Are you confident of the risks you face in your business and strategic planning?

To ignore the effects of uncertainty means to potentially expose your organization to unnecessary risk and potential failure. Your knowledge and your toolset will make the difference between whether your work succeeds or fails.

Whether you're creating a business case, determining pricing sensitivity, calulating VaR or NPV, estimating future costs, forecasting demand in competitive markets, or assessing the financial risks in new ventures and proposals, you need to account for the known uncertainty in your models. No matter what risks you face, Crystal Ball software can help you find the specific solution for your needs.

Crystal Ball is a Microsoft® Excel®-based suite of analytical tools that includes Monte Carlo simulation, optimization, and forecasting. With little effort, you can apply these advanced analytical techniques to your new or existing spreadsheets to create more accurate cost and financial predictions and better informed business decisions.

Primary Crystal Ball energy applications include analysis of trading issues and of wide variations in project to project costs, analyze new ventures, Determine lifecycle of current capital investments, determining risk in investments, evaluate commodity pricing proposals, predict petrochemical prices, supply/demand volumes, imports, exports, operating rates for plants, and portfolio optimization.

Key features of interest to your industry include sensitivity and tornado analysis, correlation, historical data fitting, optimization, and real options. The sensitivity analysis and tornado analysis are two separate methods that help you to understand which of the uncertain inputs (e.g., the recovery factor or the price of oil) drive the uncertainty in your models. Correlation lets you link uncertain inputs and account for their positive or negative dependencies.

If historical data does exist, the data fitting feature will compare the data to the distribution algorithms and calculate the best possible fit and parameters for your data. Optimization allows you to account for uncertainty and risk in simulations but still select the best possible settings (e.g., staffing levels, investment amounts, product prices) to achieve success.

Real-options analysis applies financial options theory to capital investments. Why is it a real option? It is "real" because you are investing in operating capital instead of financial capital. It is an "option" because you are investing in the right, but not the obligation, to invest. Real options are used in situations where management has flexibility in large capital budget decisions with high uncertainty. Some examples include research and development projects, mergers and acquisitions, technology development, facility expansion, e-business project prioritization, enterprise wide risk management, business unit budgeting, licensing, contract valuation, and intangible asset valuation.

LEARN MORE ABOUT CRYSTAL BALL FOR THE ENERGY INDUSTRY

This page offers links to a growing number of resources, including recorded Web seminars, articles, white papers, case studies, and example models. Additionally, you can view a list of common uses and examples reported directly from customers using Crystal Ball. You can also download a free trial version of Crystal Ball to see how it can help improve your business forecasts and decisions!

RECORDED WEB SEMINARS

Developing a Strong Energy Asset Portfolio Using the “Efficient Frontier” Approach Explore how to develop a strong energy asset portfolio with a case study on power plants. The case study illustrates implementation of the “efficient frontier” approach to portfolio development. Presented by Jim Letzelter, Partner, with Webb, Scott & Quinn Recorded January 18, 2006	View recording Download files
How To Use Crystal Ball In Your Economics Course: Weather Hedging In The Gas Industry Learn how Crystal Ball can be used to analyze risk associated with hedging strategy using weather-based derivatives Presented by Jiri Hnilica, Associate Professor at the Prague University of Economics Recorded December 11, 2006	View recording Download files
Power Asset Evaluations: Challenges in Dealing with Uncertainty Simulation analysis of two separate gas fired power generation plants will be presented – the first one at the development and the second one at the operational stage. Presented by Andrei Smilenov, Director Analysis and Planning at NiSource Inc. Recorded February 6, 2007	View recording Download files

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WHITE PAPERS & ARTICLES

Applications of Risk Analysis and Optimization to Evaluation of an Integrated Reliability Improvement Program By Charles W. Williams Jr., Progress Energy Florida	Download
Boosting Our Confidence With Crystal Ball By Patrick Leach, Senior Consultant with Decision Strategies Inc (Written for Pipeline Magazine)	Download
Diablo Canyon Power Plant: Steam Generator Repair/Replacement Cost Benefit Analysis By Todd Anderson, Senior Engagement Manager, SDG	Download
Efficient Frontier Modeling for Physical Assets By Jim Letzelter, Partner, Webb, Scott & Quinn	Download
Electric Power System Portfolio Risk Assessment for the Pacific Northwest By Michael Schilmoeller, Ph.D., Northwest Power and Conservation Council	Download
Guidelines for Successful Risk Facilitating and Analysis By Dr. Iqbal Noor and Thomas J. Rye	Download
Predicting Long-Term Energy Prices With OptQuest Jim Letzelter, President, Webb, Scott & Quinn, Inc.	Download
Sensitivity Study of the Economics of Photoelectrochemical Hydrogen Production By Margaret Mann, NREL	Download
Update of Hydrogen from Biomass - Determination of the Delivered Cost of Hydrogen By Pamela Spath, Janice Lane, Margaret Mann, Wade Amos, NREL	Download
Valuation and Optionality of Large Energy Industry Capital Investments By Robert Graber, Vice President, EnergyPath Corporation	Download

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CASE STUDIES

Schlumberger on Real Options in Oil and Gas	Download
Minnesota Power Financial Simulation via Crystal Ball Professional Aids Risk Management At Minnesota Power	Download

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EXAMPLE MODELS

Economic Analysis Taking Into Account Uncertainties Ranging From Reserves to Production, Operating Expenses and Scheduling Risk From: Oscar Bravo, Petroleum Engineer with ECOPETROL S.A. and Bravo and Sanchez For: Crystal Ball Level: Moderate-advanced Detail: This very detailed model intends to capture the most important uncertainties that are part of the Oil & Gas industry. The logic behind the model intends to illustrate rather than be exhaustive. This model shows the effect of schedule risk, but it also does a pretty comprehensive reserves simulation and a complete economic analysis with discounted cash flow analysis and an NPV.  It simulates many uncertainties from oil price through operating expenses, production, and schedule risk.	Download For: Crystal Ball Level: Moderate- advanced
Supply Chain (Gasoline) Detail: In this example, we determine the optimum amount of gasoline to transport between different levels of a gasoline supply chain. Our objective is to minimize the total cost, which includes transportation costs and inventory holding costs at various points in the supply chain. We also want to minimize stockouts at various retail outlets. The complexity of the problem arises from the fact that we have stochastic production at the refinery level and stochastic demand at the retail outlet level.	Download For: Crystal Ball & OptQuest Level: Beginner-moderate

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COMMON USES & EXAMPLES

The following examples were provided by our customers and represent only some of the potential oil & gas and energy applications for Crystal Ball.

• Analysis of trading issues and of wide variations in project to project costs
• Analyze costs and benenfits of Demand Side Management programs for the electric and gas utility business
• Analyze new ventures
• Analyze probable production levels and trading values of energy units
• Cash flow forecasting and interest rate analysis
• Cost estimation for chemical consumption with associated risks
• Determine lifecycle of current capital investments
• Determining Risk in investments in the wind power and renewable energy industries.
  
• Developing an economic model for natural gas processing projects in Alaska
  
• Developing pricing views for marketing gas at all major trading hubs across North America
• Economical optimization for investment and replacement questions in Electircity and Gas distribution networks
• Evaluate commodity pricing proposals on behalf of large energy consumers in the competitive electricity markets
• Evaluate firm/interuptable pipeline takeaway transportation options
  
• Evaluating the inherent risk in achieving financial targets for acquisitions
• Figuring commercial terms for service offerings
• Forecast liquidity availablility
• Give my clients cost and schedule risk profiles
• Model utilization trends
• Predict petrochemical prices, supply/demand volumes, imports, exports, operating rates for plants
• Project optimization, financial modeling, option analysis, etc.
  
• Portfolio optimization
• Preparation of project budgets
• Risk and sensitivity on proposed capital projects
• Sales and market clearing price forecasting
• Tech portfolio management and asset allocation

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TEXTBOOKS

Analyzing and Managing Risky Investments

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