L1 introduction, demand, supply and equilibrium.pptx

Petroleum economic damand supply

1. Introduction to economics demand, supply & Equilibrium

2. PETROLEUM ECONMICS It is derived from Greek word OIKONOMIKUS: Economics is study of Survey, Testing, Drilling , Production, Transportation, Distribution, Consumption of Wealth in human society . One can also view economics as the science that deals with the production, allocation, and the use of goods and services.

4. The fact is that economics affects our daily lives and creates an awareness of: local , national and international economic issues. Whether it be price increases, interest rate changes, fluctuations in exchange rates, unemployment, economic recessions or balance of payments problems. Economics is sometimes called the study of scarcity because an economic activity would not exist if scarcity did not force people to make choices. Scarcity means that there are not enough , or there can never be enough goods, and services to satisfy the needs of individual, families and societies.

5. Microeconomics focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, borrowers and lenders. Macroeconomics takes a much broader view by analyzing the economic activity of an entire country or the international marketplace.

6. Loan capital Shareholders’ funds Loan repayments Shareholders’ profit Re-investment Shareholders’ dividend Overall Flow of Funds

7. Calculating Project Cash Flow Gross revenues from sales of hydrocarbons Payments for farming out project or part of project Capex Capital expenditure on assets (platforms, facilities, wells) Opex Operating expenditure for assets (maintenance, insurance) Government take (royalties, taxes)

8. NCF = R - I - E - FIT Re v enu e Investments Expenses Fed IncTax / [Outside Share] Ta x es [ Taxes / Royalties / Govt Take ] Sale of Oil & Gas Sale of Other Products Sale of Surplus Eqpt. Sale of Prod. Properties Drilling Eqpt. purchase Pipelines P lat f o r ms Operating costs Maintenance costs Overhead Eqpt. Replacement Repair workovers Fuel costs P & A costs NCF Summary

9. In v e s t m ents Bonuses (Purchase Leases) Exploration (Seismic, Drilling) Tangible investment (Pipe, Equipment, Platform) Intangible drilling costs , Intangible other investment NCF=R-I-E=FIT

10. Expenses Direct operating costs Differ from investments, may be discontinued at any time to shut in production Should include expenses caused by the proposed investment Are expressed as a fixed amount per well , fixed amount per field , or variable amount per unit of production Direct costs - Non routine or anticipated periodic costs Periodic expense workovers Plug and abandonment costs .

11. Other Expenses (E) Production taxes Tariffs Transportation fees Indirect Expenses (E), Overhead Money required to run the business above the field level Costs for salaries, offices, supplies, and equipment Investment and expense overhead are included in economic analysis Expenses

12. IMPORTANCE OF ECONOMICS USEFUL FOR THE PRODUCER :- Economics is very useful for the producer. It guides him that how he should follow the factors of production and minimize the cost of production. USEFUL FOR THE CONSUMER :- The consumer can adjust his expenditure of various goods in better way if he knows the principles of economics. He will spend his income according the law of Equi -Marginal utility in order to get maximum satisfaction.

13. IMPORTANCE OF ECONOMICS POVERTY-AND-DEVELOPMENT :- It helps in removing the poverty from the country. Under developed countries are facing many problems like unemployment , over population low per capita income and low production. Economics is very useful in solving these problems. ECONOMIC-PLANNING :- In the modern age the importance of economic planning can not be ignored. Through planning we can utilize our natural resources in better way and can improve our economic condition.

14. IMPORTANCE OF ECONOMICS SOLUTION FOR ECONOMIC CRISES :- It guides the nations that how they can save themselves from the economic crises. The advanced countries desire is that there should be economic stability and full employment without inflation to achieve these objectives, economics is very useful for them. OPTIMUM USE OF RESOURCES :- In the third world countries there is a lot of wastage of resources which is the main cause of their poverty. The study of economic development will enable them to make the optimum use of their resources.

15. IMPORTANCE OF ECONOMICS Study of Economics helps to formulate budget The knowledge of economics is very essential for the Finance Minister, It helps in framing the just system of  taxation . It helps in formulating the budget for development and for removing unemployment. Supply of money, effective credit system, efficient working of the banking system can be had in the country only by having a thorough knowledge of economics by the people who administer these sectors.