Decision Analysis for Petroleum Exploration

This book introduces the reader to ways of applying risk and decision analysis concepts to the analysis of decisions under uncertainty in petroleum exploration. Topics covered in the book represent a composite of evaluation practices and problem-solving approaches used throughout the world. Decision analysis methods apply to any type of business investment decision. The emphasis in this book is on quantitative methods useful in petroleum exploration. The book will be of special interest to anyone involved in the evaluation of property acquisition, geophysical surveys, and prospect drilling decisions: petroleum geologists, engineers, geophysicists and managers. A mathematical or statistical background is not required to follow the practical, applications-oriented discussions.P The book first reviews the advantages and disadvantages of various profitability criteria used for selecting and comparing drilling prospects. Next is the important expected value concept. This decision criterion recognizes judgments about risks and uncertainties expressed as probabilities. Expected value is the cornerstone of formal, quantitative analysis of decision making under uncertainty. Included in this discussion about expected value are chapters on the formulation and solution of decision trees, Monte Carlo simulation, and risk policy using utility theory. The remainder of the book is devoted to decision modeling: determining the possible outcomes and their probabilities for decisions made under conditions of uncertainty. Throughout the book, numerous real-world exploration examples are presented to illustrate how risk and decision analysis methods are applied. A feature of the book is a case studyentitled "The Blackduck Prospect." This three-part series is a dialogue between various executives trying to decide whether to drill an exploratory well on newly acquired acreage. The book also contains references for further reading and a glossary of terms.