Risk man agement and risk assesment in oil and gas projects qke sept 16 2020
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Risk management in oil and gas
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Risk man agement and risk assesment in oil and gas projects qke sept 16 2020
- 1. Risk Assessment and Risk Management in Oil and Gas Projects Kayode Adebiyi, FCA, MBA Sept. 16, 2020
- 2. Our Roadmap E & P Business Risks Risk & Uncertainty Management Risk analysis & Risk assessment Q & A Risk- Perspectives
- 4. • Asset= anything has value to the organization • Vulnerability= any Weakness of Asset • Threat= any possible Danger • Risk= Vulnerability exposed to Threat Risk= Vulnerability X Threat • Control= Countermeasure to reduce Risk Asset, Vulnerability, Threat, Risk & Control
- 6. Human resource is the most valuable asset Threat • Crocodile is a threat Risk • Possibility of falling is a risk Vulmerability • Imbalance is a weakness Risk Diagram
- 9. Goal
- 10. Risk depends on perspective (1) 10
- 11. Risk depends on perspective (2)
- 12. Risk depends on perspective (3) 12
- 14. “Flavors” of Risk • Risk includes – Exposure to losses (hazards) • Risk managers avoid risks – Potential for gain (opportunities) • Risk managers take risks
- 15. 15 Why take risks? OpportunitiesRisks Try to balance risks and opportunities
- 16. Risk without the expectation of reward is suicide Attitude to risk: Where do YOU sit? An old and bold pilot is difficult to find ! Risk Averse Risk Neutral Risk Seeking
- 17. 17 Risk Increases the More You Don’t Know All The Potential Outcomes The Probability of Occurrence Cost of a Undesirable Outcome
- 18. 18 All The Potential Outcomes The Probability of Each Outcome Occurring Cost of Undesirable Outcomes Said Another Way: The more you do know and understand about the better long term risk manager you will be.
- 20. 14 “Risk comes from not knowing what you’re doing” - Warren Buffett Well, then I guess, we both are in deep trouble
- 22. EOD EOD
- 24. Crude Oil Characterization Hidden underground High risk and uncertainty Highly regulated Strict regulation at all stages. Capital and Technology intensive Ready finance and cutting-edge technology Crude Oil Characterization Main characteristics of crude oil and gas.
- 25. E&P Projects Life Cycle The life-cycle of an E&P project could be shown simply in figure below and need decision for each stage:
- 26. Oil and Gas Risk ExposuresOil and gas value chain Exploration & Development Hydrocarbon Production Shipping Refining & Blending Storage Distribution Marketing
- 27. Oil and Gas Risks and Exposures (E&P cycle) ATA Appraisal drilling Field Development Plan Abandonment Acreage acquisition Basin analysis Prospect generation Economic analysis Wildcat Drilling Field development Facilities design Facilities construction Facilities installation Operations Reservoir Mgt NIGERIAQIT CAMEROUN Exploration and Production Life Cycle Economic analysis QI L LAGO S 6
- 29. Main E&P Project Risks ➢ Exploration ➢ Existence of Hydrocarbons ➢ Magnitude of Discovery ➢ Type of Hydrocarbon ➢ Development ➢ Technical Risk ➢ Reservoir Development ➢ Fiscal ➢ Changes in fiscal terms ➢ Economic Risks ➢ Exploration and development costs ➢ Hydrocarbon prices ➢ Political risk ➢ Nationalization ➢ Policy and Rule Changes
- 31. Major Risks Associated with Oil and Gas Upstream Well Blowout: Costs of control: Loss of the Well:
- 32. Major Risks associated with Oil and Gas POLLUTION AND OTHER THIRD PARTY LIABILITY RISKS
- 33. EXPLORATORY DRILLING PHYSICAL DAMAGE • RIG • DRILLING EQUIPMENT / CONSUMABLES • IN HOLE EQUIPMENT • AUTOMOBILES • CARE CUSTODY AND CONTROL • CARGO
- 34. DRILLING OPERATIONS OFFSHORE WELL Drilling Equipment offshore PHYSICAL DAMAGE and DRILLING OPERATORS LIABILITIES Drill ships Jack-up drilling units Semi-submersibles Submersibles/swamp barge
- 35. Construction and Installation PHYSICAL DAMAGE • CONSTRUCTION INSURANCE ON PRODUCTION FACILITIES (ON/OR OFFSHORE) • DRILLING EQUIPMENT / CONSUMABLES • IN HOLE EQUIPMENT • AUTOMOBILES • CARE CUSTODY AND CONTROL • CARGO • FSO/FPSO AND ALL MOORING FACILITIES
- 36. PRODUCTION (OPERATION) PHYSICAL DAMAGE • ONSHORE PRODUCING ASSETS • OFFSHORE PRODUCING ASSETS OIL STOCKS • OIL AND GAS STOCKS • FSO/FPSO AND MOORING SYSTEMS • PIPELINES • DRILLING EQUIPMENT / CONSUMABLES • IN HOLE EQUIPMENT • AUTOMOBILES • CARE CUSTODY AND CONTROL • CARGO
- 38. Time Zero - Understand the Business? • What is the business? • What is the industry? • What is the strategic plan? – NOW, WHERE, HOW • Who owns the business? • Who runs the business? • How will risk management „fit‟? • What is the Risk Appetite for the company or Project 3
- 39. Time Zero – Risk Assessment Questions to be answered 3 • Where do the risks come from? • How big are they? • What are the major contributors? (Time, Cost etc) • What are the risks sensitive to, and how can they be changed? • What level of risk does the company find intolerable, what is considered trivial? • What is it worth doing to reduce the risk? • Fundamental First steps
- 40. Risk assessment - determining acceptable levels of risk for your business Companies need to pay attention to risks and have robust processes in place Busine ss risks Identifyi ng Assessi ng Correctl y evaluati ng Exami ne cost Consider Regulato ry regimes Decide how far to go with protective and mitigating measures Reduce risk Manage risk Recognis e opportuniti es Lloyd’s Register Energy
- 43. Risk vs Uncertainty (1)
- 44. Risk vs Uncertainty (2)
- 45. Risk vs Uncertainty (4)
- 46. Risk vs Uncertainty (5)
- 47. Risk vs Uncertainty (6)
- 49. ImportanceofRisk Management CashFlow Stability Credit Longevity RISKMANAGE
- 52. Risk Management vs Crisis Management
- 53. The mind of the RM (1)
- 54. The mind of the RM (2)
- 55. The mind of the RM (3)
- 56. The mind of the RM (4)
- 57. Source Vassiliki Theodoridou - Economic Evaluation of E&P Projects Risk & Uncertainty Management Uncertainties and risks should be considered at all stages of the lifecycle decision making process to create and secure value 1 Explorati on Portfolio 2 Apprai sal Portfol io 3 Develme nt Portfolio 4 Producti on Portfolio 5 Abandonm ent Portfolio Project Portfolio Business Driven Technical Driven Technical Driven Technical Driven Technical Driven Technical Driven Uncertainty
- 58. • Good management practice • Process steps that enable improvement in decision making • A logical and systematic approach • Identifying opportunities • Avoiding or minimizing losses What is Risk Management?
- 59. RM Cycle
- 63. Risk Treatment
- 64. Risk Mitigation Process Identification of risk exposures and latent opportunities Evaluation of actions in place to reduce risks Assessment of the effect of mitigation Development of focussed action plans Preparation of a Risk Register 6 4
- 65. “Business as usual is business at risk” 6 - Deloitte Old whitepaper “The problem in my life and other people’s lives is not the absence of knowing what to do, but the absence of doing it” - Peter F Drucker Famous Quotes
- 66. “If you treat risk management as a part-time job, you might soon find yourself looking for one.” --someone in Deloitte 6
- 67. Thanks for your attention !!! kydadebiyi@yahoo.com 08033181225
- 68. Albert Einstein’s Theory A = X + Y + Z A = Success X = Work Y = Play Z = Keeping your mouth