Financing petroleum projects and the impact of uncertainty
Philip Reichardt A and Stuart Wilcox AMacquarie Group Ltd 1 Martin Place Sydney NSW 2000
The APPEA Journal 49(2) 583-583 https://doi.org/10.1071/AJ08056
Published: 2009
Abstract
Financial institutions provide funding to the upstream oil and gas industry for a variety of projects including assisting with asset purchases, field appraisals and developments. Various uncertainties including reservoir, macro-economic and political variables are major considerations for financial institutions and have a considerable impact upon the type of finance offered for a project.
The primary considerations for exploration and production (E&P) companies requiring capital are the quality and stage of development of their resources. The level of resource uncertainty may be considered on a spectrum from proved developed producing reserves to contingent or prospective resources. Financial structures are designed to balance resource uncertainty with a commensurate level of return to the investor. This paper presents a brief overview of the forms of finance available, highlights how uncertainties and risks affect the type of finance provided and explores the assessment of reservoir risk through petroleum engineering and geology and geophysics.
In addition to resource uncertainty, this paper also discusses other risks including project execution, commodity prices, project costs, security coverage, the political environment and country risk, and the impact of these factors on project financing.
The paper will also touch upon various risk mitigation factors, including product hedging and political risk insurance.
keywords: Financing
Philip Reichardt is a division director for Macquarie Metals and Energy Capital Division, based in Sydney. Philip joined Macquarie in 2003. His previous employers include Oil Search, Pioneer Natural Resources (USA) and Exxon. Philip has over 20 years of experience in petroleum reservoir engineering and operations, and has worked on projects in Australia, both north and south America, the North Sea and southeast Asia. Philip holds a BEng (Hons) in mechanical engineering from the University of Technology, Sydney, and a Master of applied finance from Macquarie University. Philip.Reichardt@macquarie.com |
Stuart Wilcox is a Sydney based associate director for Macquarie Metals and Energy Capital Division. Stuart has 14 years of upstream oil and gas experience in various exploration and production companies including British Gas, Mobil, Repsol-YPF and Santos. Stuarts experience includes subsurface reservoir engineering, offshore well operations and commercial evaluation of diverse projects and assets. Stuart holds an MBA from INSEAD, France; a MSc in petroleum engineering from Imperial College, England; and a BEng in mechanical engineering from the University of Edinburgh, Scotland. stuart.wilcox@macquarie.com |
