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Title: Dealing with risk and uncertainty in exploration: how can we improve

Abstract

Risk and uncertainty are inherent aspects of investing in petroleum exploration ventures. The tasks in serial exploration decision making are to be consistent in dealing with risk and uncertainty, and to perceive uncertainty realistically, reducing it where possible. Many biases exist in the mental processes by which most people make risk decisions. These biases tend to produce significant inconsistencies. Consideration of such behavioral patterns, use of quantified risk-aversion methods, and periodic review of investment decisions all help to optimize risk decision making. Target-size estimates tend to range widely, and they seem to be accurate only within +/- 1 order of magnitude of the actual size of discovered accumulations. Also, target-size forecasts tend to be significantly over optimistic. Estimates of discovery probability also tend to be over optimistic, because they commonly do not distinguish between noncommercial and commercial new-field wildcats. In addition, analysis of different geologic risk factors (structure, reservoir, trap, and hydrocarbon charge) may help improve perception of discovery probability, but explorationists commonly do not realize which geologic factor actually constitutes the primary exploration hazard for a given prospect. Cost-of-finding estimates seem to show the smallest variation in predictive accuracy. Exploratory performance can be improved through constructive postmortem analysis ofmore » geotechnical predictions, review of exploration tactics versus declared strategy, and year-to-year comparison of exploration performance parameters. 15 figures, 4 tables.« less

Authors:
Publication Date:
Research Org.:
Telegraph Exploration Inc., TX
OSTI Identifier:
6438065
Resource Type:
Journal Article
Journal Name:
Am. Assoc. Pet. Geol., Bull.; (United States)
Additional Journal Information:
Journal Volume: 71:1
Country of Publication:
United States
Language:
English
Subject:
02 PETROLEUM; PETROLEUM DEPOSITS; EXPLORATION; PETROLEUM INDUSTRY; ECONOMIC ANALYSIS; RISK ASSESSMENT; ECONOMICS; GEOLOGIC DEPOSITS; INDUSTRY; MINERAL RESOURCES; RESOURCES; 020200* - Petroleum- Reserves, Geology, & Exploration

Citation Formats

Rose, P R. Dealing with risk and uncertainty in exploration: how can we improve. United States: N. p., 1987. Web.
Rose, P R. Dealing with risk and uncertainty in exploration: how can we improve. United States.
Rose, P R. Thu . "Dealing with risk and uncertainty in exploration: how can we improve". United States.
@article{osti_6438065,
title = {Dealing with risk and uncertainty in exploration: how can we improve},
author = {Rose, P R},
abstractNote = {Risk and uncertainty are inherent aspects of investing in petroleum exploration ventures. The tasks in serial exploration decision making are to be consistent in dealing with risk and uncertainty, and to perceive uncertainty realistically, reducing it where possible. Many biases exist in the mental processes by which most people make risk decisions. These biases tend to produce significant inconsistencies. Consideration of such behavioral patterns, use of quantified risk-aversion methods, and periodic review of investment decisions all help to optimize risk decision making. Target-size estimates tend to range widely, and they seem to be accurate only within +/- 1 order of magnitude of the actual size of discovered accumulations. Also, target-size forecasts tend to be significantly over optimistic. Estimates of discovery probability also tend to be over optimistic, because they commonly do not distinguish between noncommercial and commercial new-field wildcats. In addition, analysis of different geologic risk factors (structure, reservoir, trap, and hydrocarbon charge) may help improve perception of discovery probability, but explorationists commonly do not realize which geologic factor actually constitutes the primary exploration hazard for a given prospect. Cost-of-finding estimates seem to show the smallest variation in predictive accuracy. Exploratory performance can be improved through constructive postmortem analysis of geotechnical predictions, review of exploration tactics versus declared strategy, and year-to-year comparison of exploration performance parameters. 15 figures, 4 tables.},
doi = {},
url = {https://www.osti.gov/biblio/6438065}, journal = {Am. Assoc. Pet. Geol., Bull.; (United States)},
number = ,
volume = 71:1,
place = {United States},
year = {1987},
month = {1}
}