presentation 6
DESCRIPTION
TRANSCRIPT
Petroleum Project Economics Econ210D
Presentation 6
Sensitivity Analysis for Changing VariablesWeek 6 1
Changing Variables
• Economic evaluations are made based on
assumed parameters
• These parameters are likely to change
over life of field
• Such changes would affect the feasibility
of the project2Sensitivity Analysis for Changing
Variables Week 6
Sensitivity Analysis for Changing Variables
• Measuring the effect of changes in key
variables on the economic performance of
an investment.
• Parameters are varied one at a time with
all other variables held constant.
• The effect on NPV is usually measured.3Sensitivity Analysis for Changing
Variables Week 6
Petroleum Project Parameters
Parameter Field EstimateRecoverable Reserves 160 mbo
Field Life 20 yearsOil Price $60
Total CAPEX $500mOPEX per bbl $5
Sensitivity analysis examines the effect of
changes in any one of these parameters on
the economic evaluation of a project. 4Sensitivity Analysis for Changing Variables Week 6
Independent and Control Variables
• The parameters which are changed in the
sensitivity analysis is called the independent
variable.
• The other variables in the sensitivity
analysis which are held constant are called
control variables.5Sensitivity Analysis for Changing
Variables Week 6
Independent and Control Variables
Parameter Field Estimate Sensitivity AnalysisRecoverable Reserves 160 mbo Control
Field Life 20 years ControlOil Price $60 Independent
Total CAPEX $500m ControlOPEX per bbl $5 Control
In this sensitivity analysis, oil price is the
independent variable and all other parameters
are control variables. 6Sensitivity Analysis for Changing Variables Week 6
Sensitivity Analysis of Oil Price
Oil Price
NPV $B
$50 $2.1
$60 $2.9
$70 $3.7
7Sensitivity Analysis for Changing Variables Week 6
Spider Plots• Sensitivity analysis examines “What if”
situations based on changes in one parameter
at a time.
• Spider plots are used to present graphically
several sensitivity analyses
• This helps to give a visualization of the
parameters which has the biggest effect on a
projects profitability.8Sensitivity Analysis for Changing
Variables Week 6
Spider Plots
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 4.49Sensitivity Analysis for Changing
Variables Week 6
10Sensitivity Analysis for Changing Variables Week 6
11Sensitivity Analysis for Changing Variables Week 6
Other Independent Variables
• Altered production profiles
• Changes in production start-up date
• Unscheduled shut downs
• Inflation
12Sensitivity Analysis for Changing Variables Week 6
13Sensitivity Analysis for Changing Variables Week 6
Home Work
• 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.
• Use the results to construct a spider plot.14
15
Independent Variable Price OPEX CAPEX
Percentage Change
-50% -2.9 5.8
50% 0 4.4