E-Focus:@RISK used to Determine Viability of Offshore Wind Farms In This Issue
What’s New

» @RISK used to Determine
   Viability of Offshore
   Wind Farms

» Palisade Discusses Supply
   Chain Risk in

» Palisade Events
   Around the World

Case Study
» ADWEC uses @RISK to
   Forecast Water Demand
   in Abu Dhabi

@RISK Modeling Tips
» Oil and Gas Focus

Upcoming Webcasts

In This Issue
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2012 Palisade Risk Conferences
Industry experts present real-world case studies, Palisade consultants deliver workshops and training, plus sneak previews of new software. Don't miss the opportunity to sign up for an Expert Session, in which you can have an expert review your model and answer questions, one-on-one, at no charge.
» London: 18-19 April
» Sydney: 29-30 May
» Las Vegas: 7-8 Nov

Regional Seminars
» Asia-Pacific
Brisbane: 8-9 August
Singapore: 21-22 August
Sydney: 9-10 October

» Brazil
Rio de Janeiro: 7-8 de agosto
São Paulo: 22-23 de agosto
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  19-21 de setembro
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  26-28 de setembro
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» EMEA & India
London: 31 July - 1 August
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» Latin America
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» North America
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Vancouver: 17-18 October
Washington DC: 23-24 October

Live Web Training Decision-Making and Quantitative Risk Analysis
using @RISK

26-27 July, 1pm-5pm ET

Project Risk Assessment
using @RISK

20 August, 9am-1pm ET

Decision-Making and Quantitative Risk Analysis
using the DecisionTools Suite

6-7 Sept., 9am-1pm ET
17-18 Sept., 9am-1pm ET


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@RISK used to Determine Viability
of Offshore Wind Farms

Palisade’s risk analysis software @RISK is being used by the energy research organization ECN to determine whether offshore wind farms are financially viable from an operation and maintenance perspective. In particular, the turbines are subjected to more severe weather conditions than those faced by their onshore equivalents which, coupled with their location, makes repair and maintenance time-consuming and expensive. Before progressing with a project, operators want to understand the cost implications of the long downtimes that are currently unavoidable in the industry.

More specifically, @RISK is used to estimate uncertain costs, such as repair and maintenance costs of the turbines. In addition, @RISK is used to model failure rates of the turbines, based on reliability of their components.

ECN is an independent research organization based in the Netherlands that provides in-depth knowledge and technology to enable the transition to sustainable energy management.

" The @RISK model can handle vast amounts of data and
  present it in a way that is easy to understand, thereby making
  it straightforward to quantify the risk associated with a venture.
  Wind farm developers – and their potential investors – can
  therefore make informed decisions about whether an offshore
  operation will offer a good return on investment."
                          –  Luc Rademakers, Senior Manager,
                             Wind Energy Systems Development , ECN


 » More on @RISK
 » More on ECN

Palisade Discusses Supply Chain
Risk in SupplyChainBrain

The expansion of global supply chains has meant an exponential growth of the risk of disruptions to those networks. Catastrophic events, such as the Japanese earthquake and Hurricane Katrina, have highlighted the need for analysis of disruption risk and development of mitigation plans to cope with them. In addition, trends such as globalization, heavy reliance on transportation and communication infrastructures, and lean manufacturing have led to an increase in the vulnerability of supply networks. Furthermore, nodes on supply chains are very often interrelated, causing these vulnerabilities to propagate rapidly.

Palisade consultant Fernando Hernandez discusses how quantitative risk analysis like the Monte Carlo simulation performed in @RISK can address these growing risks to global supply chains.

 » Read the full article in SupplyChainBrain

Palisade Events Around the World
Palisade continues to lead the way in providing risk analysis education opportunities, many at no cost to the attendees! In recent months hundreds of risk professionals have attended free half-day seminars held in the US, Canada, Colombia, Brazil, Central America, the UK, Norway, Denmark, Sweden, Germany, Switzerland, and New Zealand. There are many upcoming events around the world – don’t miss out:

Mine Planning and Optimization
Toronto, Canada, July 26 – no charge

Quantificação Estratégica do Risco
Belo Horizonte, Brazil, August 6 – no charge

Strategic Risk Quantification for the Energy Industry
Calgary, Canada, August 13 – no charge

Strategic Risk Quantification for the Mining and Energy Industries
Perth, Australia, August 14 – no charge

Southeast Asia Risk Forum
Singapore, August 20 – no charge

Strategic Risk Quantification in Industry and Project Management
Sydney, Australia, August 24 – no charge

And coming later…

The Palisade Risk Conference Las Vegas!
The most important event of the year for risk quantification and decision analysis Las Vegas, Nevada, November 7-8

 » Learn more! Full schedule coming soon.
 » Book your room

Case Study
ADWEC uses @RISK to Forecast
Water Demand in Abu Dhabi

The Abu Dhabi Water & Electricity Company (ADWEC) is the 'Single Buyer and Seller' of power and water in the Emirate of Abu Dhabi. It has to balance demand and supply through sales contracts on the basis of a Bulk Supply Tariff (BST) with the distribution companies and through Power and Water Purchase Agreements (PWPAs) with the generation companies. Its role is to guarantee the security and supply of water and electricity across the region.

Abu Dhabi relies almost completely on desalinated seawater for its potable water requirements. The desalination process is challenging in terms of operation, costs, and environmental impact. ADWEC must therefore forecast as accurately as possible the demand for water and electricity across the Emirate in order to plan for the optimum expansion as well as the most efficient and effective use of water production plants.

ADWEC selected @RISK from Palisade because to forecast demand for water because it offered the features required and was cost-effective. ADWEC now uses @RISK to help it forecast Abu Dhabi's water demand up until the year 2030. (This timescale is in line with the government's vision, 'Abu Dhabi Plan 2030', a framework to optimize the city's development, based on environmental, social and economic criteria).

As a result of using @RISK to assist with its forecasting, planning and management strategies, ADWEC has been able to consistently meet with almost complete accuracy and a high degree of confidence the Abu Dhabi Emirate water demand forecasts.

"@RISK, which is easy to use and provides us with a
  comprehensive set of tools, enables us to be confident in our
  forecasts. The high degree of accuracy it enables ensures that
  we provide a reliable and cost-effective source of potable
  water over a wide range of demand scenarios."
                          – Mohammad Al-Hajjiri, Head of the Water
                             Forecasting section in ADWEC’s Planning
                             and Studies Directorate


 » Read the full case study
 » More about @RISK
 » More about ADWEC

Product Spotlight
Oil and Gas Focus

Simple Production Forecasting

This is a simple model forecasting production for a particular oil well. The estimated reserves within the well are uncertain and are represented with a Lognormal distribution function. The mean is 500,000 STB and the standard deviation is 50,000 STB.

The output in the model is the NPV of the reserves for the first 10 years of production. Other factors considered include the decline rate, the gas-oil ratio (GOR), the prices of oil and gas, as well as the rate of increase of the prices of oil and gas. The only input factor that contains an @RISK probability distribution function is reserves, but you could make the model more realistic by using distribution functions to describe the decline rate, GOR, price of oil, etc.

 » Download the example

Production and Economic Forecast using Exponential Decline
This model forecasts production, revenues, and present value based on exponential decline. The exponential decline pattern for oil production is represented using the formula:

q = qi*exp(-at)

where qi is the annual production for the first year and a is the (fixed) annual percentage decline rate.

Uncertain input factors include:

  • Yearly production (YrlProd), represented by a Lognorm distribution
  • Decline rate (Declrate), represented by a Lognorm distribution
  • GOR (constant Gas-Oil-Ratio), represented by Triang distribution
  • Price of gas, represented by a Normal distribution
  • Price of oil, represented by a Normal distribution
  • Rate of increase of oil and gas prices, which are represented by Normal distributions embedded in the Revenue formulas.

For each year, a new sample is drawn from a new Normal distribution, modeling variation from year to year.

Operating expenses are fixed throughout the forecast. The first year expense may be thought of as capital investment. Outputs are defined as:

  • Total NPV
  • OilGros, or production, for each year

Like the Band.xls model, you can generate a summary graph to see the change in OilGros over time.

Finally, a SimTable function has been used in the Discount Rate input that is used to calculate Total NPV. This contains two possible values for Discount Rate – 12% and 14% - enabling you to run two back-to-back simulations to compare the effect of different discount rates on your Total NPV.

This example was taken from Decisions Involving Uncertainty: An @RISK Tutorial for the Petroleum Industry by James Murtha, published by Palisade, where a detailed, step-by-step explanation can be found.

 » Download the example
 » More oil and gas models

Introduction to Risk & Decision Analysis
using @RISK & the DecisionTools Suite

Presented by Freeman Liu, Palisade
   August 1, 2012, 3pm EST (Australia Eastern Standard Time)
» Register Now

リスクと意思決定分析入門@ RISK&DecisionTools Suiteを使用して
フリーマン リウ (Freeman Liu), アジア及び日本担当ゼネラルマネージャー
   8 August 2012 10am JST (Japan Standard Time)
» Register Now

使用@ RISK的DecisionTools Suite的风险及决策分析
劉 海翔 , 亞洲區總經理
   15 August 2012 10am CST (China Standard Time)
» Register Now

Introduction to Risk & Decision Analysis
using @RISK & the DecisionTools Suite

Presented by Palisade
   September 12, 2012, 11am EDT (Eastern Daylight Time)
» Register Now

Portfolio Management using @RISK
Presented by Matt Rosenberg, RoseCap Investment Advisors
   September 20, 2012 11am EDT (Eastern Daylight Time)
» Register Now

» See complete Webcast schedule


The Global Leader in Risk and Decision Analysis
Palisade is the world’s leading provider of risk and decision analysis software and solutions. Founded in 1984, its products @RISK and the DecisionTools Suite are used by over 95% of the Fortune 100, in nearly every industry around the world. Palisade is headquartered in New York State, and has offices in London, Sydney, Rio de Janeiro, and Tokyo.


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