Unfortunately most of the decisions have to be made

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Unformatted text preview: ter 6). As an asset proceeds through its life from exploration, through development to production and, ultimately, to abandonment, the relative risk and uncertainty associated with it decrease, though the relative risk and uncertainty may increase. (For example, at a recent Society of Petroleum Engineers seminar in Aberdeen, Mike Cooper and Steve Burford demonstrated how the relative risk and uncertainty associated with the Murchison field actually increased with time). Unfortunately, most of the decisions have to be made near the beginning of the asset’s life when the risk and uncertainty are particularly high. This makes it paramount that organisations use probabilistic methods for the generation of both reserves and economic estimates. Some companies use a combination of deterministic and probabilistic techniques. For example, Nangea and Hunt (1997) describe how Mobil used such an approach for reserve and resource evaluation prior to their merger with Exxon. The authors, and presumably the company, believed that both methods have valid justification for utilisation and that when they are used jointly, they can provide greater insights into the recoverable hydrocarbon volumes and the probability of recovering those volumes, than when they are used in isolation. During exploration, proved and probable reserves (as defined by the World Petroleum Congress, see Section 7.4 of Chapter 7) were calculated deterministically. A Monte Carlo simulation was then run to establish the cumulative probability distribution for recoverable hydrocarbons. This curve and the deterministic results were then utilised to determine the possible volumes (“geological uncertainty”) and associated confidence factors (“geological risk”) for each of these categories. The mean value of this probabilistic curve (the expected value) was the case used for the economic analysis. No indication is given in the Nangea and Hunt’s (1997) paper as to how Mobil conducted their economic analysis. However, clearly by using only one reserves case to run the economic analysis, the economic impact of the high and low reserve cases was ignored. As fields went into production and new information became available, Mobil’s analysts generated new deterministic and probabilistic estimates of the proven and possible reserves of each field. Near the end of fields’ lives, Mobil believed that there is a little uncertainty associated with the reservoir parameters or the size of the field. 122 Consequently, the company discontinued using probabilistic analysis at this stage, and the production volumes (and associated confidence factors) were calculated deterministically. Whilst it is certainly true that during production risks and uncertainties are significantly reduced, they are by no means eliminated. For example, the oil price prediction used in the economic models may prove inaccurate, as was the case with the Brent field. The physical structures could fail. This occurred with the facilities for Foinaven, Balder and Sleipner (Wood...
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This document was uploaded on 03/30/2014.

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