Introduction to Crude Oil Markets
What you'll learn
- Detailed overview of how crude oil markets work
- How do oil and gas companies access oil and gas deposits
- How are oil and gas deposits developed
- How is crude oil produced
- How is crude oil transported from upstream sector to downstream sector
- How do oil pipelines operate
- How are investment decisions (regarding oil pipelines) made
- Be able to read and understand English language
This masterclass is a combination of the seven courses (PLUS Multiple Choice Questions based tests for each course) which include:
Course 01: Introduction to Oil
This course will give an overview of all the topics we shall be looking at in this course.
We shall begin by describing the oil value chain - the exploration and development, how oil is produced, shipped, and marketed. Moving further, we will learn about the importance of oil in the industry, both as a fuel and as a raw material in various forms in the global economy.
Then, we will go through a brief history of oil – how it all began, and the different ‘kinds’ of oil discoverers.
We will be introduced to the major players in the oil market - the top producers and the major consumers. We will then see how oil is formed, how it sits deep within the earth and how we discover and refine it. We will learn about the different types of oils, and the methods employed to extract them.
This will be followed by a brief overview of the different means of transporting oil, and the risks and benefits associated with the different methods of oil transport.
Lastly, we shall look into the different oil benchmarks that prevail globally.
Course 02: Access, Leasing & Exploration
This course focuses on the very first step in setting up an oil well – including acquiring access and leasing rights.
Reading begins with an overview of the legal process and the various steps involved in developing a petroleum project. There is a brief discussion on the formation of oil and gas, and how subsurface geological structures affect oil and gas production.
We also take a look at the legal aspects of exploring land (for oil and gas) as well as gaining access to the mineral rights, under the different types of fiscal regimes.
This is followed by an overview of the components of a lease agreement, the common deal terms and the methods used to establish royalty payments.
The reading also elaborates the different characteristics and classifications of reserves. Finally, the reading ends with a brief discussion on the reserve replacement and reserve to production ratios.
Course 03: Developing Oil & Gas Projects
This chapter focuses on project development and the risk and return evaluation of oil and gas projects.
We begin with an overview of the various steps involved in the decision making & project development processes, explained through a case study, and talks about upstream project development stages and the associated risks elements.
The reading then explains the concept of unitization and the creation of Joint Development Zones.
This is followed by calculations and interpretations of project economic metrics such as NPV, IRR, WACC and risk adjusted return.
The reading describes potential risk exposures related to the use of contractors and sub-contractors in petroleum projects. The various contractor relationships and their environmental and socioeconomic impact along with safety risk issues are also discussed here.
We finally conclude by identifying and calculating key cash flow elements in an oil project and their determinants – capital investment, wellhead price, gross revenue and operating expenditures, as well as simple royalty and tax payments, explained again with the help of a case study.
Course 04: Production of Oil & Gas Products
This reading focuses on the managerial challenges faced in producing oil and gas with an emphasis on cost efficiency & cost advantage. The reading begins by examining the various costs in the upstream sector, and how they are accounted for, their impact on the company's earnings and how production costs vary by location.
The reading then takes a look at oil economics, using various parameters like operating profitability, break-even point, working interest and taxation. The reading then moves on to strategic cost management, examining the various cost drivers and their impact on specific costs. It then talks about the impact of economies of scale, economies of scope, and learning curve on production costs. It then discusses and differentiates between primary, secondary and tertiary methods of oil recovery.
The reading then assesses the terms and conditions of a partnership management agreement, explaining how duties are shared and disputes settled among the various parties involved. The reading further talks about the management of contractor supply chains and the different contractor needs that different stakeholders have in the oil and gas industry.
Chapter 05: Oil Transportation & Storage
This reading explains the logistics of transporting crude oil and other refined products.
The reading begins with oil tankers - how they are classified by type and size and their transport characteristics. It then moves on to the common types of charter contracts used to ship oil and their characteristics, followed by an introduction to the Worldscale pricing system, and how the cost of an oil shipment is calculated using it.
The reading then explains the relative economics associated with the various oil transportation methods and describes how pipeline shipment times and unexpected disruptions in shipment can impact commodity traders and oil consumers.
This is followed by a description of the types of crude oil storage facilities and an explanation of how storage level reports are generated.
Finally, the reading discusses the content and use of primary inventory storage reports produced by different agencies.
Course 06: Oil Pipeline Operations
This course elaborates on the oil transportation system, focusing mainly on oil pipelines – both crude and refined. The reading opens with a brief introduction to oil pipelines and their types. It then explains pipeline field operations (receipt and delivery of both crude oil and refined products) and central control room operations.
The reading then explains the key aspects of planning and scheduling pipeline operations including the role of personnel, batching, pressure and transmix.
Lastly, the reading identifies and explains routine and abnormal operations.
Course 07: Investment Decisions (Oil Pipelines)
This reading answers questions as to how and why pipelines are built and who decides to build them. It looks into all the various stakeholders involved in the decision making process and how they influence the economics of pipeline construction.
It then moves on into explaining the factors that motivate buyers and sellers to change the ownership of pipelines.
Finally, the reading talks about what determines the sale price for pipelines and discusses the various methods used to value the pipeline cost.
Who this course is for:
- Beginner students interested in understanding how crude oil markets work
- Teachers who wish to develop a deeper understanding of how crude oil markets work
- Energy Risk Professional (GARP) candidates
- Financial Analysts who wish to understand the oil and gas industry because they need to evaluate and value Oil and Gas companies
- Accountants who are working in or aspire to work in oil and gas companies
Muhammad, is a business & finance instructor focused on helping Chartered Financial Analyst (CFA) candidates & Energy Risk Professional (GARP) candidates prepare for the final exams.
Muhammad has worked as an equity research analyst / investment advisor in the past.
- Investment & Business Analysis.
- Energy Markets (Oil & Gas Industry).
- Financial Modeling.
- BSc Computer Science (Hons.)
- MBA (Finance)
- Cleared two of the three Chartered Financial Analyst (CFA) exams.