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Title: Risk management in international petroleum ventures: Ideas from a Hedberg Conference

Journal Article · · AAPG Bulletin
OSTI ID:426167
 [1]
  1. Texaco E&P Technology Dept., Houston, TX (United States)

The purpose of this paper is to review the ideas presented at the October 1995 Hedberg Conference concerning decision and risk analysis (DRA) with respect to petroleum exploration in both domestic and international arenas. Many types of analyses were discussed. All methods are applicable in some circumstances, and many are applicable in most circumstances. What was particularly surprising was how frequently most presenters addressed risk management in terms of the same basic elements: the geologic probability of success; the commercial probability of success; the uncertainty of the size of the hydrocarbon resource, if discovered; and the value of the hydrocarbon resource. Most methods seemed to focus on the petroleum system components to define geologic chance, a probabilistic volumetric reserve calculation to devine the resource size uncertainty, and expected net present value to define value. New valuation methods included option pricing models applied to petroleum ventures and risk aversion techniques that define the utility function in terms of exponential, hyperbolic, and user-defined curves. Several presenters defined the risk management process in terms of (1) considering alternative opportunities, (2) predicting variables, (3) evaluating the sensitivities, (4) calculating the value of additional information, (5) deciding on investments relative to other opportunities in the portfolio, and (6) looking back on the results using project reviews and annual performance assessments. Other topics of interest included {open_quotes}efficient frontier{close_quotes} methods of balancing risk and reward, portfolio optimization, and the appropriate level in the organization to make project selection decisions.

OSTI ID:
426167
Journal Information:
AAPG Bulletin, Vol. 80, Issue 12; Other Information: PBD: Dec 1996
Country of Publication:
United States
Language:
English