practical context.
3 = Recognition
Student to be aware of the subject matter and recognise its relevance in apractical context.
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Documentation will be provided for most lectures
Slide handouts
Accompanying articles
Look to Sharepoint for schedule and documentation
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Learning objectives are defined for each lecture
Example
Lecture 3.6.1 Introduction to project economics
Learning objective:
• Understand key terms in cash flow analysis: Cash flow, Net present value,Internal rate of return, Discount rate. (Level 2)
• Be able to conduct an economic analysis of a simple investment project (Level 1)
Levels for learning objectives:
Level 1 = Capability (Knowledge required to perform)Level 2 = Understanding (Describe, evaluate, discuss)Level 3 = Recognition (Awareness; recognize relevance)
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Your challenges
You were asked to define:
Which are the most important challenges, problems and questions in the
petroleum sector and its administration of your country?
What challenges should you DO something about – after the program?
During the course you will:
Use lectures, discussions etc as means of preparing to meet your challenges
Have some guidance from Petrad, but success is your own responsibility
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Thought you were going
on vacation ?
Wrong.
Lectures: 4 x 90 minutes (daytime) + some eveningsCase work: All contribute
Excursions
Country presentations
Social events
Many evenings & week-end days
are scheduled
or will be required for case work
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YOUare responsible for learning.
WE(Lecturers and PETRAD staff)
are here to assist.
Good luck !
You are also expected to support other students in their efforts to learn.
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PETRADNorwegian International Programme for
Petroleum Management and Administration
PETRAD,
Prof. Olav Hanssens vei 10,
P.O. Boks 598,
4003 Stavanger,
Norway.
Tel: 51876000Fax: 51876428
E-mail: [email protected]
Web page: www.petrad.no