Reining In the Data Junkies -- Having the Guts Not to Appraise

Abstract

Abstract With multi-billion dollar price tags for developments in deepwater, it is important to be prudent in reducing subsurface risk. But ultimately, the deepwater oil and gas business is a risky one, and sometimes the best course forward is to stop looking for unobtainable information and just proceed with development. And at $100+ million per well, deepwater appraisal is certainly not the place to be conducting science experiments. Subsurface experts are always hungry for more information, but this is not the realm of information for its own sake. Unless an appraisal well can affect key development decisions, it should probably be forgone. This paper reviews an actual application of a value of information (VOI) approach to putting a number on the value that each of several different appraisal wells could add to a potential development. The theoretical basis of this analysis has been covered by other authors -- the focus here is on the practical application of the method and advice on carrying it out. A VOI assessment is made on three proposed appraisal well targets in a discovered deepwater oil field. A standard application of VOI is used, using several key subsurface risks and uncertainties as the learning priorities for appraisal. These are built into a reservoir model and incorporated into an Experimental Design process to derive a regression equation for ultimate recoverable oil. Decision trees using discrete realizations as endpoints and an economic model are used to understand the various development decision paths with no additional information, with perfect information, and with imperfect information on the target uncertainties. The assessment of two of the three appraisal targets does not show enough information to change the original development plan. While the information does affect the estimate of ultimate recoverable oil, it does not change well placement, the optimal host capacity, or the basic Go/No-go decision on the development. A third target, penetrating multiple potential stacked reservoirs, does show the potential to materially change the development plan and is pursued. In the analysis, several factors are critical, including: clarity on the reference case decision with no additional information; clear benchmarks on threshold economic criteria; good reliability assessments and sensitivity testing; a good Design of Experiments process incorporating all key uncertainties; inputs from development planners and engineers to understand the impact of subsurface information on the development plan. The approach is able to put a dollar value on appraisal information and tie subsurface uncertainties directly back to critical development decisions. The analysis uses inputs that are all currently available or readily obtained from the project team. Most importantly, the analysis shifts the focus of appraisal from uncertainty to decisions, and this shift in perspective can have a profound effect on how a company approaches appraisal.