Petroleum Projects Research Articles

Using Real Options and Geometric Brownian Motion Methods to Evaluate Petroleum Projects in Indonesia

There are several methods for evaluating the value of a project. The most commonly used method is the Discounted Cash Flows (DCF) method which is more practical in its use. However, the DCF method still has several weaknesses, including not paying attention to the flexibility of the manager's decision-making when the project is carried out. The Real Options method enhances this by offering more flexible and varied models. This study uses Benninga's version of the binomial method to evaluate the value of petroleum projects with the characteristics of existing companies in Indonesia. In this study, oil prices are assumed to move following the Geometric Brownian Motion (GBM) model which is commonly used in modeling the movement of a fluctuating price. In addition, the author also modifies the binomial model by including expansion options, divestment options and a combination of both. The results of this study show that the more options that managers can choose in decision-making, the greater the opportunity for the company to optimize profits and minimize losses.

Petroleum development projects. Concept selection, taxation and recovery rate

The paper models and discusses important dimensions when choosing development concept for petroleum projects, and the consequences it has for recovery rate and project economics. By means of case analysis, optimal concept selection is analysed from the perspective of oil companies and government, accounting for the difference in evaluation metrics. While government has emphasis on net present value, a key decision criterion for oil companies is breakeven price. There are two reasons why oil companies select development concepts that are suboptimal from a government perspective: 1) to attain a low breakeven price (capital rationing), a cheaper development concept is often chosen; and 2) conservative resource estimation is often applied. Underinvestment leads to low recovery rate. When oil companies are inclined to select suboptimal development concepts, it is optimal for government to combine cash flow tax and uplift. An uplift enhances marginal investment incentives and could also remedy the incentive for postponement inherent in the breakeven price decision criteria. Our topic, the effect of tax design on development concept and thus extraction ratio is generic, it applies also to the mining sector.

Reducing Uncertainty in Site-specific Stress Prediction for CO2 Storage in the North Sea, Norway

Two CO2 storage sites located in the western Norwegian North Sea (NNS), called Aurora and Smeaheia, are currently under construction and assessment respectively. In geological storage of CO2, the in situ minimum horizontal stress is an essential input parameter for assessment of both containment and induced seismic risks [1]. To infer the stress states at certain depths at a site where no data is available, the standard approach is to perform a classical linear regression on stress data versus depth and treat the fitted trend line as the best site-specific stress predictions along depth [2]. However, stress data are often highly limited at CO2 storage sites; for example, Aurora and Smeaheia have only five in situ stress measurements available at best respectively. Such limited data may severely underrepresent the true stress distribution at one site. Data scarcity coupled with measurement error and spatial variability poses a challenge to reliable stress prediction, and hence it is crucial to quantify and reduce uncertainty in site-specific stress prediction for CO2 storage. Stress uncertainty is actually the required input information in the more rational probabilistic risk assessment framework. A natural solution to reducing uncertainty is to integrate stress information from other sources.
 On the Norwegian continental shelf, extensive data has been accumulated from previous petroleum projects. Of the publicly available NPD stress database, Figure 1a shows the distribution of versus depth (< 3,000 m) for each site within the study area containing Aurora and Smeaheia, and reveals a certain degree of similarity between the stress trends at the 11 sites. Such similarity, aligned with other published results [2], may be attributed to the relaxed sedimentary basins where gravitational loading dominates the lateral stress distribution rather than tectonic components, with the between-site variation arising from differences in the geological conditions and pore pressures [3]. When facing limited data for a site like Aurora and Smeaheia, the current approach is often to either directly use the stress trend from other sites having richer data or expand the coverage area to include more data. Such semi-subjective information borrowing approach, although effective in many cases, may lead to overly confident stress predictions as it fails to account for possible between-site heterogeneity in stress trends.
 Bayesian inference has been widely used as a rigorous and powerful statistical approach for quantifying uncertainty, as well as combining information from different sources via informative prior distributions. Hence, historical stress data may be integrated into Bayesian analysis of site-specific data in the form of prior distributions, with stress uncertainties being quantified and updated as the posterior distributions [4, 5]. When developing prior distributions for site-specific stress prediction, it may be tempting to combine all historical stress data for a holistic Bayesian analysis, yet such complete pooling approach may give an overconfident summary of prior information in that it ignores the possible stress heterogeneity between sites.
 This paper presents a Bayesian hierarchical (i.e., partial pooling) model (BHM) that explicitly accounts for between-site heterogeneity/similarity when constructing prior distributions from historical stress data, and demonstrates how the proposed model effectively borrows historical information to reduce uncertainty in site-specific stress prediction for CO2 storage in the NNS study area. Figures 1b illustrates the prior predictions of versus depth at the Aurora site from the Bayesian complete and partial pooling models. Although the complete pooling model gives less uncertain stress predictions than the partial pooling model as indicated by the narrower 90% prediction intervals (PIs), it does not well capture the five unseen stress measurements at Aurora in that two out of five stress values fall outside the 90% PIs. This suggests that complete pooling analysis indeed gives overconfident prior distributions out of the NPD database, and is thus not suitable for integrating historical data into site-specific stress prediction for CO2 storage in the NNS. On the other hand, the partial pooling model gives fairly good prior predictions of the five unseen stress values at Aurora, albeit with larger uncertainties. This result demonstrates the effectiveness of BHM as a framework for formulating proper informative priors from historical data, and an encouraging implication is that probabilistic risk assessment is allowed even with no site-specific stress data at this storage site, which is not possible if external information is not integrated properly. Figure 1c shows the posterior stress predictions updated with the five site-specific stress values from the two Bayesian models in question. After incorporating the site-specific data, the complete pooling model still over-predicts the two stress values at depths with barely noticeable updating, while partial pooling gives considerably more accurate stress predictions with reduced uncertainty.

Regulator Analyzes Australia’s Decommissioning Challenge

_ This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper SPE 208483, “Is Australia Prepared for the Decommissioning Challenge? A Regulator’s Perspective,” by David Christensen and Andrew Re, National Offshore Petroleum Safety and Environmental Management Authority. The paper has not been peer reviewed. _ The Australian offshore petroleum industry has been in operation since the early 1960s and at the time of writing has approximately 57 platforms, 11 floating facilities, 3500 km of pipelines, and 1,000 wells in operation. Many offshore facilities are now approaching the end of their operational lives. Modeling has estimated Australia’s combined offshore petroleum industry decommissioning liability (including wells, pipelines, subsea equipment, and facilities) to be $40.5 billion. The purpose of the complete paper is to highlight the importance and benefit of adopting best practices when planning for decommissioning throughout the life cycle of a petroleum project. Introduction Australia’s offshore petroleum decommissioning challenge is significant given its remote location, limited availability of specialist services, and the relative infancy of its offshore industry in undertaking large-scale decommissioning projects. Recent events in Australia have shown that the industry is, broadly speaking, unprepared for decommissioning. Australian Regulatory Approach The Offshore Petroleum and Greenhouse Gas Storage (OPGGS) Act of 2006 and associated regulations provide the legal framework for the exploration and recovery of petroleum and greenhouse gas activities in Australian Commonwealth waters (those areas that are more than 3 nautical miles from the territorial sea baseline). The key principle underpinning the OPGGS Act and regulations is that responsibility for ensuring the health and safety of workers and the protection of the environment lies with those who create the risks. An objective-based regulatory regime sets requirements that must be achieved but does not prescribe how those requirements must be met. The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) has been established and appointed under the OPGGS Act as regulator for health and safety, structural (well) integrity, and environmental management of petroleum activities in Australian waters (3–200 nautical miles offshore) and in coastal waters (0–3 nautical miles offshore) where regulatory powers and functions have been conferred. Section 572, Maintenance and Removal of Property. Section 572 of the OPGGS Act establishes requirements for maintenance and removal of property by the titleholders, along with exemptions and obligation provisions. Section 572(2) of the OPGGS Act provides that a titleholder must maintain in good condition and repair all structures that are, and all equipment and other property that is, in the title area and used in connection with operations. Section 572(3) of the OPGGS Act provides that a titleholder must remove from the title area all structures that are, and all equipment and other property that is, neither used nor to be used in connection with the operations in which the titleholder is or will be engaged.

Risk assessment process for the Iraqi petroleum sector

Abstract Risk management is important for project success as risks in petroleum projects must be minimized to achieve the goals of production. Risk management composes of planning, identification, analysis, and response, which is an important phase. Controlling risks gains the projects the capability to overcome the uncertainty and thus effectively produce the targeted quantities. In this study, four types of risks have been examined in the oil field, and the Iraqi oil exploration company has been taken as a case study. These four types of risks are operational, financial and administrative, economic and political, and potential risks. The effect of these types has been examined by using a closed-type questionnaire form. The questionnaire form was based on the Likert quintet scale, and it contains 114 risk factors distributed in four groups representing the examined four types of risks. Over 170 questionnaire forms have been distributed in the oil field to engineers, managers, experts, and technicians, and 153 forms have been adopted for the analysis. SPSS software was used to execute the statistical analysis concerning statistical mean and relative important index. The most important factors have been found and then validated by using an assessment checklist. It was found that the most factors affecting operational risks are as follows: the presence of mines and explosives left over from past wars in areas to be explored and the incorrect storage of flammable materials. Regarding the financial and administrative risks, it was found that the existence of financial and administrative corruption in oil companies and the mismanagement by managers or their assistants have the most effect on this type of risk. For the economic and political risks, it was found that the most important factors are the entry of some companies into the blacklist of major economic countries and decreased global market demand for oil. Finally, regarding the potential risks, it was found that the control of terrorist groups over the oil areas and regions is the most significant risk that the Iraqi oil and gas sector may face. In addition, it was concluded that the spread of Coronavirus disease 2019 and other epidemics should be treated as a potential risk because it has a huge effect on global oil prices.

Imperial Metropolis: Los Angeles, Mexico, and the Borderlands of American Empire, 1865–1941 by Jessica M. Kim

Reviewed by: Imperial Metropolis: Los Angeles, Mexico, and the Borderlands of American Empire, 1865–1941 by Jessica M. Kim Joseph L. Scarpaci Jessica M. Kim Imperial Metropolis: Los Angeles, Mexico, and the Borderlands of American Empire, 1865–1941. Chapel Hill: University of North Carolina Press. photographs, map, tables, appends., notes, bibl., index, (paperback ISBN: 978-1-4696-6624-2), $27.95. The publishing parentage of historian Jessica M. Kim’s book is as varied as the topic examined. A consortium forged by the David J. Weber Series in New Borderland History at Southern Methodist University, and the University of North Carolina’s already well established Latin American focus, birthed this interdisciplinary book. Already acclaimed with the Kenneth Jackson Award awarded by the Urban History Association, the work should interest students of economic, cultural, urban and regional geography. It dives headfirst into the much-used notion of core-periphery by anchoring the discussion on how Los Angeles’ growth in the post-Civil War Era, extending through the Porfiriato Era (1876–1911), and up to the onset of World War II, was intricately tied to southern California’s capital tentacles that reached deep into Mexico. This growth in empire comes to [End Page 208] life in vivid detail to convince readers (who might not otherwise accept the notion) that geopolitical borders are mere lines in the sand. Savvy strategies used by Los Angeles investors cajoled U.S. and Mexican governments to manipulate race, class and labor to extract value in agriculture, the petroleum industry, and real-estate. Think Immanuel Wallerstein’s world-system’s theory or Saskia Sassen’s world city. At its core, this book shows the frenetic pull of investment that became a “marriage of capitalism and the nineteenth century city” (p. 9). It was driven by such “lumi-nary” Los Angeles iconic empire builders such as Griffith J. Griffith, Lewis Bradbury, Edward L. Doheny, Thomas Bard, Henry Workman Keller, Henry A. Crabb, Senator John A. Miller (CA), General William Starke Rosecrans (ret.), the Merchants and Manufacturers Association, the Colorado River Land Company, and Harrison Gray Otis, among others. The prevailing winds at their backs were the Manifest Destiny, the Monroe Doctrine, victories in Havana and Manila, and the expectation that the role of U.S. and Mexican governments –the latter encouraged to facilitate liberal development through the support of these projects— would create favorable tax credits, build infrastructure (e.g., The Pan American Highway, or IPH: International Pacific Highway), military conquest, ideas of racial superiority, and American settler colonialism, among other forces. Mexican, Japanese, Native American, and Chinese laborers who toiled in anti-union and open-shop settings in Mexico and the United States helped alleviate the “white man’s burden.” Southern California investors hustled across the border to invest in agricultural and petroleum projects, keeping race, class, and labor lines in order. White managers and foremen stayed on top of brown-skin workers. And middle-class investors in the late nineteenth and early twentieth century stock market cared little whether their investments were in sugar fields in Cuba or the Philippines, or agricultural projects in Mexico. Six chapters and an epilogue develop these and related themes. Historian Kim weaves personal letters, newspaper reports, archival materials, and copious materials to show how this cross-border web of elite alliances thrust Los Angeles into the pilot’s seat of empire building. Even after the Mexican Revolution, the legal framework allowed Los Angeles’ investors to hold considerable control over core-periphery trade. Chapter Two’s review of the Quimichis Colony of large-scale farming along the Pacific coast offers a granular look at how local settlements had little choice but to acquiesce to truck farming and U.S. consumer tastes. Chapter four’s discussion of lessons learned in Cuba and the Philippines in 1898 and afterwards portrays an ethos that revived and legitimated American expansion. While the late nineteenth century bravado and risk-taking grew out of a post-Civil War Manifest Destiny ethos, the 1898 war rekindled the ideology that empire was good for the world. The Mexican Revolution (possibly kindling revolutions in Russia, China and elsewhere), created an anti-Americanism and strong sense of nationalism that forced...

Smart archiving of energy and petroleum projects utilizing big data analytics

Complexity of the construction projects vary by the domain and type of the project. Due to the interaction between different disciplines and parties, Energy and Petroleum Projects (EPP) are considered among the most complex. This complexity produces a dense network of interrelated documents which are produced to cover the various aspects and details of the project. Analyzing this network which is composed of unstructured data is required to gain insights from old data, this task traditionally requires experience, knowledge, and awareness about the existence of the required data. Accordingly, a key asset of any company is the knowledge accumulated over the time from various projects. This research proposes a framework that enables salvaging traditional archives and include its data in searchable databases to increase the efficiency of archiving such accumulated data without affecting the normal workflow of companies, and hence decrease the manhours expenditure and reduce the time of archiving while not affecting the accuracy of the outcome. Due to the large diversity of the EPP projects, the research focuses on five main commodities which are selected based on the frequency of their existence in projects in addition to their monetary value as the main data to be stored which are Tanks, Air Coolers, Pumps, Generators and Distributed Control Systems (DCS). The key attributes of each commodity are identified based on technical questionnaires with technical specialists to act as the basis for building the proposed framework. The proposed framework integrates four modules to provide a complete solution to the problem, by implementing data mining techniques while harnessing the power of big data analytics tools to transform the existent unstructured data into structured data in the form of smart archives which can then be used to support ongoing business processes.

Analysis of the Risks Associated with the oil and gas industry and the Role of Corporate Social Responsibility Towards these Risks

In this paper, an investigation of the risks involved in the oil and gas industry is presented, with special emphasis on how Oil Companies could use Corporate and Social Responsibility (CSR), as a good approach towards controlling, curbing, mitigating, and/or managing these risks. After a brief presentation of the petroleum project life cycle and the oil price environment to set the context, the dangers related to the oil and gas industry will be depicted and grouped as an environmental risk, political risk, economic risk, social risk, exploration, and geological risk, construction risk, and operational risk. A general suggestion for risk analysis and risk management within the oil and gas industry will then follows before discussing how Corporate and Social Responsibility (CSR) of petroleum Companies and/or oil and gas projects could be used to influence price valuation, risk reduction, and profitability within the oil and gas industry.

Neuro-fuzzy system based model for prediction of project performance in downstream sector of petroleum industry in Iran

Purpose Planning phase of a project results to series of crucial decisions which determine the path to objectives achievement. At the same time, in this phase, project encounters the highest level of uncertainty in comparison of all phases of project lifecycle. This paper aims to support early decisions of project based on the progress forecasting. Design/methodology/approach The scope of study is limited to downstream projects of petroleum industry in Iran, and the proposed model is trained and tested based on 75 Iranian completed petroleum projects. First, types of progress curve functions are investigated, and various types are studied and the most appropriate ones are selected through curve fitting. In the next step, using questionnaire, dependent and independent variables are recognized. Finally, using historical data and s-curve generator functions, a fuzzy inference system (ANFIS) based model have been developed to support early phases decision-making processes. Findings Based on the analysis of received questionnaires, six functional criteria in two groups as dependent variables and 25 independent variables, in two groups and four clusters are determined and categorized. Eventually, performance prediction model of a project has been developed by using Adaptive Nero Fuzzy Inference System. Originality/value The main contribution of this study to construction management knowledge is categorizing two groups of variables, which first one defines the project dynamic and the other calculates the key effects on previous one. Also, this investigation improves the current knowledge by analyzing the project system from the dynamic behavior perspective and modeling the defined variables using ANFIS tools.

Economic Feasibility Study for Petroleum Projects (Practical Aspects)

An increasing importance is given to the Economic Feasibility Study of Petroleum Projects. The reason behind that is the critical role played by the Petroleum Industry in Society, Economy and Foreign Trade. In general, Petroleum Industry is involved with the Exploitation of Oil and Gas Resources to satisfy the country's needs (households and industrial sectors) and to export these resources, in order to, gain foreign currencies which are necessary for
 funding the country's social and economic requirements. Petroleum Projects have diversity features in terms of location, size, capital, technology and risks. On the Other hand, because of the importance of the Petroleum Industry, high significance should be given to the Economic Feasibility Study, especially the necessary of good knowledge of the nature of Petroleum Activities, Projects and Contracts, as well as the fundamentals of Advanced Feasibility Study.

Economic Evaluation of Petroleum Projects (Basic Aspects)

Economic Evaluation is an essential step for assessing and studying and selecting new Petroleum Projects which involve different activities. This article presents basic aspects related to the Economic Evaluation Process such as concepts and requirements as well as the nature of Petroleum Projects. Particular focus was given to the new roles and skills and tools that are needed to achieve reasonable study of any Petroleum Project proposal.

Decommissioning and rehabilitation: funding models

Decommissioning oil and gas facilities and rehabilitating a petroleum operation area involve complex, lengthy and costly processes. Funding the liability for the decommissioning and rehabilitation phase of a petroleum project is determined by the juxtaposition of a matrix of three fundamental and closely interdependent policy decisions on: whose obligation it is (the proponent, the state or both) to carry out decommissioning, whose liability it is (the proponent, the state or both) to pay for decommissioning and which decommissioning funding model is appropriate for the proponent and/or the government (if there is state participation). Proponent models may include funding with or without security or contributions to a decommissioning fund. Government funding models are inextricably linked with the imposition, collection and appropriation of the fiscal take applying to the oil and gas sector. There are therefore many variants in the responses to, and stance taken, on the above policy issues. It is, however, universally accepted that the state should not be inadvertently left with the ultimate obligation and/or the liability for decommissioning and rehabilitation. The preferred policy choice involves finely balancing the interests of the state without disincentivising private sector investment in the development of the petroleum resource. This study will review the pros and cons of the main alternative funding models typically used internationally, the status of Australia’s decommissioning funding and associated fiscal policies, whether and to what extent the Australian government participates in the funding of decommissioning and rehabilitation undertakings and proposed improvements to the policy design settings.

Project Economics in the Big-Bets Industry: The Integrated Valuation in Practice

Value creation from petroleum projects is uncertain. Yet, even with great odds of failure, companies increasingly take on these ventures. Here, no analytics could cut failures out. We could only avoid loss by avoiding poor investment decisions. In practice, most valuations use inconsistent principles that potentially obscure the value–maximizing decisions. For example, when drilling for hydrocarbons most firms decide which opportunity to drill based on their expected value—calculated from values of multiple outcomes, each with different levels of uncertainty but traditionally evaluated with a single discount rate. The all-inclusive discounting could lead to biases and poor decisions. In this paper, we discuss the shortcomings of the traditional approach and implement a coherent method of integrated valuation that, while more detailed, excels in valuation of uncertain investments.

Comparative Study of Duty of Care (Devoir De Vigilance) in Upstream Petroleum Projects

Present memoire is a comparative study that tries to shed light on the notion of duty of care or as French say, devoir de vigilance of multinationals in their foreign direct investments; it draws a general doctrinal normative map of the duty of care and describes to what extent the two legal systems of France and the United Kingdom resemble or differ in their perspective towards this notion. It explains that notion universally consists of two pillars (or sub-regimes): first the duty to conduct and maintain due diligence in order to address, mitigate and prevent risks of an investment project and second, the obligation to redress and amend damages if the endeavors of due diligence fail. Doing that, it uses typical facts of an upstream petroleum project, as application of the notion of duty of care is, in many aspects, heavily fact-based, including in its assessment of the concept of control that plays a leading role in connecting default and liability of the operating entity and its principal (i.e. the multinational).

Joint venture and joint operating agreements in Iran: legal aspects

Abstract Under current Iranian laws and regulations there is a requirement for an upstream petroleum contract to be managed by a joint venture entity and so the conclusion of a joint venture agreement (JVA) is compulsory in such petroleum projects. In this research article we first discuss the rules governing JVAs and the statutory requirements of such agreements in Iran. Then, by studying the relevant rules, we consider the advantages and disadvantages of the both unincorporated and incorporated forms of JVA and finally we discuss some of the implications of the JVA regarding tax, accounting procedures and fiduciary duties. We also consider the role played by unincorporated joint ventures and the joint operating agreement (JOA) in Iran.

Balancing Environmental Protection and Offshore Petroleum Developments in Guyana

This paper reviews Guyana's challenge to regulate the new petroleum sector. The need to amend several pieces of legislation to be aligned with the Aichi targets for 2020 under the Convention on Biological Diversity are examined. Aichi Target 11 provides that ‘by 2020, at least 17 per cent of terrestrial and inland water areas and 10 per cent of coastal and marine areas, especially areas of particular importance for biodiversity and ecosystem services, are conserved through effectively and equitably managed, ecologically representative and well-connected systems of protected areas and other effective area-based conservation measures, and integrated into the wider landscape and seascape.’ The Government of Guyana's Green State Development Strategy which has sustainable development at its core is also examined along with several environmental law principles. The Green State Development Strategy and several environmental law principles are discussed to highlight their relevance to the protection of the marine environment and biodiversity conservation. Several recommendations are made to highlight relevant laws which should be updated for the State to achieve the right balance regarding protection of the environment and sustainable management of offshore petroleum projects in line with the obligations under the Convention on Biological Diversity.

The role of oil service companies in managing oil & gas projects within the oil & gas companies for the period 2017-2018

The research aims to study the role of oil service companies in managing oil & gas projects within the oil & gas companies for the period 2017-2018, as it is an exploratory study in a sample of oil service companies in the city of Erbil. It includes the services of oil companies, an independent variable and affects the management of the oil sector. The research also aims to achieve its goals by relying on the two approaches, the first approach is the descriptive approach, i.e. describing the variables and identifying the oil companies along with the number of oil service companies (5). The questionnaire was distributed to them and it was relied upon as a tool to collect data and information, and then we developed a hypothetical model based on a set of assumptions, including: -1. There is a significant relationship with statistical significance for the services provided by the oil companies in managing the petroleum projects.2. There is a statistically significant effect of the services provided by oil companies on the management of petroleum projects. 3. The role of the petroleum department varies with the services provide by the petroleum companies. Also, reliance on the second approach is the analytical approach, that is, to analyze the data and information collected and to use them to analyze the result

Overview of the New Legal Era for Development Projects in the Newfoundland and Labrador Offshore

Petroleum projects offshore Newfoundland and Labrador continue to hold promise. The 20-year history of these projects developed within a legal and regulatory context that is currently being overhauled. This article outlines key similarities among Newfoundland and Labrador’s original offshore petroleum projects, describing them as projects of a legal era that is drawing to a close. The article then proceeds to recount the key features of a new legal and regulatory landscape that the up-and-coming offshore petroleum projects will face. Major elements of this new legal era include: changes in supporting legal structure, shortened lead time between discovery and development, new entrants (including increased interest from major international companies), new locations, and changes to the environmental assessment regime.

Lithological identification with probabilistic distribution by the modified compositional Kriging

Lithological distribution, as a direct geological reflection, has been widely used in petroleum and geological projects. It is a challenging task to obtain a probabilistic map of lithology by compositional Kriging (CK) with limited logging core data. The predictions are usually affected by local high or low values, resulting in discontinuous boundaries and abnormal data fluctuation. To address the problem of local instability, we proposed the modified compositional Kriging (MCK) with a regulating factor, for adjusting the influence of core data to increase the accuracy and continuity of lithological probabilistic map. To obtain a reasonable result, we determined the hyper-parameter in the regulating factor’s function and a kind of seismic attribute highly correlated with logging data. The examples and the cross validation showed the effectiveness of Kriging method, and then proved the outstanding achievement of MCK through the comparison of field data’s predictions. After direct demonstration, we extracted the correlation coefficients and the regulating factor in our method to reveal more details inside the calculation. The correlation coefficients showed the variation of logging’s influence and illustrated the phenomenon that lacking of loggings can lead to deviations in the probability map. The regulating factor’s distribution showed the extra effect of MCK to increase the stability by its controlling effect. Hence, the proposed MCK method can provide a stable distribution of lithology when a suitable regulating factor has been chosen. This method is an effective tool for estimating lithological probabilistic map with limited wells.

Dennis L Buchanan and Mark H A Davis: Metals and energy finance: application of quantitative finance techniques to the evaluation of minerals, coal and petroleum projects: 2nd edition

Dennis L Buchanan and Mark H A Davis: Metals and energy finance: application of quantitative finance techniques to the evaluation of minerals, coal and petroleum projects: 2nd edition