Understanding common risk analysis problems leads to better E and P decisions
- Smith (Marvin B.), Black Hawk, CO (United States)
Many petroleum geologists, engineers and managers who have been introduced to petroleum risk analysis doubt that probability theory actually works in practice. Discovery probability estimates for exploration prospects always seem to be more optimistic than after-the-fact results. In general, probability estimates seem to be plucked from the air without any objective basis. Because of subtleties in probability theories, errors may result in applying risk analysis to real problems. Four examples have been selected to illustrate how misunderstanding in applying risk analysis may lead to incorrect decisions. Examples 1 and 2 show how falsely assuming statistical independence distorts probability calculations. Example 1 and 2 show how falsely assuming statistical independence distorts probability calculations. Example 3 discusses problems with related variable using the Monte Carlo method. Example 4 shows how subsurface data yields a probability value that is superior to a simple statistical estimate. The potential mistakes in the following examples would go unnoticed in analyses in most companies. Lack of objectivity and flawed theory would be blamed when fault actually would lies with incorrect application of basic probability principles.
- OSTI ID:
- 6782710
- Journal Information:
- World Oil; (United States), Vol. 215:10; ISSN 0043-8790
- Country of Publication:
- United States
- Language:
- English
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