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AAPG Bulletin


AAPG Bulletin, V. 92, No. 10 (October 2008), P. 1251-1261.

Copyright copy2008. The American Association of Petroleum Geologists. All rights reserved.


Handling risk and uncertainty in petroleum exploration and asset management: An overview

P. Craig Smalley,1 Stephen H. Begg,2 Michael Naylor,3 Sigrunn Johnsen,4 Antonella Godi5

1BP Exploration, Chertsey Road, Sunbury on Thames, Middlesex TW16 7LN, United Kingdom; [email protected]
2Australian School of Petroleum, University of Adelaide, SA 5005, Australia; [email protected]
3Shell Exploration and Production, Kessler Park 1, 2288 GS Rijswijk ZH, Netherlands; [email protected]
4RWE Dea AG, North Africa-Middle East, Uberseering 40, 22297 Hamburg, Germany; [email protected]
5Eni Exploration and Production, Via Emilia 1, 20097 San Donato Milanese, Italy; [email protected]


Uncertainties, and the business risks they generate, touch all aspects of the oil and gas industry. Being able to understand and quantify the risks and uncertainties, and knowing how to manage them effectively, contributes to well-founded business decisions, protects the value of projects and assets, and maximizes the value of company project portfolios. This article shows how different combinations of risks and uncertainties become relevant through the life cycle of an oil or gas field from exploration (main risk: absence of commercially viable hydrocarbons) through appraisal and development (main risks: aspects of effective project delivery) to field operation (main risks: delivery of promised reserves and value). This corresponds to a change in the relevance of uncertainties, which are mainly related to static volumetric issues early on, with dynamic factors coming to dominate later in field life. The specific risks related to individual assets need to be managed using mitigations or contingencies. By contrast, the overall risk exposure of the company (comprising many assets and potential projects) is managed by optimizing the portfolio of opportunities that are to be actioned.

The 10 articles that follow in this thematic set cover risk and uncertainty across all stages of field life and from individual fields to portfolios. The articles discuss some of the latest technologies, modeling approaches, philosophies, and communication styles that can help make effective decisions to minimize risk exposure and maximize project and asset value.

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