chapter3 petroleum economics

7/25/2019 Chapter3 Petroleum Economics

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PETROVIETNAM UNIVERSITY

Instructor: Hoang Hung, Ph.D.

Email: [email protected]

Mobile: 091 873 8 873

Chapter 3Petroleum Economics
mailto:[email protected]:[email protected]


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Content

Petroleum Economics

Basic Terms Definitions

Factors used in a Petroleum ProjectEvaluation

Petroleum Project Evaluation with risks

Hoang Hung, PhD Fundamental Economics 2


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1. Basic TermsDefinitions

Cash Flow

Cost Flow

Capital Investment

Interest

Time Value of Money

Project Costs

Project Returns

Profit

Equivalent Value

.


Terms to learn:


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1. Basic Terms Definitions (Cont.)

Dng tin ls dch chuyn tin vo/raca mt doanhnghip, d n hay sn phm ti chnh trongmt thi giannht nh

Dng chi phlphng php trong cc chi phdchchuyn thng qua doanhnghip (nguynliu, lap ng,qu trnh lmvic, hang tn kho, chi ph bun bn, )

u t vn cp n qu u t trong doanhnhiphay cng ty vi mc ch y mnh ccmc tiu kinhdoanh.



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More about

Capital Investment:



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u t vn (in Petroleum Industry): Tin u tvod n O$G theo cc hnhthcvn c nh vvn lu ng

Li sut l gin b chovic s dng vn vay. Lisut cthnhockp

Li sut kp: lisut trnvn tr vocui mi k cthm votin vn gc, lisut nyc chuyn qua tinvn gc chok hn tip theo. Lisut kp cthri rchoc lintc.



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Li sut

n Kp

Lin tc Ri rc

Thc t Danhngha



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Lisut kpri rc

Danh ngha: Khngc iu chnh bi lm pht

Thc t:iu chnh bi lm pht

= Lisut danhngha t l lm pht

Li sut tng ng: lisut cth c gp kpnhiu ln mt nm ph thuc vos ln thanh ton lisut c thc hin.



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li sut kp thc t (Realinterest rate) c a rabi Fisher equation:

Where,i: lisut danhnghaP:t l lm pht

https://en.wikipedia.org/wiki/Fisher_equationhttps://en.wikipedia.org/wiki/Fisher_equation


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Vn Li sut trnvn

Vn + li sut

1st period P Pi P(1+i)

2nd

period P(1+i) P(1+i)i P(1+i)2

nth period P(1+i)n-1 P(1+i)n-1i P(1+i)n

F = P(1+i)n

F = P(1+in)

Gitr tng laica ng tin(F)

1. Lisut n:

2. Lisut kp:


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Future Value of Money (F)

Morereading:

4.1 Basic Definitions,Page 70,

PetroleumEconomics andEngineering



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Example of Future value of Money


A sum of $1,000 is deposited into an accountwhere the interest rate is 10% compoundedannually; compare the future values of thedeposit for the two cases of simple and

compound interest after 4 years.

1. Simple Interest: F4 = 1,000[1 + 4(0.1)] = $1,400

2. Compound Interest: F4 = 1,000(1 + 0.1)4 = $1,464.1


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Dng tin v gi tr quy i

Dngtin vo (Inflow)

Sn phm bn hangtrong giaion sn

xut

Gitr cnli sau khi thanh l

hp ng


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Dngli nhun:

Sai khcgia dngtin vo v dngtin ra

Trongsut d n = TRTC

Where:

i : Profit of Year i TRi: Turn-ver of Year i

TCi: Total cost of Year i

n: Project life (Years)



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Cash Flow Diagram



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Description of Cash Flow in Table


Cash Flow Year

0 1 2 3 4

Investment 800

Turn-over 1.000 1.000 1.000 1.000

Costs 500 500 500 500

Cash Flow before Tax -800 500 500 500 500

Tax 150 150 150 150

Cash Flow After Tax -800 350 350 350 350


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Chit khu dng tin (DCF)

DCF phn tchs dng dngtin nhnri tng laidn vchit khu n gitr hin ti , nh gitim nng u t.

CF = DngtinR = Chit khu (WACC)

http://www.investopedia.com/terms/p/presentvalue.asp


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Gitr tng lai (FV)

Gitr tng laica mt khon tin l gitr hin ti ca tngcng cckhon lisut pht sinht nay chon tng lai.

FV = PV * (1+r)n

Where:

n: S nm

r: Chit khu


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End of1. Basic TermsDefinitions



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2. Factors used in Petroleum Projects Evaluation

2.1 Gi tr hin ti rng (NPV):

NPV l sai khcgia gitr hin ti ca dngtinvo v gitr hin ti ca dngtin ra.

Follow us: Investopedia

where:Ct = dngtin vo;Co=tng chi phu t ban ur = chit khut = thi gian

http://ec.tynt.com/b/rf?id=arwjQmCEqr4l6Cadbi-bnq&u=Investopediahttp://ec.tynt.com/b/rf?id=arwjQmCEqr4l6Cadbi-bnq&u=Investopedia


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2. Factors used in Petroleum Projects Evaluation (cont.)

NPV in another formula


Where:

i: Gitr rng dngtin cui nm i

TRi: Doanh thud n nm i

TCi:Tng chi phd n nm i

r:t l chit khu


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NPV lmt trongnhng tiu ch quantrng

s dng nh gihiu qu d n v so

snhvi ccd n khc.

Cngmt t l chit khu, NPV cng ln ,dnCng hiu qu .

NPV>0: t l li nhun caohn t l chit khu

=> d n kh thi;

Quanim

nn xem xt

D n l khng ng h;

Nhnt phi ti chnhtrc khi

NPV=0:

Nhu tQuyt nh;

NPV d n khng kh thi.


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u im v Nhc im khis dng NPVtrongnh gidn

tnhc gitrhin ti ca tin

n gin

So snhc ccdn c kchthckhc nhau

u im Nhc im

Dngtin c tnh trongthigian didn n khngchnh xc



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IRR lchit khu lm cho gitr hin ti rngca dnbng 0. IRR c cngthc tng tNPV

2.2 Sut thu li ni ti (IRR)

Then r = IRR


d l l ( )


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IRR in another formula

Ni chung, IRR cng cao,dn cngkh thi


2 d i l j l i ( )


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IRR lt l li nhun thc t ca dn;Thmnh dn so snh IRRvi t l chit khu:

IRR > i: dnkh thi IRR = i : ccyu tkhccn c a vo

tnh ton IRR < i : dn khngkh thi

2 F d i P l P j E l i ( )


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u im IRR

Tnhn gitr tin theothi gian

Xcnh IRR m khngcnbit chit khu

So snhc ccd nvi quym vthi gian khc nhau


2 F t d i P t l P j t E l ti ( t )


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Nhc im IRR

Chxcnh t sut linhun, khngphi ldngtin tuyt i.




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2.3 Thi gian honvn

lkhong thi giancn thit thuhicckhon chi tiu trongu thay tn im havn.




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Simple Payback Period




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Simple Payback Period in another formula


Where:

n ls nm dngtin tchly ca d n< 0, nhngdngtin tchly n nm n+1 > 0.t is the cash flow of each year until year nn+1 is the cash flow of the year n+1

Simple PP E ample 1 E en Cash Flo s


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Simple PP: Example 1: Even Cash Flows


PVN is planning to undertake a project requiring initial

investment of $105 million. The project is expected togenerate $25 million per year for 7 years. Calculatethe payback period of the project.

Solution:Payback Period = Initial Investment Annual Cash

Flow = $105M $25M = 4.2 years

tiveSimple PP: Example 2: Uneven Cash Flows


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Year Cash Flow CumulativeCash Flow

0 -50 -50

1 10 -40

2 13 -27

3 16 -11

4 19 8

5 22 30

Simple PP: Example 2: Uneven Cash Flows

PVN is planning to undertake another project requiring initialinvestment of $50 million and is expected to generate $10million in Year 1, $13 million in Year 2, $16 million in year 3,$19 million in Year 4 and $22 million in Year 5. Calculate thepayback value of the project.

Solution:

Payback Period= 3 + (|-$11M| $19M)

= 3 + ($11M $19M) 3 + 0.58 3.58years

Simple PP: Advantages &n Disadvantages


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Simple PP:Advantages &n Disadvantages

u im

Thi gian honvnt n h to nn gin.

Cth nh giri rotim tang d nca d n, nuthi gian honvn ngn cho thy nhu t cngnhanh thu hi vn vri ro i vi vn u t ca dn cngthp. Do vy Tiu chun Thvc pdngrng ri trong phn tch vnh gid n mang tnh

ri ro cao

i vi cng ty phi i mt vi vn thanhkhon, ncungcp mt d nth hng tt s tr li tin sm.


Simple PP: Advantages &n Disadvantages (Cont )


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Simple PP:Advantages &n Disadvantages (Cont.)

Nhc im

Gitr ng tin theothi gian khngctnh ton=>> cth dn n quyt nh sai

N khng tnh ton dngtin sau khi honvn


2 Factors used in Petroleum Projects Evaluation (cont )


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Thi gian honvn cchit khu

Chit khu PP tnh cho gitr ng tin theothi gianbi chit khu dngtin ca dn


Discounted Payback Period


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Discounted Payback Period

Cngthc chit khuPP tng t vi PP

n gin nhng tnhthem chit khu dng

tin vo.


Discounted PP : an Example


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Discounted PP : an Example

Year

n

CashFlow

CF

Present Value Factor

PV$1=1/(1+i)n

Discounted Cash Flow

CFPV$1

CumulativeDiscounted

CashFlow

0 $2,324,000 1.0000 $2,324,000 $2,324,000

1 600,000 0.9009 540,541 1,783,459

2 600,000 0.8116 486,973 1,296,486

3 600,000 0.7312 438,715 857,771

4 600,000 0.6587 395,239 462,533

5 600,000 0.5935 356,071 106,462

6 600,000 0.5346 320,785 214,323


An initial investment of $2,324,000 is expected to generate$600,000 per year for 6 years. Calculate the discounted

payback period of the investment if the discount rate is 11%Solution: Step 1

Step2: Discounted Payback Period = 5 + |-106,462| / 320,785 5.32 yrs

Discounted PP : Advantages & Disadvantages


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Discounted PP :Advantages & Disadvantages

Gitr ng tintheothi gianc tnh=>ng tin cy hn

so vi PP ngin

u im Nhc im

Bqua dongtinvo cadn sau khihon vn




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2.4 Ch s kh nng sinhli (PI)

PI lt sgitr hin ti ca dngtin votng laivi vn ban u. N chothy bao

nhiu US$/Dongs dn cth to ra chomiUS$/Dongs u t.




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A BCR l t s li ch ca d n hay ngh bng tin so vi chi ph ca n cngbng tin.

Tt c li ch v chi ph cn c th hinvi chit khu gi tr hin ti.

2.5 T s li ch chi ph (BCR)




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Ch s li ch chi ph (BCR)

Phn tchu ttheo BCR:BCR > 1:Kh thi

BCR < 1: Khngkh thiBCR = Max => u t ti u nht

Tiu chunBCR mang tnhtng i, cho ta bit

mt n v gitr hin ti ca chi phd nto rabao nhiu gitr hin ti ca doanh thu.


Homework 1


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Homework 1


Homework 1 (cont )


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Homework 1 (cont.)


Homework 2


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Homework 2


Homework 3


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Homework 3

Nm 2010 2011 2012 2013

C 1000 1500 1500 1000

FV 1000 1650 1815 1331


Homework 4


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Homework 4

Nm 1 2 3C 200 300 500

FV 174 227 329



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Homework 6


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Homework 6

Nm 0 1 2 3 TngPA1 C 50 50 50 50 200

PV 50 45 40 36 170

PA2 C 250 - - (70) 180

PV 250 - - (50) 200

H s chit khu 1 1.12 1.2544 1.404928


Homework 7


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Homework 7


Homework 8


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Homework 8


Homework 9


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o e o 9



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End of

2. Factors used inPetroleum Projects Evaluation


3. Petroleum Project Evaluation with risks


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j

Gitr kvng (EV)

l gitr mongi ca mt khon u t,tnh tonbngtngcc tchgiaxcsut xyraca migitrcth ca bin vigitr

EV = NPV(s) * p CF * (1-p)

Where,

NPV(s): Gitr hin ti thc ca d nnu thnh cng

CF: Gitr hin ti thc ca chi phu t nu khng thnh cng p: xcxut thnh cng


3. Petroleum Project Evaluation with risks (Cont.)


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j ( )

Dndu kh lin quann nhiu ging:

Where,NPVi: Gitr hin ti thun ca ging iPi : Xcsut thng mi O&G ca ging iCFi : Chi phu t ca ging iPi(f) : Xcsut tht bn ca ging i




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j ( )

Project selection using EV

EV > 0 : Chp nhn d n

EV < 0 : D n khngkh thi

Nnla chn d n c max EV




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j ( )


4.4. Phn tch v nh gi d n khi xt n ri ro


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g

Tnh ton gi tr k vong thng c biu th bi s sau:

Tiu chun gi tr k vng

EV

NPV t c hi thnhcng

Chi ph khi thtbi

Xc sut thnh cng

5

Xc sut tht bi



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j




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i vi cc d n thm d trong ngnh du kh, gi tr k vng c th c sdng tnh ton ri ro thm d c kh nng chuc:

NPV(tc): Gi tr ca thnh cng; CF: Chi ph thm d

x: Ri ro thm d c kh nng chu c

Cho EV = 0 ta s tm c xc sut ri ro trong thm d ti a m d n cth chu c


1 - x

x

EV = (1 - x) * NPV(tc) - x * CF

Trong :

EV

NPV(tc)

- CF

EV = 0 =>

NPV(tc)

x = -----------------

NPV(tc) + CF



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Ta cng c th s dng gi tr k vng tnh ton xem vi t l thu thu noca Chnh ph th d n c th chp nhn c:

EV = p * (1 - t) * NPV(tc) - (1 - p) * CF

Trong : T: Gi tr thu c ca thnh cng sau thu;

NPV(tc): Gi tr hin ti ca d n trc thu; t: T l thu

CF: Chi ph trong trng hp tht bi; p: Xc sut pht hin m

Tng t, cho EV = 0 ta cng s tm c t l

thu thu ti a m d n c th chu c:


p

1 - p

EV

T = (1 - t) * NPV(tc)

- CF

(1 - p) * CF

EV = 0 => t = 1 - -----------------

p * NPV(tc)



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More Readings

8. Risk,Uncertainty,andDecisionAnalysis.

Page 161


Chapter 3: Petroleum Economics


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End of Chapter 3

chapter3 petroleum economics

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