Probabilistic resource/cost appraisals for evaluation of petroleum resources

Abstract

In the increasingly open global marketplace, unconventional resources such as coal seam methane, shale gas and shale oil are now the marginal (highest cost) sources of supply in some regions and are seen as potential important components of energy policy for many nations, including Australia. Large in-place hydrocarbon volumes, low-recovery efficiency, and slim profit margins characterise the development of most of these resources around the world. Although they contribute a relatively small percentage of global petroleum production, they greatly influence world commodity prices and pose challenges to developers, investors and policy makers. Traditional assessments of in-place or technically recoverable hydrocarbon volumes alone are inadequate for evaluating the economic viability of these unconventional resources. By integrating probabilistic geology-based assessments with estimates of undiscounted life-cycle capital and operating expenditures, however, single parameter resource assessments become two-parameter resource cost appraisals, which can be used to: benchmark alternative oil or gas technologies; quantify the effects of technological change on high-cost developments; and, compare alternative resource development opportunities. The integration of geological and technological information thus provides an important tool for the effective evaluation of potential projects and for setting energy policy.