Our Experience

Industries Petroleum Natural Gas Chemicals Electronics Pharmaceuticals, Medical Devices, & Biotech Retail/Consumer Goods Technology Transportation Local/State Government School Districts Other Industries

Functional Areas Antitrust & Competition Analysis of Damages Forensic Economics Intangibles/IP Labor Economics Regulatory Economics & Finance Transfer Pricing Taxation Valuation Fiscal Impact Analysis Demographic Analysis Public Policy Analysis

 

Petroleum Industry

IIC, Inc. has extensive experience analyzing the energy industry with a particular focus on petroleum and natural gas. Several of our professionals are noted experts in this area, and have spent a major portion of their careers working on issues related to these industry areas. We bring detailed knowledge and keen insights into the workings of energy markets to our clients, who include energy companies, government officials, attorneys, and consumer groups.

The petroleum industry is under increased scrutiny by consumers, industry participants, and outside interests as a result of price volatility, political uncertainty, changes in industry structure, and regulatory environment. These trends today affect everyone as oil prices reach new heights. Shifts in supply and demand, investment uncertainty and risk, the role of futures trading and speculation, and the emergence of new technologies together combine to make the issues facing this industry increasingly complex, requiring expert knowledge and guidance in understanding the impacts on all who are affected.

IIC, Inc. assists its clients to understand these complex trends and operate effectively. Our experience and knowledge extend to all facets of this industry, from exploration and production of crude oil to transportation, storage, refining, and marketing of finished products.

We have experience in contract evaluation, supply and trading (transactions) analysis, futures and derivatives trading, supply modeling, oil and gas leasing evaluations, demand and pricing assessments, fiscal analysis, royalty disputes, damages analysis, antitrust and merger reviews, corporate strategy and risk analysis, asset valuation, technology evaluation, and regulatory ratemaking analysis. Much of our work has been performed in the context of expert testimony and litigation, although we have also consulted to private entities and performed policy analysis for local, state, federal and international clients.

Gulf of Mexico Deepwater Leasing

IIC, Inc. has analyzed the behavior of oil and gas companies in the leasing of acreage for the potential exploration and development of oil and gas resources. For example, IIC, Inc. analyzed historical data on leasing and exploration activities in the Gulf of Mexico to understand the value and quantity of leases sold under various regulatory and fiscal regimes of the federal government. As part of this work, IIC, Inc. evaluated the effect of the deepwater royalty relief program on leasing behavior and activity, exploration activity, and the collection of royalties and leases bonus payments. We also analyzed the potential impact of several alternative royalty relief programs.

Alaska Offshore Oil and Gas Leasing

Recently, IIC, Inc. provided expert testimony regarding the value of various offshore oil and gas leases in the Alaskan OCS. The analysis supporting this testimony assessed the behavior of all major leaseholders in terms of lease relinquishments to ascertain whether these leases held any value. We also analyzed other economic and technical data indicating the reservation price required to make these leases economic as well as the probability of such prices being attained within the life of the leases.

Oil and Gas Exploration Modeling

In a major study for the, IIC, Inc. developed a supply model for the Gulf of Mexico which the Minerals Management Service uses to project oil and gas exploration, development and production used in environmental impact reviews. The model, based on prior modeling efforts and new data requirements, is composed of several different components that include simulation of new field discoveries, field economics, and field production and reserves appreciation. We continue to update this model and provide support to MMS.

Evaluation of Technology

The development and use of technology have become increasingly important as the search for oil and gas reserves moves to more remote and politically sensitive areas. IIC, Inc. has provided expertise in evaluating these new technologies as well as the human capital and know-how which allow these new resources to be cost-effectively located and developed. We have also measured the value-added and the competitive advantage gained through this knowledge and expertise.

Collection and Valuation of Royalties

IIC, Inc. has consulted on various disputes involving the collection and valuation of royalties on oil and gas production in locations throughout the United States. We assisted in the development of revised royalty valuation regulations by the federal government, and we have consulted on numerous audits and reviews regarding the proper payment of royalties. We have also trained auditors on proper methods for reviewing and analyzing transactions data and contractual information to determine the value received and paid for oil and gas, which is used as the valuation basis for royalty purposes. Most recently, IIC, Inc. provided expert testimony in a matter relating to the proper valuation of oil produced in the Gulf of Mexico for royalty purposes. We demonstrated that the prices reported for royalty purposes understated the true market value of the oil and provided an alternative computation of the fair market value of the oil that was accepted by the jury.

Crude Oil Estimates and Studies

The demand for crude oil is what economists term a “derived demand,” that is, it is derived from the demand for the products that are produced from crude oil, most notably gasoline. IIC, Inc. has analyzed the demand for crude oil in a variety of settings, and has used various models to estimate the demand and market value of various types of crude oil produced both in the United States and abroad. In a number of engagements, we have estimated the market clearing price of a type of crude oil based on spot price data, futures markets, contractual data, and refining value information. We have also used refining models to determine quality differentials among different types of crude oil, assessed pricing differentials quoted in various contractual arrangements, and evaluated quality differentials contained in pipeline tariff filings. Recently we have assessed the role of spot and futures markets in the pricing of crude oil and gasoline, including the role played by speculators by increasing the volatility of these prices.

Pipeline Regulation

Transportation of crude oil and refined products in the United States is done largely by pipeline, which is typically the most efficient method. Pipelines are regulated by both state and federal authorities particularly with regard to rates and terms of access. IIC, Inc. provides expertise and counsel on matters relating to cost of service ratemaking, indexation of rates, access terms, and market-based ratemaking. We have extensive experience testifying before both state and federal (FERC) regulatory agencies on these issues.

For example, we recently provided expert testimony regarding the cost of service for a major interstate products pipeline on the West Coast. We developed a cost of service model using the FERC’s trended original cost ratemaking method, and showed that the rates being charged on this line were unjust and unreasonable, and shippers deserved refunds for the rates they had been paying.

Valuation of Assets in Petroleum Industry

IIC, Inc. has valued various tangible and intangible assets in the petroleum industry including crude oil and natural gas reserves, refineries, retail outlets, transportation assets, trademarks, brand names, and various technologies. We recently completed a major study that valued all of the tangible assets of a major multinational integrated oil company. This involved the valuation of upstream reserves, transportation and storage assets, refineries and marketing assets. We used various methods including income and transactions approaches.

Transactions Analyses

We have analyzed the value and profitability of various refineries both in the United States and abroad. As part of this work we have developed a large database on refinery transactions, and we have assessed the operations of a significant number of refineries, in terms of crude slates, output and profitability.

Pricing of Refined Products

Economic analysis of wholesale and retail pricing of refined products such as gasoline, diesel, jet fuel and heating oil involves the analysis of supply and demand trends including inventory behavior. IIC, Inc. has provided analyses to various clients regarding the pricing of these products, the role of inventory behavior as well as the impact of market structure and competitive factors. Our experts have provided testimony on these issues in numerous matters, and we have testified before Congress regarding gasoline price increases.

In addition we completed a study for the Attorney General of the state of Florida regarding the pricing of gasoline and the cause of severe increases in the price of gasoline in Florida during the spring of 2004. We found that crude oil price increases, growing demand, and tight supply contributed to these increases, and we also concluded that other factors such as low inventory levels maintained by the companies and the high level of concentration of the industry helped explain the high level of prices.