Presentation 6

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Presentation 6

  1. 1. Petroleum Project Economics Econ210D Presentation 6 Sensitivity Analysis for Changing Variables Week 6
  2. 2. Changing Variables <ul><li>Economic evaluations are made based on assumed parameters </li></ul><ul><li>These parameters are likely to change over life of field </li></ul><ul><li>Such changes would affect the feasibility of the project </li></ul>Sensitivity Analysis for Changing Variables Week 6
  3. 3. Sensitivity Analysis for Changing Variables <ul><li>Measuring the effect of changes in key variables on the economic performance of an investment. </li></ul><ul><li>Parameters are varied one at a time with all other variables held constant. </li></ul><ul><li>The effect on NPV is usually measured. </li></ul>Sensitivity Analysis for Changing Variables Week 6
  4. 4. Petroleum Project Parameters Sensitivity analysis examines the effect of changes in any one of these parameters on the economic evaluation of a project. Sensitivity Analysis for Changing Variables Week 6 Parameter Field Estimate Recoverable Reserves 160 mbo Field Life 20 years Oil Price   $60 Total CAPEX   $500m OPEX per bbl $5 
  5. 5. Independent and Control Variables <ul><li>The parameters which are changed in the sensitivity analysis is called the independent variable. </li></ul><ul><li>The other variables in the sensitivity analysis which are held constant are called control variables. </li></ul>Sensitivity Analysis for Changing Variables Week 6
  6. 6. Independent and Control Variables In this sensitivity analysis, oil price is the independent variable and all other parameters are control variables. Sensitivity Analysis for Changing Variables Week 6 Parameter Field Estimate Sensitivity Analysis Recoverable Reserves 160 mbo Control Field Life 20 years Control Oil Price   $60 Independent Total CAPEX   $500m Control OPEX per bbl $5  Control
  7. 7. Sensitivity Analysis of Oil Price Sensitivity Analysis for Changing Variables Week 6 Oil Price NPV $B $50 $2.1 $60 $2.9 $70 $3.7
  8. 8. Spider Plots <ul><li>Sensitivity analysis examines “What if” situations based on changes in one parameter at a time. </li></ul><ul><li>Spider plots are used to present graphically several sensitivity analyses </li></ul><ul><li>This helps to give a visualization of the parameters which has the biggest effect on a projects profitability. </li></ul>Sensitivity Analysis for Changing Variables Week 6
  9. 9. Spider Plots Sensitivity Analysis for Changing Variables Week 6 Change in Independent Variable NPV due to change in Independent Variables Price OPEX CAPEX Reserves Field Life Tax -50% 0.0 -2.9 5.8 5.8 8.7 1.5 -25% 1.5 0.0 4.4 4.4 5.8 2.2 0% 2.9 2.9 2.9 2.9 2.9 2.9 25% 4.4 5.8 1.5 1.5 0.0 3.6 50% 5.8 8.7 0.0 0.0 -2.9 4.4
  10. 10. Sensitivity Analysis for Changing Variables Week 6
  11. 11. Sensitivity Analysis for Changing Variables Week 6
  12. 12. Other Independent Variables <ul><li>Altered production profiles </li></ul><ul><li>Changes in production start-up date </li></ul><ul><li>Unscheduled shut downs </li></ul><ul><li>Inflation </li></ul>Sensitivity Analysis for Changing Variables Week 6
  13. 13. Sensitivity Analysis for Changing Variables Week 6
  14. 14. Home Work <ul><li>Using the data in the following slide, together with the data from presentation 4 conduct a sensitivity analysis based on the changes in the slide which follows. </li></ul><ul><li>Use the results to construct a spider plot. </li></ul>
  15. 15. Independent Variable Price OPEX CAPEX Percentage Change -50% -2.9 5.8 50% 0 4.4

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