Computing Risk for Oil Prospects: Principles and Programs
- J.W. Harbaugh, Professor of Geological Sciences and Petroleum Engineering, Stanford University, Stanford, California, USA
- J.C. Davis, Chief, Mathematical Geology, Kansas Geological Survey, Professor of Petroleum Engineering, University of Kansas, Lawrence, Kansas, USA
- J. Wendebourg, Research Scientist, Geology/Geochemistry Division, Institut Français du Pétrole, Rueil-Malmaison, France
The petroleum industry is enduring difficult financial times because of the continuing depressed price of crude oil on the world market. This has caused major corporate restructuring and reductions in staff throughout the industry. Because oil exploration must now be done with fewer people under more difficult economic constraints, it is essential that the most effective and efficient procedures be used. Computing Risk for Oil Prospects describes how prospect risk assessment — predicting the distribution of financial gains or losses that may result from the drilling of an exploration well — can be done using objective procedures implemented on personal computers. The procedures include analyses of historical data, interpretation of geological and geophysical data, and financial calculations to yield a spectrum of the possible consequences of decisions. All aspects of petroleum risk assessment are covered, from evaluating regional resources, through delineating an individual prospect, to calculation of the financial consequences of alternative decisions and their possible results. The bottom lines are given both in terms of the probable volumes of oil that may be discovered and the expected monetary returns. Statistical procedures are linked with computer mapping and interpretation algorithms, which feed their results directly into routines for financial analysis. The programs in the included library of computer programs are tailored to fit seamlessly together, and are designed for ease and simplicity of operation. The two diskettes supplied are IBM compatible. Full information on loading is given in Appendix A - Software Installation. Risk I diskette contains data files and executables and Risk 2 diskette contains only executables.
The authors contend that the explorationist who develops a prospect should be involved in every facet of its analysis, including risk and financial assessments. This book provides the tools necessary for these tasks.
For professional geologists, geophysicists, landmen and managers in petroleum exploration and development. Financial analysts and computer specialists in the petroleum and investment industries. Government, academic and industrial researchers in resource assessment, and those teaching courses on risk assessment.
- Published: November 1995
- Imprint: PERGAMON
- ISBN: 978-0-08-041890-2
...an informative and well-written book...For the geologist, engineer or manager who knows about exploration geology but not about probability, economic analysis, and decision-making techniques, I highly recommend this book.
Michael R. Walls, Geotimes, August 1996
...I found this book a highly readable, carefully constructed, painstakingly systematic presentation of a viewpoint that may be shared by many...the book is a significant and long overdue addition to the petroleum literature. I would add
James A. Murtha, Computers & Geosciences, 1997
Table of Contents
Foreword. Preface. Getting things rolling. The Challenge of RiskAssessment. The nature of exploration. Defining probabilities. Geological uncertainty and oil occurrence. Regional hydrocarbon endowment. Principal premises of this book. Field Size Distributions. Estimating "Q". Oil field populations. Statistics of frequency distributions.Cumulative probability plots. Caution: future discoveries. Success, Sequence, and Gambler's Ruin. Success ratios and dry hole probabilities. Long-term luck and binomial distribution. Estimating Discovery Size from Prospect Size. Statistical correlations between properties. Estimating volumes from seismic maps. Outcome Probabilities and Success Ratios. Geology and drilling results. Bayesian revision of regional success ratios. Bayesian revision of distributions. Modeling Prospects. Appeal of the simulation approach. Steps in Monte Carlo simulation. Distributions and parameters. Are geologic properties independent? Mapping Properties and Uncertainties. Computer contouring. How contour maps are made. Geostatistics in risk assessment. Discriminating Discoveries and Dry Holes. Combining geological variables. Assessing a new area. Updating assessments. Exploring magyarstan target area. The immature stage. The intermediate stage. The mature stage. The final stage. Forecasting Cash Flow for a Prospect. Financial overview. Discounted net cash flow analysis. Using cashflow. Output from cashflow. Example applications of cashflow. The Worth of Money. A dry hole versus a discovery. RATs, Decision Tables, and Trees. RATs link outcomes with risk. How RATs treat information. Example risk analysis tables. Decision aids for actions. Constructing decision tables. Decision trees. Overview and a look to the future. Bringing It Together. Risking the Roskoff prospect. The prize offered. Troyska and Roskoff areas compared. Estimating Roskoff's dry hole probability. Probabilities attached to field volumes. Roskoff prospect financial analysis. Some final points. Bibliography. Appendix A - Software Installation of Risk. Appendix B - Riskstat Manual. Appendix C - Riskmap Manual. Appendix D - Risktab Manual. Index.
151 illustrations, 861 lit. refs.