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Techno-Economic Evaluation of Exploration & Production

Sumeet Gupta, Manvinder Singh Pahwa



Oil and gas producing industry, which is extractive in nature, involves activities related to acquisition of minerals interests in properties, exploration, development and production of oil and gas. Oil and gas companies consist of many types of activities before it starts its operation in the field. It involves bidding procedure, acquiring mining lease, petroleum exploration license (PEL).  It consists of high risk and uncertainties which may cause financial distress for a company. The aforesaid activities are collectively referred to an upstream operation and form the ‘Upstream Petroleum industry’.   The industry is commonly referred to as the E&P industry.

In order to assure the receipt of fair market value for oil and gas asset economic evaluation is performed. Economic evaluation consists of the assessment of oil and gas resources the valuation of resources in the market and the use of evaluation in considering the bid, exchange offer or other action. Full development of all three components of economic evaluation is essential if it is to be successful evaluation. Evaluation process embraces a range of procedures which, when applied to available data leads to an estimation of the right’s and property’s value. So to quantify the risk and uncertainties a good economic evaluation process is needed. There are many economic evaluation processes. Among the existing economic evaluation processes, which one is the best, is the main motto of our study.

The study discusses different method of economic evaluation like Internal Rate of Return (IRR), Net Present Value (NPV), discounted payback period, etc. This report also consist some example on various methods. These methods does not account for risk and uncertainties. A trivial change in predictions alters the whole calculation of profit and loss and may compel the company to be great loser. Now to analyze the risk and uncertainties, Risk analysis is necessary. In this report we have included Sensitive analysis, Decision Tree and Monte Carlo simulation. At the end of the report analysis is broadly given in support of the best method of economic.                                 

             Key Words: Simulation, Economic Evaluation, Sensitive


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