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PETROVIETNAM UNIVERSITY
Instructor: Hoang Hung, Ph.D.
Email: [email protected]
Mobile: 091 873 8 873
Chapter 3Petroleum Economics
mailto:[email protected]:[email protected] -
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Content
Petroleum Economics
Basic Terms Definitions
Factors used in a Petroleum ProjectEvaluation
Petroleum Project Evaluation with risks
Hoang Hung, PhD Fundamental Economics 2
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1. Basic TermsDefinitions
Cash Flow
Cost Flow
Capital Investment
Interest
Time Value of Money
Project Costs
Project Returns
Profit
Equivalent Value
.
Hoang Hung, PhD Fundamental Economics 3
Terms to learn:
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1. Basic Terms Definitions (Cont.)
Dng tin ls dch chuyn tin vo/raca mt doanhnghip, d n hay sn phm ti chnh trongmt thi giannht nh
Dng chi phlphng php trong cc chi phdchchuyn thng qua doanhnghip (nguynliu, lap ng,qu trnh lmvic, hang tn kho, chi ph bun bn, )
u t vn cp n qu u t trong doanhnhiphay cng ty vi mc ch y mnh ccmc tiu kinhdoanh.
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1. Basic Terms Definitions (Cont.)
More about
Capital Investment:
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1. Basic Terms Definitions (Cont.)
u t vn (in Petroleum Industry): Tin u tvod n O$G theo cc hnhthcvn c nh vvn lu ng
Li sut l gin b chovic s dng vn vay. Lisut cthnhockp
Li sut kp: lisut trnvn tr vocui mi k cthm votin vn gc, lisut nyc chuyn qua tinvn gc chok hn tip theo. Lisut kp cthri rchoc lintc.
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1. Basic Terms Definitions (Cont.)
Li sut
n Kp
Lin tc Ri rc
Thc t Danhngha
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1. Basic Terms Definitions (Cont.)
Lisut kpri rc
Danh ngha: Khngc iu chnh bi lm pht
Thc t:iu chnh bi lm pht
= Lisut danhngha t l lm pht
Li sut tng ng: lisut cth c gp kpnhiu ln mt nm ph thuc vos ln thanh ton lisut c thc hin.
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1. Basic Terms Definitions (Cont.)
li sut kp thc t (Realinterest rate) c a rabi Fisher equation:
Where,i: lisut danhnghaP:t l lm pht
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https://en.wikipedia.org/wiki/Fisher_equationhttps://en.wikipedia.org/wiki/Fisher_equation -
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1. Basic Terms Definitions (Cont.)
Hoang Hung, PhD Fundamental Economics 10
Vn Li sut trnvn
Vn + li sut
1st period P Pi P(1+i)
2nd
period P(1+i) P(1+i)i P(1+i)2
nth period P(1+i)n-1 P(1+i)n-1i P(1+i)n
F = P(1+i)n
F = P(1+in)
Gitr tng laica ng tin(F)
1. Lisut n:
2. Lisut kp:
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1. Basic Terms Definitions (Cont.)
Future Value of Money (F)
Morereading:
4.1 Basic Definitions,Page 70,
PetroleumEconomics andEngineering
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Example of Future value of Money
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A sum of $1,000 is deposited into an accountwhere the interest rate is 10% compoundedannually; compare the future values of thedeposit for the two cases of simple and
compound interest after 4 years.
1. Simple Interest: F4 = 1,000[1 + 4(0.1)] = $1,400
2. Compound Interest: F4 = 1,000(1 + 0.1)4 = $1,464.1
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1. Basic Terms Definitions (Cont.)
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Dng tin v gi tr quy i
Dngtin vo (Inflow)
Sn phm bn hangtrong giaion sn
xut
Gitr cnli sau khi thanh l
hp ng
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1. Basic Terms Definitions (Cont.)
Dngli nhun:
Sai khcgia dngtin vo v dngtin ra
Trongsut d n = TRTC
Where:
i : Profit of Year i TRi: Turn-ver of Year i
TCi: Total cost of Year i
n: Project life (Years)
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Cash Flow Diagram
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Description of Cash Flow in Table
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Cash Flow Year
0 1 2 3 4
Investment 800
Turn-over 1.000 1.000 1.000 1.000
Costs 500 500 500 500
Cash Flow before Tax -800 500 500 500 500
Tax 150 150 150 150
Cash Flow After Tax -800 350 350 350 350
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Chit khu dng tin (DCF)
DCF phn tchs dng dngtin nhnri tng laidn vchit khu n gitr hin ti , nh gitim nng u t.
CF = DngtinR = Chit khu (WACC)
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http://www.investopedia.com/terms/p/presentvalue.asp -
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1. Basic Terms Definitions (Cont.)
Hoang Hung, PhD Fundamental Economics 18
Gitr tng lai (FV)
Gitr tng laica mt khon tin l gitr hin ti ca tngcng cckhon lisut pht sinht nay chon tng lai.
FV = PV * (1+r)n
Where:
n: S nm
r: Chit khu
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End of1. Basic TermsDefinitions
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2. Factors used in Petroleum Projects Evaluation
2.1 Gi tr hin ti rng (NPV):
NPV l sai khcgia gitr hin ti ca dngtinvo v gitr hin ti ca dngtin ra.
Follow us: Investopedia
where:Ct = dngtin vo;Co=tng chi phu t ban ur = chit khut = thi gian
Hoang Hung, PhD Fundamental Economics 20
http://ec.tynt.com/b/rf?id=arwjQmCEqr4l6Cadbi-bnq&u=Investopediahttp://ec.tynt.com/b/rf?id=arwjQmCEqr4l6Cadbi-bnq&u=Investopedia -
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2. Factors used in Petroleum Projects Evaluation (cont.)
NPV in another formula
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Where:
i: Gitr rng dngtin cui nm i
TRi: Doanh thud n nm i
TCi:Tng chi phd n nm i
r:t l chit khu
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2. Factors used in Petroleum Projects Evaluation (cont.)
Hoang Hung, PhD Fundamental Economics 22
NPV lmt trongnhng tiu ch quantrng
s dng nh gihiu qu d n v so
snhvi ccd n khc.
Cngmt t l chit khu, NPV cng ln ,dnCng hiu qu .
NPV>0: t l li nhun caohn t l chit khu
=> d n kh thi;
Quanim
nn xem xt
D n l khng ng h;
Nhnt phi ti chnhtrc khi
NPV=0:
Nhu tQuyt nh;
NPV d n khng kh thi.
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2. Factors used in Petroleum Projects Evaluation (cont.)
u im v Nhc im khis dng NPVtrongnh gidn
tnhc gitrhin ti ca tin
n gin
So snhc ccdn c kchthckhc nhau
u im Nhc im
Dngtin c tnh trongthigian didn n khngchnh xc
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2. Factors used in Petroleum Projects Evaluation (cont.)
IRR lchit khu lm cho gitr hin ti rngca dnbng 0. IRR c cngthc tng tNPV
2.2 Sut thu li ni ti (IRR)
Then r = IRR
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d l l ( )
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2. Factors used in Petroleum Projects Evaluation (cont.)
IRR in another formula
Ni chung, IRR cng cao,dn cngkh thi
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2 d i l j l i ( )
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2. Factors used in Petroleum Projects Evaluation (cont.)
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IRR lt l li nhun thc t ca dn;Thmnh dn so snh IRRvi t l chit khu:
IRR > i: dnkh thi IRR = i : ccyu tkhccn c a vo
tnh ton IRR < i : dn khngkh thi
2 F d i P l P j E l i ( )
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2. Factors used in Petroleum Projects Evaluation (cont.)
u im IRR
Tnhn gitr tin theothi gian
Xcnh IRR m khngcnbit chit khu
So snhc ccd nvi quym vthi gian khc nhau
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2 F t d i P t l P j t E l ti ( t )
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2. Factors used in Petroleum Projects Evaluation (cont.)
Nhc im IRR
Chxcnh t sut linhun, khngphi ldngtin tuyt i.
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2 F t d i P t l P j t E l ti ( t )
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2. Factors used in Petroleum Projects Evaluation (cont.)
2.3 Thi gian honvn
lkhong thi giancn thit thuhicckhon chi tiu trongu thay tn im havn.
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2 F t d i P t l P j t E l ti ( t )
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2. Factors used in Petroleum Projects Evaluation (cont.)
Simple Payback Period
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2 F t d i P t l P j t E l ti ( t )
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2. Factors used in Petroleum Projects Evaluation (cont.)
Simple Payback Period in another formula
Hoang Hung, PhD Fundamental Economics 31
Where:
n ls nm dngtin tchly ca d n< 0, nhngdngtin tchly n nm n+1 > 0.t is the cash flow of each year until year nn+1 is the cash flow of the year n+1
Simple PP E ample 1 E en Cash Flo s
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Simple PP: Example 1: Even Cash Flows
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PVN is planning to undertake a project requiring initial
investment of $105 million. The project is expected togenerate $25 million per year for 7 years. Calculatethe payback period of the project.
Solution:Payback Period = Initial Investment Annual Cash
Flow = $105M $25M = 4.2 years
tiveSimple PP: Example 2: Uneven Cash Flows
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Hoang Hung, PhD Fundamental Economics 33
Year Cash Flow CumulativeCash Flow
0 -50 -50
1 10 -40
2 13 -27
3 16 -11
4 19 8
5 22 30
Simple PP: Example 2: Uneven Cash Flows
PVN is planning to undertake another project requiring initialinvestment of $50 million and is expected to generate $10million in Year 1, $13 million in Year 2, $16 million in year 3,$19 million in Year 4 and $22 million in Year 5. Calculate thepayback value of the project.
Solution:
Payback Period= 3 + (|-$11M| $19M)
= 3 + ($11M $19M) 3 + 0.58 3.58years
Simple PP: Advantages &n Disadvantages
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Simple PP:Advantages &n Disadvantages
u im
Thi gian honvnt n h to nn gin.
Cth nh giri rotim tang d nca d n, nuthi gian honvn ngn cho thy nhu t cngnhanh thu hi vn vri ro i vi vn u t ca dn cngthp. Do vy Tiu chun Thvc pdngrng ri trong phn tch vnh gid n mang tnh
ri ro cao
i vi cng ty phi i mt vi vn thanhkhon, ncungcp mt d nth hng tt s tr li tin sm.
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Simple PP: Advantages &n Disadvantages (Cont )
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Simple PP:Advantages &n Disadvantages (Cont.)
Nhc im
Gitr ng tin theothi gian khngctnh ton=>> cth dn n quyt nh sai
N khng tnh ton dngtin sau khi honvn
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2 Factors used in Petroleum Projects Evaluation (cont )
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2. Factors used in Petroleum Projects Evaluation (cont.)
Thi gian honvn cchit khu
Chit khu PP tnh cho gitr ng tin theothi gianbi chit khu dngtin ca dn
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Discounted Payback Period
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Discounted Payback Period
Cngthc chit khuPP tng t vi PP
n gin nhng tnhthem chit khu dng
tin vo.
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Discounted PP : an Example
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Discounted PP : an Example
Year
n
CashFlow
CF
Present Value Factor
PV$1=1/(1+i)n
Discounted Cash Flow
CFPV$1
CumulativeDiscounted
CashFlow
0 $2,324,000 1.0000 $2,324,000 $2,324,000
1 600,000 0.9009 540,541 1,783,459
2 600,000 0.8116 486,973 1,296,486
3 600,000 0.7312 438,715 857,771
4 600,000 0.6587 395,239 462,533
5 600,000 0.5935 356,071 106,462
6 600,000 0.5346 320,785 214,323
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An initial investment of $2,324,000 is expected to generate$600,000 per year for 6 years. Calculate the discounted
payback period of the investment if the discount rate is 11%Solution: Step 1
Step2: Discounted Payback Period = 5 + |-106,462| / 320,785 5.32 yrs
Discounted PP : Advantages & Disadvantages
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Discounted PP :Advantages & Disadvantages
Gitr ng tintheothi gianc tnh=>ng tin cy hn
so vi PP ngin
u im Nhc im
Bqua dongtinvo cadn sau khihon vn
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2 Factors used in Petroleum Projects Evaluation (cont )
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2. Factors used in Petroleum Projects Evaluation (cont.)
2.4 Ch s kh nng sinhli (PI)
PI lt sgitr hin ti ca dngtin votng laivi vn ban u. N chothy bao
nhiu US$/Dongs dn cth to ra chomiUS$/Dongs u t.
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2 Factors used in Petroleum Projects Evaluation (cont )
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2. Factors used in Petroleum Projects Evaluation (cont.)
A BCR l t s li ch ca d n hay ngh bng tin so vi chi ph ca n cngbng tin.
Tt c li ch v chi ph cn c th hinvi chit khu gi tr hin ti.
2.5 T s li ch chi ph (BCR)
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2 Factors used in Petroleum Projects Evaluation (cont )
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2. Factors used in Petroleum Projects Evaluation (cont.)
Ch s li ch chi ph (BCR)
Phn tchu ttheo BCR:BCR > 1:Kh thi
BCR < 1: Khngkh thiBCR = Max => u t ti u nht
Tiu chunBCR mang tnhtng i, cho ta bit
mt n v gitr hin ti ca chi phd nto rabao nhiu gitr hin ti ca doanh thu.
Hoang Hung, PhD Fundamental Economics 42
Homework 1
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Homework 1
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Homework 1 (cont )
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Homework 1 (cont.)
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Homework 2
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Homework 2
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Homework 3
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Homework 3
Nm 2010 2011 2012 2013
C 1000 1500 1500 1000
FV 1000 1650 1815 1331
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Homework 4
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Homework 4
Nm 1 2 3C 200 300 500
FV 174 227 329
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Homework 6
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Homework 6
Nm 0 1 2 3 TngPA1 C 50 50 50 50 200
PV 50 45 40 36 170
PA2 C 250 - - (70) 180
PV 250 - - (50) 200
H s chit khu 1 1.12 1.2544 1.404928
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Homework 7
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Homework 7
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Homework 8
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Homework 8
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Homework 9
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o e o 9
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End of
2. Factors used inPetroleum Projects Evaluation
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3. Petroleum Project Evaluation with risks
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j
Gitr kvng (EV)
l gitr mongi ca mt khon u t,tnh tonbngtngcc tchgiaxcsut xyraca migitrcth ca bin vigitr
EV = NPV(s) * p CF * (1-p)
Where,
NPV(s): Gitr hin ti thc ca d nnu thnh cng
CF: Gitr hin ti thc ca chi phu t nu khng thnh cng p: xcxut thnh cng
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3. Petroleum Project Evaluation with risks (Cont.)
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j ( )
Dndu kh lin quann nhiu ging:
Where,NPVi: Gitr hin ti thun ca ging iPi : Xcsut thng mi O&G ca ging iCFi : Chi phu t ca ging iPi(f) : Xcsut tht bn ca ging i
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3. Petroleum Project Evaluation with risks (Cont.)
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j ( )
Project selection using EV
EV > 0 : Chp nhn d n
EV < 0 : D n khngkh thi
Nnla chn d n c max EV
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3. Petroleum Project Evaluation with risks (Cont.)
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j ( )
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4.4. Phn tch v nh gi d n khi xt n ri ro
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g
Tnh ton gi tr k vong thng c biu th bi s sau:
Tiu chun gi tr k vng
EV
NPV t c hi thnhcng
Chi ph khi thtbi
Xc sut thnh cng
5
Xc sut tht bi
3. Petroleum Project Evaluation with risks (Cont.)
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j
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4.4. Phn tch v nh gi d n khi xt n ri ro
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i vi cc d n thm d trong ngnh du kh, gi tr k vng c th c sdng tnh ton ri ro thm d c kh nng chuc:
NPV(tc): Gi tr ca thnh cng; CF: Chi ph thm d
x: Ri ro thm d c kh nng chu c
Cho EV = 0 ta s tm c xc sut ri ro trong thm d ti a m d n cth chu c
Tiu chun gi tr k vng
1 - x
x
EV = (1 - x) * NPV(tc) - x * CF
Trong :
EV
NPV(tc)
- CF
EV = 0 =>
NPV(tc)
x = -----------------
NPV(tc) + CF
3. Petroleum Project Evaluation with risks (Cont.)
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3. Petroleum Project Evaluation with risks (Cont.)
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4.4. Phn tch v nh gi d n khi xt n ri ro
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Ta cng c th s dng gi tr k vng tnh ton xem vi t l thu thu noca Chnh ph th d n c th chp nhn c:
EV = p * (1 - t) * NPV(tc) - (1 - p) * CF
Trong : T: Gi tr thu c ca thnh cng sau thu;
NPV(tc): Gi tr hin ti ca d n trc thu; t: T l thu
CF: Chi ph trong trng hp tht bi; p: Xc sut pht hin m
Tng t, cho EV = 0 ta cng s tm c t l
thu thu ti a m d n c th chu c:
Tiu chun gi tr k vng
p
1 - p
EV
T = (1 - t) * NPV(tc)
- CF
(1 - p) * CF
EV = 0 => t = 1 - -----------------
p * NPV(tc)
3. Petroleum Project Evaluation with risks (Cont.)
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More Readings
8. Risk,Uncertainty,andDecisionAnalysis.
Page 161
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Chapter 3: Petroleum Economics
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End of Chapter 3