Layer | Fill | Outline |
---|
Map layers
Theme | Visible | Selectable | Appearance | Zoom Range (now: 0) |
---|
Fill | Stroke |
---|---|
Collaborating Authors
Results
Abstract Enormous effort and expense is put forth to explore for "sweet spots", but is it worthwhile? Is it even possible or, more importantly, a good business decision to attempt to explore for sweet spots? It is contended that, at a minimum, the vast majority of sweet spot exploration activity is wasted time and effort. Chasing the "golden carrot" leads to poor decision making and the investment of vast sums of capital in non-economic plays and basins. While the term "sweet spot" has taken on several different definitions over the previous decade, Industry seems to be settling on the definition being a limited area of productivity which falls within the upper quartile of the productivity of the opportunity. Ambiguity remains concerning the context, however, the concept and intent to drill the best possible productivity is a misguided remnant of the conventional mindset. Our quest should be to rapidly and efficiently evaluate a material area for economic development potential. In this, the understanding of what will eventually constitute a material opportunity is critical. Materiality ultimately delivers control and competitive advantage. While one may argue a coherent and valid sweet spot prediction method provides a competitive advantage, it does so later in the development phase and not during exploration. At best, sweet spot exploration is unreliable. In high variability reservoirs, the allocation of scarce resources to define successful sweet spot discovery is inefficient and destroys project value. Simply being "lucky" can derail an entire program as the intent shifts to focus on "successful" efforts while the typical well in the area under-produces for lack of engineering and geoscience attention. As such, sweet-spotting will fail to properly characterize the true economic potential of the opportunity. The drive to define the best, most productive locations within an acreage position misses the point that the value of the acreage will be the aggregated value of the entire developed area. To base development decisions on sweet spot results even in those rare instances when the "blind pig finds the truffle" over attributes causality, ultimately overvalues the opportunity and misleads investors. Sweet spot exploration oriented programs are based on imperfect interpretation are unreliable, potentially misrepresent the project potential and delay efficient development. The solution is to adhere to a fair and reliable assessment of the opportunity at hand. The early definition of material interest in a material play bodes well for the success of the company. Once the aggregate results have shown economic development potential of an area capable of providing distinct competitive advantage and control of the Company's domain, then sweet spot techniques come to the fore as they contribute to the efficient early capture of upside productivity. The quickest and lowest risk pathway into an unconventional opportunity is to seek a fair assessment of the entire opportunity, not simply the presumed sweet spot(s). The initial wells into an opportunity should be placed to provide confidence that the extent and productivity of the recoverable hydrocarbons present are greater than the project execution thresholdโฆ that what you have is at least as much as what you need to have in order to create/sustain a viable project. When we enter a play, we do so expecting the aggregate result to be positive. We need to avoid cloaking the development decision with a shroud of unreliable, unrepresentative early well results. Knowledge and figuring out the game is wonderful, but it needs to happen at the correct point in the development process.
- Reservoir Description and Dynamics > Unconventional and Complex Reservoirs (1.00)
- Reservoir Description and Dynamics > Reservoir Characterization > Seismic processing and interpretation (1.00)
- Management > Energy Economics > Unconventional resource economics (1.00)
- Management > Strategic Planning and Management > Project management (0.86)
Unconventional Type Curves: Useful, or Sirens of Destruction?
Haskett, William J. (Decision Strategies)
Abstract Considerable faith is placed in Type Curves; Type Curves that are ultimately responsible for resource estimation, revenue generation, and value determination. We assume that they are valid representations of what will happen, but is this faith warranted? In and of itself, a type curve is a purely deterministic forecast of a multi-dimensional uncertainty. To their credit, explorationists have recognized range-based volumetric assessments as providing significant advantage in both resource determination and downside risk mitigation for nearly two decades. Given that nearly two-thirds of the uncertainty in NPV for an unconventional opportunity is production profile based, it is vital to understand the true range in the production profile. Unfortunately, given the two dimensional aspect (both rate and time are uncertainties) of time series uncertainty and the scale up issue from individual well ranges, this is not as straightforward as it may seem. Attempts at ranged type curves tend to be biased by center anchoring and unreliable P10-P90 estimates. Ranged type curves are often the "expected" curve factored up and down symmetrically (!). This typically does not reflect valid production behavior. Well life is often inappropriately anchored at 40 years, or even 60 years and the curve is back-calculated to one of the most unreliable elements... initial production. The free variable in the calculation becomes decline, yet we receive decline information early in the life of the well. We have no clear reason to anchor production curves to a set time. As such, time should be the calculated variable. Additionally, the expected type curve when replicated across an area of potential will not be a representative case that delivers the expected value of an opportunity. Type curves can be useful, ranged type curves even more so. Stochastic assessment of production potential allows companies to validly assess the true potential of a project area. It enables prioritized learning plans and downside recognition. Individual profile iterations can be easily ranked using discounted present production (DPP), but a value context is greatly preferred. Valid curves enable a company to recognize if a project will be production- or cost-sensitive and efficiently allocate time, people, and capital, thus optimizing the factory phase of the project. Assessments are made to support decisions. Assessments without a decision context are a waste of time.
Abstract There is significant current commitment within the industry to develop and implement methods to assess the prospectivity of Unconventional Resource opportunities. The purpose of this paper is to identify some of the common recurring errors in both numerical evaluation and operational priorities, with specific examples. Efficient planning and evaluation of Unconventional opportunities is critical due to the low margin, high capital nature of the business. Converting the Conventional exploration and development mindset over to one that places high value on project management and manufacturing efficiency is difficult. Appropriate evaluation and applied operational learning are critical to evaluating decisions that can mitigate downside risk, including the critical post-pilot go/no go decision. Some Specific trouble points are: Attempting to model future program results with a single distribution of individual well EUR results-predicting the unpredictable with unwarranted precision. Force fitting a lognormal distribution through datasets that are decidedly non-lognormal, particularly in the outer portions of the probability space. The โdouble whammyโ of prediciting an overpopulation of high volume wells (including unrealistically high recovery wells) and underpopulation of low volume wells results in overestimation of resultsโฆ often significantly so. Overemphasizing assessment of chance of geologic success, when the key questions to resolve are the chance that the significant risked (pre-pilot) investment will lead to a โgoโ decision, how often does a particular pilot design correctly predict viability or non-viability-and what the chance is that the entire venture will be an economic success. Failing to recognize the critical success factor-production profile uncertainty โ and model this correctly, and develop appropriate prioritized learning objectives for the pilot. Ignoring the impact of business pinch-points, the scarce resource items which when controlled provide profit assurance and distinct competitive advantage. The failure to link the statistical assessment to operational priorities on project assessment or Play entry relegates business sense to an after-thought. The unfettered, unfocused "drill it and see what happens" approach results in sub-optimal pilots that fail to provide appropriate confidence for critical business decisions, destroys value, and risks loss of competitive advantage in an Unconventional Play.
Abstract The assessment of Regret and Pain of Regret is an important decision focused step in the evaluation of significant go / no go decisions. Regret is the probability that the opportunity will fail to meet its objectives; that management will regret the decision made to enter, leave prematurely, or decline an opportunity. Pain of Regret is the magnitude of hurt or injury to the organization given the occurrence of Regret. Pain can be a loss of value, competitive advantage, resources, or even shareholder confidence. As with Risk and Uncertainty, or Dependency and Correlation, Regret and the Pain of Regret is a pairing of a probability gate and a ranged element. But more importantly, Regret and Pain strike to the very core of the decision process; they relate directly to the objectives of the opportunity whether they are economic, competitive, or strategic. As such, assessment of Pain and regret is more than a calculation. While management often centers in on the expected NPV, and analysts have embraced the concept of probabilistic assessment, it is the avoidance of Pain and Regret that often carries the day. Pain and Regret assessment offers management a way to express, with clarity, the objectives expected for an opportunity in a broader context, as well as way to understand the threat to the organization from failure. While Pain and Regret assessment is typically carried out in the context of project entry, the decision to walk from a project may also carry disappointment, especially when a competitor takes over and is successful. Unconventional Resource Plays can be a decision confidence minefield. How much do you invest in your pilot phase? How sure are you of a viable project? How big a threat of loss will you take before you elect to walk from a project? How confident do you have to (want to) be in your go forward decision? How likely are you to be making the wrong decision? While it will never be possible to completely eliminate errors of commission or omission, understanding the potential Pain and Regret of a decision provides benefits well beyond possible value metric improvement, or identification of mitigation opportunities. Understanding Pain and Regret provides a more complete understanding of decisions and leads directly to confidence through clarity. Introduction As we make our way through the myriad opportunities in our portfolios we calculate. We calculate means, medians, P10's. P90's, volumes, returns, taxes, NPV, and so on; a seemingly endless metric generation. Which one matters most? Which one was a waste of time to calculate? Will you know before you calculate them? Does anybody really care? Yet, what and where are the decisions? And how do "they", the anonymous, omnipresent decision maker, make the decision? In a calculation-centric world, and many companies are exactly that, it becomes obvious that decision-makers could simply take the assessment outputs and high-grade the opportunities based on the calculated metrics. Then, who needs the decision-makers? Companies could just feed the technical and evaluative thought engines of the company and have a computer figure out what they will do in the next quarter, the next year, and the next decade. Surrounded by details, the natural tendency is to sort, order, and act. But there is more to management and leadership decision-making than thatโฆ isn't there?
Abstract Making sound business decisions in one of the hottest domestic exploration plays, unconventional gas, offers a set of challenges not usually encountered with more traditional opportunities. Unlike with standard prospect and conventional play risk analysis, geologic chance is not a major issue, and estimates of initial production, decline rates, mechanical efficiency, and success planning dominate the analysis rather than traditional volumetric determinations. The valuation and assessment of unconventional or "continuous resource" opportunities is not feasible using traditional probabilistic, volumetric-based methods. A fully stochastic business, value-chain model is the best way to assess the potential of an unconventional play. Such an evaluation method allows for multi-disciplinary and cost input that affords decision makers with the appropriate data to make good decisions. The boundaries of unconventional reservoirs extend well beyond the limits of most individual acreage holdings. As such, the recommendations of Schmoker and others to base the full resource availability on a cell or single well drainage area should be embraced as a starting point. Resource uncertainty is handled by a continuum of well size distributions arranged to form an EUR Envelope. Volumes are only part of the equation, however. Uncertainty in the production profile must be taken into account, with variations in initial production, decline rate, and hyperbolic exponent figuring prominently in the final assessment of profitability. There are four main stages in the exploitation of unconventional opportunities: Exploration, Evaluation, Delineation, and Development. Proper assessment, including identification and management of downside risk, requires a decision-focused, integrated, multi-discipline evaluation process through the four stages. Unconventional plays use an initial number of wells to test the viability of a play and stimulation technology/methods. These pilot programs can be optimized, for number of wells, and company risk tolerance. Pilot Effectiveness is the (measurable) probability of the pilot program providing truthful results given the small number of test wells modeled. Output from the proposed stochastic evaluation method include both single economic and product-based metrics in cumulative probability curves, as well as time series output in both aggregate and pathway forms. A thorough understanding of results analysis, Value of Information, and decision options is encouraged in order to take full benefit of the stochastic assessment method. Introduction In recent years, resources recoverable from reservoirs of difficult nature have come to be called "Unconventional Resources". In addition to fractured reservoirs, unconventional plays include tight gas, gas/oil shale, oil sands, and coal-bed methane (CBM).
- Geology > Rock Type > Sedimentary Rock > Organic-Rich Rock (0.54)
- Geology > Rock Type > Sedimentary Rock > Clastic Rock (0.48)
- Geology > Petroleum Play Type > Unconventional Play > Heavy Oil Play (0.34)
Abstract Successful exploration, efficient appraisal, and profitable extraction are the three phases of any E&P project; each in turn is dependent upon the prior. However, efficient appraisal of newly discovered resources sets the stage for maximizing project profitability and managing risk. The goal of an efficient appraisal program is to achieve maximum reduction in uncertainty with minimal cost. The more certain a company is regarding the size and scope of a particular project, the better decision it can make on its development case selection, the greater the possibilities for downside risk mitigation, and the more efficiently it can manage its entire development portfolio. The end of the appraisal period occurs when further uncertainty reduction would not materially effect the principle development decisions, or at the point at which the downside project risk becomes acceptable to the company. Specific appraisal locations should typically be selected on their ability to provide the greatest overall reduction in project uncertainty. Project uncertainty is tied directly to the variance of the outcome distribution and can be summarized by the uncertainty range, which utilizes the commonly understood distribution descriptors. An understanding of the difference between discrete learning events and population sampling learning is critical to the estimation of uncertainty reduction. Potential appraisal locations will contribute to a reduction in uncertainty given either failure or success. Competing appraisal locations may be compared through their propensity for uncertainty reduction using standard value of information techniques (VoI). This quantitative method provides an assessment of the relative value of uncertainty reduction of competing or prioritized development locations, and may be extended within a multi-prospect situation to rank competing prospects within a commonly constrained business opportunity. Introduction The post-discovery appraisal effort abounds with opportunity for efficiency. Optimal choices for appraisal well locations and knowing when to end the appraisal phase of a project will not only create the maximum value for the organization, but will provide the most efficient path to proved resource. Demirmen (1996, 2001) has pointed out the opportunity for the use of value-of-information techniques to rank preference amongst appraisal opportunities. He also points out that under or over-appraisal erodes economic value. This author agrees and extends the argument to a decision context for both single and multiple prospect objectives. One of the most difficult dilemmas faced by appraisal personnel is where to locate the next well. Teams are frequently dry-hole phobic stating that the project "can't afford to have a dry appraisal well". A frequent result of this approach is a virtual twinning of the existing discovery, or minimal step-out, which provides little if any reduction in uncertainty and necessitates further drilling to determine materiality. Security of activity has taken precedence over security of business. Appraisal activities must be distinguished from exploration and development activities. Appraisal has its own set of rules and objectives. In order to appraise there first needs to be a successful exploration effort. Exploration "success" is the establishment of a minimum quantity of producible resource. It is the acknowledgement that sufficient resource is present and deemed producible that would tempt a responsible owner to proceed with further appraisal or development. As such the basic risk elements of container (reservoir, vertical seal, and lateral seal) and contents (source, timing, and migration) are present. Exploration risk is no longer of concern, but size uncertainty abounds. Successful exploration creates uncertainty. Appraisal activities reduce uncertainty as a primary objective. Development activities, though still contributing to uncertainty reduction, have a primary responsibility for commercial extraction and management.