Petroleum economics involves the application of the techniques of economic analysis at every stage in the development of oil and gas exploration and production projects. The economics of oil and gas projects are affected by a range of factors, including:
- the level of knowledge about the oil or gas field
- the location, type and number of wells
- market conditions
- the effect of tax/royalty systems
By analysing factors like these, petroleum economists are able to assist in making investment decisions, such as deciding whether or not to drill an exploration well or whether or not to develop an entire gas production project. They are crucial in the negotiations around production sharing contracts and purchasing oil and gas properties. Petroleum economists are also involved in the assessment and management of the technical, economic and other risks associated with the different phases of an oil or gas projects.
Petroleum engineers specialising in petroleum economics can work for oil and gas exploration and production companies, service companies, banks and investment houses and government agencies.