58879

Journal of Petroleum Research & Studies
NO.5 - 2012
Economic Feasibility Study for Petroleum

Projects
(Practical Aspects)
Dr. Hisham Yas Shaallan

Economical Directorate , Ministry Of Oil
Abstract:
An increasing importance is given
funding the country's social and
to the Economic Feasibility Study of
economic requirements. Petroleum
Petroleum
reason
Projects have diversity features in
behind that is the critical role played
terms of location, size, capital,
by
in
technology and risks. On the Other
Foreign
hand, because of the importance of
the
Society,
Trade.
Industry
Projects.
The
Petroleum
Economy
Industry
and
In
general,
Petroleum
the
is
involved
with
the
significance should be given to the
of
and
Gas
Exploitation
Oil
Petroleum
Economic
Industry,
Feasibility
high
Study,
Resources to satisfy the country's
especially the necessary of good
needs (households and industrial
knowledge
sectors)
Petroleum Activities, Projects and
and
to
export
these
resources, in order to, gain foreign
Contracts,
currencies which are necessary for
fundamentals
of
as
Feasibility Study.
E 26
the
well
of
nature
as
of
the
Advanced

:
our daily needs. These projects have
specific features related to the nature
of their activities, location, capital,
of oil and gas resources and their

products which are used in most of
NO.5 - 2012
technology, risks and uncertainty.

Therefore, those features require
specific considerations pertinent to
practical experience whether the
study for upstream or downstream
projects. Advanced knowledge about
the fundamentals and techniques of a
the requirements of establishing and
operating petroleum projects and
their developments, all are necessary
issues to conduct a systematic study
that enables involved parties to make
as well as specific knowledge about
modern economic feasibility study,
reasonable decisions about available

investment
opportunities
in
petroleum industry.
Introduction:
The
Feasibility
Projects
Focusing on the requirements and
subject of an Economic
Study
has
for
recently
Petroleum
gained
the implementation of a modern

economic
feasibility
study
for
petroleum projects is the main
increasing importance. Petroleum

projects specialize in the exploitation
purpose of this paper through six

parts.
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NO.5 - 2012
Part One
risk factors and changing conditions,
Economic Feasibility Study:
to make an initial judgment on a
1: Definition
project proposal.
In
general,
an
Economic
2: Methodology:
Feasibility Study as a tool is a series

of
interrelated
and
An Economic feasibility study is
subsequent
studies, used by companies, banks,
investors, promoters, individuals and
starting from a simple idea heading
government
toward
agencies,
that
to
set
of
diversified
several
processes,
directions,
then
consider a new project as an
ending to form a complex study or
investment opportunity among many
simple report (project proposal) at
opportunities by studying their future
hand for decision-makers. The ideas
cost and future revenue to find out
are designed to produce new goods
and adopt the best options. This tool
or services, (or modify, modernize or
involves different uses of data and
renew given goods and services, etc).
information related to marketing,
Basically, these ideas require an
technical,
financial,
examination of their market features.
environmental, social and legal areas
A market study includes all the
(monetary, quantitive and qualitative
available data and information about
expressions)
specific
the markets of inputs and outputs
projections about the establishment
and their components; location, site,
and operation of the project. The
size, specifications, linkages, rules
initial investment and operating costs
and laws, projections, etc. If positive
are expressed in monetary terms. A
results have been obtained (from a
monetary expression is necessary to
market viewpoint) this will open a
calculate the expected revenues, net
way to continue for studying the
cash flows, and net benefits or
technical framework options of the
profitability indicators, taking into
project.
economic,
to
build
account the time value of money,

E 28

In principle, technical analysis is
NO.5 - 2012
analysis deals with the commercial
an essential step, maybe it is the
viability over the lifetime of a
Most important step. This analysis
project. Many issues should be
go deeply to study the project
covered in this step, including
elements that are related to project
various
shape, size, design, specifications,
required
technology level, buildings, inputs,
phase;
outputs,
and
financing terms, and the amount of
services,etc. All these elements
loans and interests), as well as all the
are organized in the form of
issues related to future costs and
technical,
time
revenues. Profitability indicators to
technical
evaluate and judge the project
analyses are often classified into
viability may be simple such as; (Net
investment costs and operating costs,
Profit, Average Profit, and Payback
which shall determine whether or not
Period). Indicators may be complex
the
as well, such as; (Internal Rate of
equipments,
monetary,
schedules.
Integrated
project
analysis
labor
and
needs
to
factors
during
(e.g.
the
are
firstly
investment
funding
Return,
to the next step. That is, the
Discounted Payback Period and
encouraging results will be the base
Profitability Index.), Indicators may
for the financial analysis.
also be more extended to comprise
achieve
an
accurate
Present
sources,
terminate, to modify or to continue
Many factors are required to
Net
that
Value,
diverse financial statements of the
financial
project such as statements of; (Net
analysis because the final judgments
Income, Cash Flow, and Budget)
will ultimately depend on the future
with selected financial Ratios. These
financial results of project. Financial
basic items are shown in Table (1).
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Table (1)
Basic Indicators of a Financial Evaluation
Undiscounted and Discounted Methods
Rate of Return
Payback Period
Net Present Value NPV
Internal Rate of Return IRR
Break-Even Point
Capital Productivity Index
Profitability Index
NPV/MAX Exposure Point
Others
Financial Statements
Balance Sheet
Income Statement
Cash Flow Statement
Financial Ratios
Current Ratio
Profit Margin
Return on Equity
Return on Assets
Interest Coverage
Debt to Equity
Debt to Total Capitalization
Others
The economic and financial results
modifications
of the project will determine, to a
assumptions
great extent, the importance of the
calculations related to issues such as
project for decision makers. They
project design, production profile,
will decide whether the project is a
technology
good investment opportunity or not,
expenditures,
or if there is a need to make
products prices, etc.
E 30
about
the
and/or
level,
basic
initial
investment
operating
costs,
NO.5 - 2012
As a completed methodology, big
frameworks and regulations that
projects require extensive analysis
should be up to date, involving taxes,
which
duties
should
extend
to
cover
and
any other
financial
environmental topics and a social
obligations the project will be
profitability analysis. But in small
subjected to.
projects these analyses are often
Fourth: gathering economic data
neglected.
about supply and demand, market
In short words, a feasibility study
prices, inflation rate, interest rate,
of a project comprises a market
etc. Fifth: use software programs
analysis, a technical analysis, and a
which have been designed for
financial analysis. The findings are
economic and financial evaluation
the resulting study which is referred
purposes. All of those requirements
to as an (Economic Feasibility
should be combined and integrated
Study).
throughout the economic feasibility
3- Practical Requirements:
study.
In
practice, there are varied
Part Two
Petroleum Industry:
requirements for the feasibility study

process; First: a special team should
1: Definition
be formed to undertake this task. The
The Petroleum Industry is one
team mainly consists of specialists
of the most important industries in
such as; (an experienced manager,
the world. This industry has special
engineers, economist, accountant,
characteristics and requirements; a
legal expert and a coordinator).
huge capital, advanced technology,
Second:
technical
senior specialists, high risks, specific
background expressed as technical
skills and experience, long term
data and information of the project
projects and high sensitivity to
which is an essential source for
political and economic events.
providing
computing the capital expenditures
Generally, the petroleum industry
and operating costs. Third: legal
has diverse activities related to the

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exploitation of oil and gas resources

under and above the ground, starting
from the pre-exploration efforts,
exploration,
development
and
production, transportation, refining,

gas processing, local distribution and
external marketing (see fig 1).
Petroleum Activities
Projects
Downstream
Projects
Upstream
Projects
Exploration
Production
Refining & Gas

Projects
Distribution &
Marketing
Fig. (1)
The Main Activities of the Petroleum Industry
E 32
Transportation
NO.5 - 2012
In spite of the specific features,
implementation of an
especially the issues that pertain to
feasibility study.
capital requirements and the number
economic
Petroleum Projects involve various
of employees, type of inputs and
activities
regarding
inputs
outputs, location, and level of risks,
outputs,
markets,
.etc, most of these issues are
locations and sites, etc. In this
interrelated and integrated.
context, for any petroleum project,
cash
and
flows,
funds which are spent during the

initial investment at an earlier period
2: Petroleum Projects:
petroleum
project
as
an
will be channeled into hundreds of

directions; for instance, purchase
investment opportunity may not
equipments
considerably differ from projects in
various
other industries. Simply, it is an
expertise, contracting with a number
allocation of a certain amount of
of companies to undertake some
capital to be spent on specific
designs or conduct certain works and
production
are
services, etc. In contrast, expected
required to establish a new project
revenues may be received after a
with
relatively long time span, under
factors
which
commercial objectives
in
and
sources,
materials
from
recruitment
of
one or more activities .
uncertain conditions, and only from
As an integrated part, it is necessary
selling one or a few products.
to distinguish between the types of

petroleum
project
Table (2) describes the main items
evaluations;
of investment and operating costs
whether simple or complex, high
and cash flows of the petroleum
cost or low cost, high risk or low
projects
risk, are for a company, investor, or
categories of the basic cash flow for
government, all these factors will
each type of petroleum projects.
which
consists
of
determine the directions and the
E 33
the
NO.5 - 2012
Table (2)
Petroleum Projects: Main Items of Cash Flow
Exploration & Production Project
Cash Inflows
Revenue from selling produced volumes of oil and gas in
Royalty/Tax fiscal systems
Cost Recovery and Profit Share in Production Sharing
Contracts
Cash Outflows
Capital Expenditures to explore and develop the field
Operating Costs to maintain equipment and transport
production to market
Royalties, taxes and any other payments to government
entities as defined by special Hydrocarbon Laws,
negotiated contracts and tax legislation
Gas Processing Plants
Cash Inflow
Revenue from selling plant products (e.g. ethane,
propane)
Cash Outflow
Capital Expenditures to build the plant
Operating Costs to operate the plant and to buy raw
material and feedstock (e.g. Natural Gas)
Local and national fees and taxes as defined by contract
or tax legislation
Refining Projects
Cash Inflow
Revenue from selling refining products (e.g. Benzene,
Gas oil)
Cash Outflow
Capital Expenditures to build the Refinery
Operating Costs to operate the Refinery and to buy
feedstock (Crude oil)
or tax legislation
Pipeline Projects
Cash Inflow
Revenue from tariffs charged to those transporting
products in the pipeline
Cash Outflow
Capital Expenditures to build the pipeline
Operating Costs to maintain the pipeline and its
equipment
or tax legislation
Source: IHS ENERGY, 2005.
E 34

Part Three
NO.5 - 2012
1: Definition:
Risks and Uncertainty Analysis:
Generally,
In a business life cycle, nothing
risks and uncertainty
have no specific definitions; also
is 100% in future events. An
they are diferent from other
economic feasibility study, as a
industries and activities. Risks and
comprehensive picture of a proposed
uncertainty cover all the unusual and
project, should involve future cash in
unknown, expected and unexpected
and future cash out and must be
conditions which affect over the life
coupled
with
reasonable
of project, whether that is attributed
assumptions.
The reasons beyond
to technical factors, environmental
that are many known and unknown
factors, political and social factors,
affected factors over the life of
or financial and economic factors.
project and the frame that deals with
The direct results of these factors, if
these
they are considered in an economic
factors
called
(risks
and
uncertainty analysis).
Petroleum
projects
feasibility study, will generate more

are
quite
than one expected value for the
sensitive to changing circumstances,
project. This case is a critical point
especially those related to the inside
for decision makers who aim to
development of projects (markets,
determine a specific value or at least
costs and revenues), as well as
very close values.
events related to inflation, exchange

rates,
etc.
All
Those
have
The knowledge and practice of past
and current events, and the ability to
significant effects on the total value
project certain future conditions that
of project. Therefore, the risks and
could cause a large loss, or even
uncertainty analysis forms a key part
affect achieving the objectives of a
in any economic feasibility study of
project is called (Risk Analysis). But
petroleum projects.
the absence or a little practice about

past conditions and the inability to
project some affected conditions and
E 35
NO.5 - 2012
their type, is called (Uncertainty
techniques (with simple and complex
Analysis). In realty, there is no quite
projects) are as follows:
Separation
between
risks
and
uncertainly
1. Sensitivity Analysis
2. Probability Analysis
3. Monte Carlo Simulation
4. Methods of High Discount
2: Techniques:
Rate, Maximizing Payback
In order to study the impact of

potential
factors
(Risks
Period
and
Uncertainty Analysis) the factors
3: Risks and Uncertainty in
should be treated and determined at
Petroleum Industry:
quantity levels, then in monetary

expression. This step is so necessary
Concerning
the
petroleum
in an economic feasibility study that
industry, for example in case of
deals and aims to reach the specific
Upstream Projects, in addition to
monetary
values
economic and financial risks, there
Entering
risks
of
and
project.
uncertainty
are
numerous
geological
risks.
analysis into the calculations of a
Decisions to drill almost invariably
feasibility study, a number of results
have to be made on the basis of
will be produced. This means there is
insufficient information. There are
more than one value of a project to
uncertainties about the porosity and
be achieved, up and down the level
permeability
of base value.
hydrocarbon
Different techniques are used with
reservoir,
of
reservoir
rocks,
reserves
in
the
Also,
there
are
etc.
this analysis, ranging from simple
technical and non-technical risks
methods to the complex, but the
associated
nature of project and the details that
drilling and completion of the wells,
are required will determine which
etc. (Krishan A. Malik).
techniques should be used. For

instance,
E 36
some
commonly
used
with
the
successful
On the other hand, Downstream

projects may face different unusual
NO.5 - 2012
events; many changing circumstances
feasibility study. Using the advanced
are
technology of the computer had
associated
with
production
operations such as crude oil prices,
created
product prices, maintenance costs,
programs which are used in broad
sudden
areas and have the ability to perform
shutdowns,
marketing
number
of
software
problems.and so on. Gas plants
many
also face circumstances that may be
petroleum project evaluations.
tasks
especially
for
the
expected but some are not, for

example feed gas price, long term
contracts, or geo-political events.
Treatment of these events is different
1: Definition:
Software programs are a set of
from case to case, depending on the
systems, based on mathematical and
nature of the project and the goals of
statistical logic that have been
feasibility team.
developed by specialists to achieve a

variety of tasks related to all areas of
Part Four
sciences.
Software Programs:
advantages of these programs are
In
The
most
important
their capabilities to store, organize

practice,
an
economic
and
analyze
huge
data
and
feasibility study of a petroleum
information, in an easy and quick
project is a complex process and
way. Additionally, these programs
includes Intensive efforts, whether
draw the (Project) in a very detailed
that is linked to collect and organize
picture, covering all data as inputs
data, or this data is treated to obtain
and all results as outputs, involving
accurate
process
tables, diagrams and figures, as well
contains many factors and relations,
as different systems of equations and
and requires notably understanding
formulas.
results.
The
not only what is related to the nature

of project, but also all the steps and
the phases of the path of the
E 37

2: Types of Petroleum Programs:
Practically, the analysis of various
NO.5 - 2012
included and many techniques cover

risks and uncertainty analysis.
Since there are many petroleum
activities requires different software
activities, a number of software
programs, and then a variety of
programs
structures and applications. Today,
development
there are many types of software
programs, and some other programs
programs,
concerning refining projects and
depending
on
their
such
as
exploration,
and
production
purposes. Simple programs are often
pipeline
used for small projects, but complex
produced and developed to meet
and expensive ones are used for
many purposes within an economic
large projects. Simple programs are
feasibility study.
often free and they include a limited
requires,
technical
awareness
and
have
been
The work with software programs
number of factors regarding some

information
programs
first
and
of
all,
good
wide
experience
fundamentals of cash flows as well
concerning the nature of the proposal
as
indicators.
project, specific skills for using
Complex programs extend to the
computers, good knowledge of an
more details to cover as much
economic
technical, financial, and economic
principles about mathematical and
data as possible. For petroleum
statistical tools. Because the complex
projects,
software
main
commonly
evaluation
complex
in
areas
are
programs
and
are
some
very
of
expensive and are often restricted in
and
use with limited time, using these
(Downstream Projects). The design
programs needs a high degree of
and the components of software
efficiency to perform these tasks.
(Upstream
used
programs
evaluation,
Projects)
programs involve many fields in

addition to financial, economic, and
accounting concepts, many details
related to technical analysis are
E 38
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Part Five
oil and gas resources require huge
Petroleum Contracts:
capital, advanced technology and
High attention is given to oil and
high experience; therefore, only
gas resources because their inputs
those capabilities to be involved. The
are valuable and interrelated with
essential point in this context is that
most of our life needs. Petroleum
petroleum contracts are concluded
contracts are the basic tools of oil
between Host Governments and Oil
and gas exploitation in the world,
Companies.
which
different philosophy and objectives
cover
exploration,
the
activities
development
of
and
experienced companies can have
Each
party
has
as shown in Table 3.
production. Exploitation efforts of

Table (3)
Objectives of Host Government and Oil Company
Parties
Government
Company
Main Objectives
Maintaining control over resources

Attracting risk investments
Meeting domestic consumption requirements
Maximizing national revenues from petroleum
Developing indigenous technology and expertise
Promoting national economic growth through petroleum
development by foreign companies.
Seeking Oil & Gas discoveries

Obtaining a reasonable rate of return
Securing crude oil supply
Ensuring sufficient security on investment
Retaining as much flexibility and control of the operation
as possible.
E 39
Government and Oil Company is the
1: Definition:
Simply,
the petroleum contract
basic goal of a feasibility study.

2: Techniques:
consists of specific arrangements,

mainly; legal, technical, financial
and
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environmental
provisions.
Conducting feasibility studies in

this industry depend on a good
However, the basic concerns among
understanding and awareness of the
involved parties are the economic
conceptual
framework
of
and financial issues (Rights &
petroleum contract, as
well
as
Obligations). These issues arise from
economic and financial issues related
the economic feasibility study which
to techniques and mechanisms for
is prepared separately by each party.
computing costs and revenues and
In this area, contracts focus on
splitting the shares among involved
special requirements such as the
parties (Host Government and Oil
amount
pricing
Company) such as taxes, royalties,
mechanisms, work programs, and the
bonuses, Profit Oil and Cost Oil, R-
value of outputs and risks; therefore,
factor, price cap, etc., see Table (4).
of
capital
and
the feasibility study is different

comparing with studies in other
industries.
Furthermore,
as
the
petroleum contracts focus, among
3: Types of Contracts:
In general, petroleum contracts
other things, on accurate rights and
are
obligations, so this work is not
categories; Concession Contracts,
smooth and needs a long time and
Production Sharing Contracts, and
different experiences.
Service Contracts, see Figure (2).
Feasibility
studies are often complex and

expensive; therefore, centering on
the net ultimate values of Host
E 40
divided
into
three
main
NO.5 - 2012
Table (4)
Selected Financial & Economic Items of Petroleum Contracts
Some Fiscal Terms
in Petroleum
Contract
Bonuses
Royalty
Cost Oil
Cost Recovery
Profit Oil
Taxes
Gov. Participation
Commerciality
Domestic Obligations
Ring Fencing
Gov. Take
Co. Take
Techniques
Sliding Scale
R Factor
Rate of Return
Price Cap
Net Back Value
Some Terms Subject to

Sliding Scale
Profit Oil Split
Royalty
Bonuses
Cost Recovery Limits
Tax Rates
Uplifts
Petroleum Contracts
Contractual Systems
Service Contracts
Concessionary
Systems
Production Sharing
Contracts
Pure Service
Contracts
Risk Service
Contracts
Fig (2)
Main Types of Petroleum Contracts
E 41
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Historically, concessions are the
framework of costs and revenues and
oldest type; tax and royalty are main
profitability indicators in any given
elements of the relationship between
project's feasibility study hides many
the Host Government and the Oil
complex details, including all items
Company.
sharing
throughout the earlier steps until the
contracts began in the sixties and
final study. Typically, the main focus
they
complex
is not only on the final result itself,
mechanisms in computing costs and
but significant attention is also given
profits.
to the original sources of costs and
Production
involve
more
There are a number of service
revenues
and
the
unusual
contracts types and there is no one
circumstances associated with the
standard model, but this type of
performance of the project.
contract has a basic point called a
It is useful in this area, and as an
service fee which shall be covered
integral
chain,
by petroleum costs and a certain
examples (just for illustrating the
return for the Oil Company. In
main parts of cash flow) of selected
general, many considerations may
petroleum projects, particularly cases
determine the trends of a relationship
include general inputs and the main
between involved parties, mainly;
results of cash flows derived from
ownership, payments, profit split,
long and complex stages related to
working program, and risk level.
market,
technical,
to
take
and
some
financial
studies reaching the following briefs.

Part Six
2 .Upstream Projects:
Case Studies
In general, feasibility studies of
1. General Comments:
It
upstream projects are more complex

goes without saying that
diversity
projects
require high experience. The main
makes their economic and financial
emphasis is on the quantities and
features
qualities of oil and gas reserves,
E 42
of
petroleum
and often take a long time and
different.
general

extracting
abilities,
potential
NO.5 - 2012
indicators.
Any
expected
risks
production rates, time scheduling,
associated over the life of project are
investments
considered with a high degree of
requirements,
and
operating costs. More attention is
accuracy.
Table (5) shows an
also given to the future values of oil
example of a production sharing
and gas reserves and profitability
contract
(from
Oil
Company's
viewpoint).
Table (5)
Production Sharing Contract: Simple Example
2011
2012
2013
2014
2015
2016
Total
Oil Production (MMBbl)
10
10
10
10
40
Oil Price ($/Bbl)
30
30
30
30
Revenue
300
300
300
300
1200
Operating Cost -
10
10
10
10
40
INPUT ($MM)
Exploration Capital -
50
Development Capital -
50
250
250
Calculations ($MM)
Royalty
30
30
30
30
Eligible Cost Recovery
310
10
10
10
CR Carry foreword Used
120
70
Adjusted Cost Recovery
310
80
10
10
Cost Recovery Ceiling
240
240
240
240
CR Carry Foreword
70
Cost Recovery Taken +
240
80
10
10
340
Profit Oil to be Shared
30
190
260
260
740
Profit Oil +
18
114
156
156
444
248
184
156
156
444
Net Cash Flow
-50
-250
Source: IHS, ENERGY.

Note: Under assumptions of 60% Profit Share, 80% Cost Recovery Ceiling, and 10%
Royalty.
E 43
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3. Gas Projects:
The logic of the work in gas
investments, projections of crude oil

and product prices, operating costs
processing plants is almost the same
and
as the work in refining projects, but
technological developments. Parts of
the main focus is given to the feed
Table (6) give some details about
gas of the plant, products of
some
processed gas, buyers obligations,
feasibility study of a particular
and some other related issues.
refinery
4. Pipeline Projects:
The
main elements for the
pipeline projects that are considered

within the economic feasibility study
are; the investment needs to establish
the pipeline, operating costs, and the
sources of revenue such as tariffs or
any form of returns related to the
running of oil, gas and products
pipelines.
5. Refining Projects:
Concerning
refining projects is
different in terms of operations, area

and technology, their plants and
activities that related to the refining
of crude oil are on the ground. The
main focus in this context is on the
E 44
product
items
markets
in
project
an
(in
and
economic
US
2002
NO.5 - 2012
Table (6)
Selected Calculations from Refinery Project
A: Capital Costs
Engineering $
5,266,800
Site Facilities
21,824,000
Process Units:
Crude Unit
6,482,000
Naphtha HDS
5,100,000
Reformer
14,700,000
Unicracker
13,800,000
Sour Gas/Sulfur Treating
1,700,000
Other Infrastructure
1,603,000
Contingency
10,571,370
Total Fixed Capital Cost
81,047,170
Working Capital
5,662,333
Total Project Capital $
86,709,503
B: Crude Oil Price

Base Crude $/bbl
26.33
Competitive $/bbl
Crude Cost $/bbl 26.33 - 32.81
26.33
Cost per Day $/d
158
C: Daily Operating Costs

Natural Gas $
12,254
Electricity
2,179
Water
170
Chemicals
7,144
Royalties
375
Labor
7,870
Maintenance Supplies
800
Total $
30,792
D: Value of Products $/day

Bbl/dy
Gal/dy
$/Gal
$/dy
Gasoline
3600
151200
1.03
156,184
Kerosene
470
19740
1.08
21,384
Diesel
1900
79800
0.95
75,633
Oil
12
493.5
0.71
351
Total $
253,552
E 45
NO.5 - 2012
E: Main Results
Capital Investment
86,709,503
Value of Products
87,475,343
Cost of Crude Oil Feed
(54,493,440)
Operating Expense
(10,623,391)
Depreciation
(5,065,448)
Net Profit
17,293,064
Return on Investment
20%
Source: John D., & P.E.
developments
the
petroleum
industry.
Conclusions:
1-Developments
in
in
the
world
3-Gathering theoretical considera-
economy and business life have
tions,
made
technological developments is the
petroleum
projects
more
practical
experience,
complex and very sensitive to
cornerstone
changing conditions, especially to
complete economic feasibility study
the markets, prices, and advanced
of petroleum projects.
technologies.
4-Increasing the details of feasibility
2-Many developments should be
topics
considered for any modern economic
contracting, negotiating, procure-
feasibility study, and to make that
ments, supply multiline, environm-
possible, many issues are required;
ental issues.) made the process of
new mathematical and statistical and
feasibility study more difficult and
financial skills, modern software
complex, so it needs more time and
programs, experience in preparing
more
detailed feasibility studies,
international
experience in legal issues, as well as
advices to achieve a completed study
capabilities in the forecasting of
especially for the large
future technical and non-technical
extensive
E 46
in
conducting
and
such
fund,
as
as
(financing,
well
as
the
consultants/offices
petroleum
and
projects.
NO.5 - 2012
References:
1.
BERA.."The Oil & Gas Industry".(2010).
www.loc.gov/rr/business/BERA/issue5/issue5_main.html.
2. Bernard Taverne "Petroleum Industry and Governments", International Energy
and Resources Law and Policy Series, London, 2000.

3. Daniel Johnston" International Petroleum Fiscal Systems and Production
Sharing Contracts", PennWell Books, USA, 1994.

4. David S.Clifton and David E.Fyffe "Project Feasibility Analysis", A Wiley-
Interscience Publication, New York, 1977.

5. Guy Allinson "Economics of Petroleum Exploration and Production: Course
Notes", 1998.
6. HIS ENERGY" Oil and Gas Economic and Fiscal Analysis", Training Course
for Ministry of Oil, Iraq, 2005.

7. John D. Jones, P.E. "Feasibility Study for a Petroleum Refinery for the Jicarilla
Apache Tribe", JOHN D. JONES ENGINEERING, INC., USA, 2004.

8. Krishan A. Malik "Petroleum Project Evaluation & Investment decision-
Making", Institute for Petroleum Development Inc, USA, the year is not
available.
9. Mohamed A. Ashosh" Managerial Studies in Economics of Project", Arabic
Copy, Center of Cairo University for Open Education, Egypt, 1993.

10. MTD International "Projects Economics & Decision Making", Training Course
Manual for OPEC Staff, UK, 2004.

11. Richard D.Seba "Economics of Worldwide Petroleum Production", OGCL and
Petroskills Publications, USA, 2003.

12. Sadik Hamed and Hanafy Zaki" Accounting Study for Project Feasibility",
Arabic Copy, Center of Cairo University for Open Education, Egypt, 1998.
13. W.Behrens and P.Hawranek "Manual for Preparation of Industrial Feasibility
Studies" UNIDO, Vienna, 1991.
E 47

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Journal of Petroleum Research & Studies

Economic Feasibility Study for Petroleum

Dr. Hisham Yas Shaallan

funding the country's social and

to the Economic Feasibility Study of

economic requirements. Petroleum

Projects have diversity features in

behind that is the critical role played

terms of location, size, capital,

technology and risks. On the Other

hand, because of the importance of

significance should be given to the

Resources to satisfy the country's

especially the necessary of good

needs (households and industrial

Petroleum Activities, Projects and

resources, in order to, gain foreign

currencies which are necessary for

Journal of Petroleum Research & Studies

our daily needs. These projects have

specific features related to the nature

of their activities, location, capital,

of oil and gas resources and their

technology, risks and uncertainty.

specific considerations pertinent to

practical experience whether the

study for upstream or downstream

projects. Advanced knowledge about

the fundamentals and techniques of a

the requirements of establishing and

operating petroleum projects and

their developments, all are necessary

issues to conduct a systematic study

that enables involved parties to make

as well as specific knowledge about

modern economic feasibility study,

reasonable decisions about available

Focusing on the requirements and

the implementation of a modern

petroleum projects is the main

increasing importance. Petroleum

purpose of this paper through six

Journal of Petroleum Research & Studies

risk factors and changing conditions,

Economic Feasibility Study:

to make an initial judgment on a

Feasibility Study as a tool is a series

An Economic feasibility study is

studies, used by companies, banks,

investors, promoters, individuals and

starting from a simple idea heading

consider a new project as an

ending to form a complex study or

investment opportunity among many

simple report (project proposal) at

opportunities by studying their future

hand for decision-makers. The ideas

cost and future revenue to find out

are designed to produce new goods

and adopt the best options. This tool

or services, (or modify, modernize or

involves different uses of data and

renew given goods and services, etc).