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PESA Vic/Tas September Technical Meeting
Wednesday, 18 September, 2019 @ 12:00 pm - 2:00 pmFree
Managing uncertainties in our oil and gas exploration business goes well beyond technical analyses. The intent of this paper is to show how factors outside the technical effort can affect the outcome of exploration campaigns. Predictions made by teams affect investment decisions but how this analysis is conveyed to other stakeholders has a significant impact on exploration decisions and hence the outcomes of programs.
All of us involved in the exploration effort including those outside the team have to have a clear line of sight between the present state of knowledge and where the company wants to go in terms of value creation.
At the core of all exploration is the statistics of expected outcomes. In the author’s view there is not much in existing literature that specifically addresses the statistics of limited trials campaigns. Much of the existing math of evaluation includes concepts like EMV which inherently assume large number statistical trials. On a limited trials basis, including the drilling of just one well, it is impossible to convey any certainty of outcomes. E.g. if a prospect has a Geologic Chance of Success (GCOS) of 25%, it equally means a 75% chance of failure. However, if we drill a series of exploration wells in a campaign, just the collection of throws of the exploration dice would increase the chance of at least one success. This process, though not guaranteeing success, shows the statistical tendency towards increased success. These are key facts that are probably known by some but not appreciated by many. Whether all levels of workers and all the stakeholders understand this critical issue can determine whether a company modifies plans or quits from what is a very carefully thought out drilling campaign. Or stays the course.
In the author’s experience, in many occasions, there is a disconnect at all levels between the hope of drilling successful wells on each prospect and the underlying reality that success is not statistically guaranteed when drilling any given prospect. This can lead to many short sighted and ill informed decisions. It is the intention of this paper to capture the whole process starting early in the risking process right through to visualization of economic benefit creation at various stages of the campaign. Keys are offered here that can provide at each instant of the exploration process, analyses of how eventual success probabilities may shape up, starting pre drill and right through the exploration process. This approach to the analysis is especially important to companies with limited capital resources that can only drill a handful of wells.