Cognitive Biases in the Petroleum Industry: Impact and Remediation

Abstract

Abstract It has been repeatedly demonstrated [1–5] that humans are prone to what are called cognitive biases - discrepancies between calculated, optimal decisions and those made using intuition. Such demonstrations of cognitive bias in expert decision makers, however, are often criticized on the basis of their content being irrelevantto the participants. We present results of a study, based on a range of questions designed to highlight a number of well-known biases and including an extension of Capen's [1] study of overconfidence in SPE members, put to industry personnel from a variety of companies. To limit the objection raised above, all questions related to the O&G industry. The authors discuss the biases exhibited and their potential impact on Oil and Gas industry decisions with a special focus on remediation. Despite domain familiarity, industry personnel exhibited a range of cognitive biases indicating that, in accordance with the literature, familiarity with subject material does not remove their impact; nor does industry experience alleviate it. The authors conclude that the biases demonstrated are likely to already be impacting industry decisions. The effect of having had specific risk training is also discussed in light of the results herein with the conclusion that, if risk training does have a beneficial effect, said effects are largely eroded by the passage of time. Finally, we argue that a better understanding of the biases that can affect decisions made within the industry, not just in terms of their existence but also their mechanism of action, will allow more meaningful attempts at remediation. It would also allow current techniques designed to lessen bias impact to be examined critically and both the strengths and weaknesses of these processes to be exposed.