Use of {open_quotes}value of information{close_quotes} concept in justification and ranking of subsurface appraisal
The {open_quotes}value of information{close_quotes} (VOI) concept can be applied to subsurface appraisal in petroleum exploration and production to provide an auditable, consistent criterion for justification of such activity. Based on this concept the {open_quotes}value{close_quotes} of subsurface appraisal can be defined as the difference in expected project (monetary) value with and without appraisal. Comparison of this value with the net appraisal cost provides a pragmatic decision tool for decision-making in subsurface appraisal. If the value is greater than the appraisal cost the appraisal is justified, otherwise it is not. Quantification of underlying uncertainty in probability form, and economic evaluation of alternative development scenarios as impacted by the uncertainty, are involved in the methodology. By extension of the concept, VOI can also be used as a ranking tool in a portfolio of subsurface appraisal activities. {open_quotes}Partial information{close_quotes} and unreliable information, both of which are common in practice, reduce the {open_quotes}value{close_quotes} of subsurface appraisal, and realistic evaluation of subsurface appraisal must take both of these effects into account. The VOI approach to subsurface appraisal helps avoid under- and overappraisal and could have a significant impact on upstream economics.
- OSTI ID:
- 468251
- Report Number(s):
- CONF-961003-; TRN: 96:006577-0056
- Resource Relation:
- Conference: 71. annual technical conference and exhibition of the Society of Petroleum Engineers, Denver, CO (United States), 6-9 Oct 1996; Other Information: PBD: 1996; Related Information: Is Part Of 1996 SPE annual technical conference and exhibition: Production operations and engineering/general; PB: 892 p.
- Country of Publication:
- United States
- Language:
- English
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