石油经济学EconomicsPP1

Course:- 28117

Class:- 289083 HERIOT-WATT UNIVERSITY

DEPARTMENT OF PETROLEUM ENGINEERING

Examination for the Degree of

MEng in Petroleum Engineering

Petroleum Project Economics

Monday 19th April 1999

10.30 - 14.30

NOTES FOR CANDIDATES

1.This is a Closed Book Examination.

2.15 minutes reading time is provided from 10.15 - 10.30.

3.Examination Papers will be marked anonymously. See separate

instructions for completion of Script Book front covers and attachment of loose pages. Do not write your name on any loose pages which are

submitted as part of your answer.

4.This Paper consists of 2 Sections:- A and B.

5.Section A:-Attempt all Questions

Sections B:-Attempt 3 numbered Questions from 5

6.Section A:-25% of marks

Section B:-75% of marks

Marks for Questions are indicated in brackets

7.This Examination represents 80% of the Class assessment.

8State clearly any assumptions used and intermediate calculations made in numerical questions. No marks can be given for an incorrect answer if

the method of calculation is not presented.

SECTION A

Answer all 10 questions in this section

4 marks are allocated to each question

Use text, short notes, formulae and/or diagrams as appropriate

A1.Explain the basic principles of the “Book Value Method”.

Identify some of the problems you might encounter in relating the book

value of a petroleum company to its market value.

A2.Why is it widely accepted that a pound received today is more valuable than a pound received at some time in the future?

What specific factors should be considered in determining the relative

values of equal cash flows which are received at different points in time? A3.Differentiate between project “screening” and “ranking”.

Review the various reasons why a company may decide to rank its

investment opportunities.

A4.Describe the stages in the calculation of Net Present Value [NPV].

Review some of the important applications of project NPV.

A5.In the context of UK Corporation Tax assessment, explain the difference between “Stand alone” and “Consolidated”.

Which procedure is likely to generate more favourable project economics? A6.Explain the concept of “Expected Value”.

Under what circumstances might a company or an individual make an

investment in the full knowledge that its expected value was negative?

A7.Explain the process of Field “Unitisation”.

What benefits can arise from unitisation?

What problems may be encountered by the participants?

A8. A producing company has a consignment of crude oil to sell.

What factors may be pertinent to the pricing of this oil?

A9.The cost of abandonment may represent a significant negative cash flow at the end of a project’s life.

Explain carefully how this can introduce an error into the calculation of

project Internal Rate of Return.

What impact is abandonment cost likely to have on the timing of

abandonment?

A10.The loss of Piper Alpha in 1988 was the worst accident to have occurred in the history of North Sea oil and gas development.

Review the various ways in which this disaster has affected the industry.