ABSTRACT

The most difficult and crucial decision in petroleum exploration is not which prospect to drill, but rather, which new play to enter. Such a decision, whether ultimately profitable or not, commits the Organization to years of involvement, expenditures of $millions, and hundreds of man-years of effort. Even though uncertainties and risk are high, organizations commonly make the new-play decision in a disjointed, non-analytic, even superficial way. The economic consequences of a bad play choice can be disastrous.

Using established principles of prospect risk analysis, modern petroleum exploration organizations routinely assign economic value to individual prospects, but they actually operate via exploration, programs in plays and trends. Accordingly, the prospect is the economic unit of exploration, whereas the play is the operational unit.

Plays can be successfully analyzed as full-cycle economic risk ventures, however, using many principles of prospect risk analysis. Economic measures such as Expected Present Value, DCFROR, etc. apply equally to plays or prospects. The predicted field-size distribution of the play is analogous to the forecast prospect reserves distribution. Economic truncation applies to both. Variance of play reserves is usually much greater than for prospect reserves. Geologic chance factors such as P _reservoir P _generation, etc., must be distinguished as independent or shared among prospects in the play, so they should be defined so as to apply as well to the play as to its constituent prospects. They are analogous to multiple objectives on a prospect, and are handled differently in performing the risk analysis.

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