Abstract

This chapter articulates the most important economic theories and financial models for applications in the petroleum industry. It starts with a thorough exploration of the traditional financial models, specifically the net cash flow/net present value model, which is the most important financial tool used in the petroleum industry to evaluate the fate of all types of reservoirs. This investigation is presented in two stages, one deals with conventional resources and the other addresses unconventional resources. In addition, a close look at the utilization of some of the decisive economic and risk management tools practiced in the petroleum industry, along with uncertainty minimization strategies are discussed. Special attention is given to the resource assessment of unconventional plays and their delicate role in the oil and gas market. Two major unconventional resource assessment approaches are introduced: the resource-based approach and the well-based approach. In this context, emphasis is given to the well-based approach, highlighting the role of the FORSPAN model and the Basin and Petroleum system modeling approach. Moreover, case studies are provided to help illustrate the use of these models in real-world scenarios. Finally, a brief discussion on the role of decision trees in mitigating risks supported by examples from the literature is presented to wrap the chapter.

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