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Most explorationists follow one of two approaches when analyzing risk. (a) Application of single probability estimates combined with unique reserve potentials. Often, development potential is incorporated incorrectly on a no-risk basis. (b) Detailed analysis using, for example, Monte Carlo approaches, requiring an abundance of data and computer processing.
The method presented here combines advantages of both approaches, and permits rapid calculations using data routinely available.
Before a prospect is drilled, precise reserve volumes are unknown. However, the likely range of reserves should be predictable with some certainty. The explorationist should also be able to estimate associated ranges of probabilities by careful matching with previous history in the area (or analogous area) combined with specific geologic conditions unique to the prospect.
Reserve and probability ranges are estimated for the initial exploratory well, and presuming success, for subsequent development wells. Examples are: 2% probability of 200,000 bbl of oil, maximum; 25% probability of 10,000 bbl of oil, exploratory; 70% probability of 10,000 bbl of oil, development (latter 2 are economic limits).
Data are plotted on cumulative probability logarithmic plots because reserve estimates, like field size distributions, should be logarithmically distributed. Expected volume reserves (initial well and development wells) are incorporated with costs and prices, using Bayesian principals, to predict economic outcome before any drilling commences.
Analytic procedures are described, together with predictions of several exploratory programs compared with actual outcome. If the prospect group is sufficiently large, pre-drilling predictions are generally within 30% of actual results.
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