Chartered Petroleum Economist®(Ch.E® – Petroleum)
Specialization – Petroleum Economist [Course Outline]
Currently, petroleum is among our most important natural resources. The importance of petroleum is that it is the most important source of energy in the world, and it enters countless industries such as plastics, soap, gum, and other technological industries. Therefore, no country can dispense with petroleum.
The oil and gas industry has both a direct and indirect impact on the domestic and global economy, with oil and gas prices directly affecting the health of the economy as a whole.
Petroleum economics is a complicated series of political and economic interactions pertaining to the oil industry. While economics in general is a complex subject, in the case of oil, political concerns add a new layer to the study of economics. People who study petroleum economics need to be familiar with economics generally, but also geopolitical history and the history of the oil industry as a whole. Experts in this field can work for government agencies, oil companies, and private companies interested in the economics of oil production, transport, and refining.
As with economics in general, there are a number of approaches to petroleum economics. Many experts boil down economic activities to a balance between supply and demand. In this case, supply and demand are both influenced by political concerns. Political events can have an impact on oil supply as well as demand, and in turn, oil supply and demand can influence politics. This branch of economics also includes a broad number of connected fields, including international shipping, agriculture, manufacturing, transport, and so forth. Understanding of these fields is important, as all of these industries are involved in the global demand for oil.
Various techniques have evolved over time in determining and calculating economic inputs, evaluating investments, quantifying risk and generating feasible portfolios.
Petroleum Economics brings together information and expertise across the spectrum and a clear understanding of concepts such as cash flow analysis, organizational challenges, price forecasting, cost drivers and risk management is required.
This specialized program aims to bring together a wide industry audience including practitioners of economics and decision making, petroleum engineers & geoscientists and offers structured short interactive training sessions on topics such as Economic Modeling, Decision Analysis, Exploration Analysis and Economics of Unconventional Resources.
Petroleum Industry Overview
Economics drives the entire oil/gas producing industry. Almost every decision is made on the basis of an economic evaluation. Economic evaluations are also performed to determine reserves and the “standardized measure of value” for reporting purposes for publicly held companies.
There are many ways to look at the oil and gas industry. From a personal perspective, oil and gas provide the world’s 7.5 billion people with 56 percent of their daily energy needs. The other 44 percent comes from coal, nuclear and hydroelectric power, and “renewables” like wind, solar and tidal power, and biomass products such as firewood.
From a business perspective, world energy markets are continually expanding, and companies spend billions of dollars annually to maintain and increase their oil and gas production. Over 200 countries have invited companies to negotiate for the right to explore their lands or territorial waters, hoping that they will find and produce oil and gas, create local jobs and provide billions of dollars in national revenues.
Petroleum Economist has covered the booms and busts in the oil price. In a period of change for the industry – influenced by everything from OPEC Policy to UN Climate Summits – Petroleum Economist remains the indispensable authority on energy.
Investors have faith in Petroleum Economist’s judgment. Chartered Petroleum Economist Certification opens doors for them in the world’s energy ministries and in oil capitals.
Petroleum Economics is one of the most highly regarded and intellectually challenging programmes to keep you up to date with the energy industry. The programmes offered by AAFM® is a Globally revered program in the fields of professional certifications. The programme focuses on the economics and business of petroleum addressing skills required for complex decision making in areas such as economic analysis of energy industry, investment analysis, Government petroleum policies, decommissioning, and energy demand.
Role of a Petroleum Economist
What do Financial Economists do?
- The development of oil and gas project is a high cost venture with many significant uncertainties. So, it requires a lot of planning to make it economical. The person behind economic planning of an oil or gas project is a petroleum economist.
- These economists contribute in making oil and gas policies and assist companies in developing new oil and gas fields after the analysis of economics of development and the assessment of related risks. At the outset of any oil or gas project, a discussion with key stakeholders is held to identify the opportunities for collaboration, potential issues of concern and procedure for obtaining needed approvals. Stakeholders may include government and regulatory bodies, development partners, neighboring property holders, non-governmental organizations (e.g. environmental or human rights group), financial institutions, and suppliers and contractors.
For every such project, petroleum economists should:
- Assume responsibility for reviewing and compiling risk based business and economic evaluations for new integrated business ventures in order to support and assist strategic decisions for the Company.
- Prepare financial and economic modeling of the Company’s new venture E&P projects, coordinate project inception up to project sanction / board approval, provide financial and economic expert guidance towards constructing project bids, prepare comprehensive portfolio planning and business analysis services necessary to support upstream strategic business plans.
- Ensure effective and robust analysis with regards to due diligence in rollout of acquisition and merger strategies.
- Provide economic modeling and sensitivity analysis in order to fully understand and implement value drivers that could significantly enhance project returns.
- Keep abreast of developments on economic evaluation, taxation and fiscal terms, cost structures product prices and hydrocarbon availability.
- Take Responsibility for leading efforts in assuring economic, financial and strategic integrity to all resource allocation and investment decisions in multi-disciplinary team based environment.
- Provide project appraisal services and ensure Economic Assumptions and forecasts (price, inflation, interest, exchange rate, Company’s Discount Rate against the current cost of capital, business risk in each country) are updated.
An economist also develops estimates for the following:
- Capital cost (production platforms , drilling gear and production facilities , e.g. compressors, pumps, separators, and instrumentation )
- Operating cost (including maintenance and workovers)
- Personnel needs (workforce size and skills , labor cost and overhead)
- Expected revenues (from oil and gas sales, tariffs and payments from partners) Special attention is paid to the agreements with a host government in regard to financial issues, such as taxes , royalty rates, royalty payment , Financial liabilities and involvement in social development or training programs. Related issues include expectations for inflation, future oil and gas prices and exchange rates. The estimates, analysis and recommendations of economists are dependent on some technical and operational factors which include:
- Expected rate of decline in well production over time
- Expected oil and gas quality (and required cleanup / treatment actions)
- Environmental regulations
- Proximity of storage facilities and pipelines(or other transportation methods) for getting oil and gas to the market
- Planning for possible operational problems during drilling and production
- Decommissioning of equipment and sites at the conclusion of the project
The above points clearly define the role of economist in petroleum industry which suggests that economists are an integral part of any E and P company. Here, a question may arise that if economists are behind the decision making then what is left with engineers and geologists who are supposed to bring efficient solutions to the problems encountered during the process. The answer can be simple that they bring a number of solutions and the economists evaluate them and select the most cost effective one.
Apart from the above role of a Petroleum Economist for new projects they are also integral part of ongoing projects as they help in the following:
- Economic analysis, cash flow, risk analysis and valuation in the oil and gas industry.
- Conduct micro-economic analysis applicable to all sectors of the oil and gas supply chain.
- How to make decisions on upstream investments necessary to integrate economic, technical and fiscal analysis?
- Analyze tariffs, margins, long-term contracts and market demand forecasts determining the economic viability in these sectors.
- How cash flow analysis can be adjusted for risk and uncertainty?
- Understand Economic Parameters.
- Understand the whole process relating oil & gas segments (Upstream, Midstream, Downstream)
- Understand the hydrocarbon composition, quality standards, and economic value
- Identify Oil & Gas companies and organizations.
- Identify marketing & pricing of crude oil/ end products.
- Conduct an Upstream feasibility study.
- Prepare sensitivity/risk analysis reports.
- Identify the Midstream segment and its various constituents.
- Understand selecting/design categoryl for Midstream surface facilities.
- Identify Downstream processes and steps
- Understand break-even analysis and its uses.
- Conduct a Downstream feasibility study.
Benefits of Program
- The program allows you to attain Super Specialist Status in ‘Petroleum Economics’ with both the knowledge and skill to perform your duties as a ‘Petroleum Economist’
- The course presents how the economic attractiveness of upstream oil and gas ventures can be evaluated.
- It highlights criteria used to make economic decisions keeping in perspective reserves classification, production forecasts, and time value of money, inflation, contractual arrangements, risk and uncertainty.
- The key benefit for certification holders is obviously the ability to add a professional designation and post nominal to your list of resume qualifications and it can also be display on your business card, letter head, email signature etc.
- It provides access to one of the top economic and financial professional networks around the globe providing the opportunity to network with charters and members throughout the world.
- The certificate of the Chartered Petroleum Economist® is awarded by the Most Prestigious American Academy of Finance Management (AAFM) and as such, it’s fully recognized in the USA, more than 170 Countries and hundreds of Institutions worldwide.
Why you should attend the program
- Identify how to construct cash flow projections for your upstream projects
- Determine key elements for making oil and gas investment decisions
- Understand in general how oil and gas is legislated around the world
- Apply economic criteria to evaluate oil and gas projects under various fiscal regimes
Program Ideal For
The programme is designed for a wide range of professional skill sets, including:
- Economists and Analysts
- Reservoir Engineers
- Production Engineers
- Petroleum Engineers
- Planning and Development Analysts/Executives
- Negotiators and Lawyers
- Financiers and Decision-makers
Minimum Qualification required to pursue the program:
- For Graduates (Any Stream): Pass Level 1 – Chartered Economist Exam.
- For Post Graduates and above in Economics: Directly pursue the ‘Chartered Petroleum Economist’ Designation.
Career opportunities for Chartered Petroleum Economist:
- Energy Industry Analyst, Market Economist: analysis of the oil, gas and electricity markets. Short-term and long-term price and trend forecasts
- Project Economist: energy project profitability study (upstream, downstream) and feasibility studies
- Trader/Assistant Trader (back, middle or front office): hedging tools and physical flows management
- Consultant: Project Studies, Integration of Environmental Constraint in Corporate Policy, Risk Management
In Businesses Sector:
- Energy Business & Economics
- Strategic Management & Marketing
- Management Consulting & Analytics
- Energy Finance, Banking & Trading
- Energy Techniques & Engineering
Important skills required for Petroleum Economist
- Analytical Skills: Petroleum Economist must be able to compile and make sense of large amounts of technical information and data in order to ensure that facilities operate safely and effectively.
- Creativity:Because each new drill site is unique and therefore presents new challenges, Petroleum Economist must be able to come up with creative designs to extract oil and gas.
- Interpersonal SkillsPetroleum Economist must work with others on projects that require highly complex machinery, equipment, and infrastructure. Communicating and working well with other engineers and oil and gas workers is crucial to ensuring that projects meet customer needs and run safely and efficiently.
- Math Skills: Petroleum Economist uses the principles of calculus and other advanced topics in math for analysis, design, and troubleshooting in their work.
- Problem-solving Skills: : Identifying problems in drilling plans is critical for Petroleum Economist because these problems can be costly. Petroleum Economist must be careful not to overlook any potential issues and must quickly address those which do occur.
Salary Prospect of Chartered Petroleum Economist
The median annual wage for Petroleum Economist is $128,230. The lowest 10 percent earned less than $73,000, and the highest 10 percent earned more than $208,000.
The median annual wages for Petroleum Economist in the top industries in which they work are as follows:
|Management of Companies and Enterprises||$153,320|
|Oil and Gas Extraction||$134,440|
|Petroleum and Coal Products Manufacturing||$123,580|
|Support Activities for Miningt||$106,340|
Curriculum of Chartered Petroleum Economist
The curriculum of Chartered Petroleum Economist consists of in-depth study of Petroleum Economics, which is based on the core concepts of the energy economics and the up-stream, mid-stream and down-stream activities of petroleum industry. Investigate & explore the moral and individual dimensions of Petroleum Economics and ethical viewpoint of energy industry and understand the moral responsibilities as a Chartered Petroleum Economist.
Concepts of Petroleum Economics
For a professional like a Chartered Petroleum Economist; an understanding of concepts of energy and petroleum economics is of prime importance. This part of course content would enable the Chartered Petroleum Economist to get a basic understanding of the concepts of energy economics. This part of course would also cover the introductory aspects of oil and natural gas.
The part of course would enable the Economics professionals in acquainting with the fundamentals, history, terminology and origination of the crude oil. The objective of this part is to enable a Chartered Petroleum Economist to understand the global energy scene and the contribution of oil and natural gas to the energy industry.
Demand and Supply of Crude Oil
For a professional like a Chartered Petroleum Economist; an understanding of the crude oil market and classification of the crude oil is the crucial aspect of the study. This part of course content would enable the Chartered Petroleum Economist to get a better understanding about the crude oil demand and the technical cost of exploration and production of the crude oil. This part of course would also cover the global energy demand perspective.
The part of course would enable the Economics professionals in acquainting with the fundamentals of crude oil supply and the overall energy supply scenario. The objective of this part is to enable a Chartered Petroleum Economist to understand the global scenario in natural gas demand & supply and the tax & legal aspect related to the crude oil and natural gas demand and supply.
Up-stream Activities of the Energy Sector
For a Chartered Petroleum Economist; know-how of the up-stream activities of energy and petroleum sector is the crucial aspect of the study. This part of course would enable the Chartered Petroleum Economist to get a better understanding about the oil & natural gas exploration, drilling and production. This part of course would also cover the increasing role of the technology in finding the oil and gas; seismic exploration; exploration techniques for petroleum; enhanced oil recovery and crude oil reserves.
The part of course would enable the Economics professionals in assets management and their process of energy and petroleum up-stream activities. The objective of this part is to enable a Chartered Petroleum Economist to understand the factor affecting the assets value and their life-cycle. It also enables Economist to manage and evaluate the up-stream assets and their operating costs.
Mid-stream Activities of the Energy Sector
For a Chartered Petroleum Economist; know-how of the mid-stream activities of energy and petroleum sector is the crucial aspect of the study. This part of course would enable the Chartered Petroleum Economist to get a better understanding about the economics of the crude oil & natural gas exploration, recovery and transportation. This part of course would also cover the increasing role of the pipeline transportation in oil and gas.
The part of course would enable the Economics professionals in pipeline transportation management and their operating costs & maintenance. The objective of this part is to enable a Chartered Petroleum Economist to understand the importance of the cross-border pipeline transportation and crude oil & gas shipping and tanker charting. It also enables Economist to understand the petroleum supply chain economics and the pricing of energy and petroleum products.
Down-stream Activities of the Energy Sector
For a Chartered Petroleum Economist; understanding the of the down-stream activities of energy and petroleum sector is the crucial aspect of the study. This part of course would enable the Chartered Petroleum Economist to get a better understanding about the finished products supply i.e. refining activities. This part of course would also cover the increasing role of the technology in refining and conversion process.
The part of course would enable the Economics professionals to understand the demand and market for petroleum products. The objective of this part is to enable a Chartered Petroleum Economist to understand the strategy for petroleum and natural gas trading. It also enables Economist to understand the petroleum retail business and petro-retailing.
For a Chartered Petroleum Economist it is crucial to understand the petro-accounting concepts and the GAAP. This part of course would enable to get a better understanding about the reverse recognition accounting and full-cost; successful efforts accounting and financial & income statements. This part of course would also cover the recording oil and gas revenue and cost.
Geo-politics of Oil Trading
For a Chartered Petroleum Economist it is crucial to understand the geo-politics of oil trading and scanning the global business scene in energy industry. This part of course would enable to get a better understanding about the future of oil; down-stream refining & marketing; trend & structure of oil and gas economy. This part of course would also cover the hydro-carbon domestic & global Economic environment.
For a Chartered Petroleum Economist it is important to know about the advancement & emerging technology used in the petroleum industry. This part of course would enable to get a better understanding about the principal of Petro E-business and E-market and E-gas Station architecture in oil and gas. This part of course would also cover the next generation services in oil and gas industry.
- Industrial Economics
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