Campbell showed us the power of myths: They inform, guide and
sustain us in key functions of our lives — relationships, spirituality
The petroleum explorationist’s version of the Hero
Journey is the “Prospector Myth.” We are inspired by the image of
the courageous lone prospector who struggles against Mother Nature,
skeptical associates and financial hardships before succeeding,
finally, through persistence, faith and luck to achieve vindication,
fame and wealth. Justifiably, we reserve our greatest respect for
such people in our Industry.
Petroleum exploration ventures are characterized
by daunting uncertainty, which can be reduced (but not eliminated)
through costly geotechnology and seasoned judgment. Prospectors
invest intense physical and mental energy, patching together possible
portraits of the subsurface, then selling and defending the economic
ventures that arise from their imagination and labor.
Because exploration is dominated by subjectivity
and uncertainty, it invites the exercise of intuition. And when
geotechnical intuition is rewarded with success, the prospector’s
ego is affirmed.
Discovery is heady stuff — we cherish the Prospector
Consequently, it is not surprising that most explorers
are over-optimistic. After all, such true believers hardly could
be expected to be objective about their prospects! The Prospector
Myth is the primary reason why explorationists persistently overestimate
the reserve potential of their prospects.
But the process by which oil and gas prospects are translated
into economic ventures also contributes to over-optimism.
In the early days of exploration, basins were lightly
drilled and many giant fields awaited discovery. Many prospectors
were indeed solitary individuals or small firms. Their investors
were private investors and corporations who were more or less knowledgeable
about petroleum exploration. Caveat emptor was the prevailing ethic,
because subscribing sponsors were expected to judge the true merit
of each deal.
So the operative criterion was to sell the deal,
to get the well drilled. Have faith: Success is bound to eventuate,
given persistence and enough trials — remember, one success will
carry a dozen failures. Promotion trumped professionalism.
Unfortunately, this same tradition still operates
in some offices (even throughout whole companies) despite the fact
that the professional employees of such publicly owned firms are
“selling their deals” to their own managements — and thus to their
Since about 1986, things have been changing — especially
among public corporations that participate in many ventures each
year, and thus are actually managing a portfolio of risk ventures.
They see exploration as a repeated-trials game. Scientific objectivity,
professional ethics, the declining resource base and the need for
delivery of promised performance together collided with the Prospector
Myth and its attendant salesmanship.
Even so, influenced by the Prospector Myth, our industry
wasted a lot of money on undiscriminating frontier exploration from
the late 1970s into the early 1990s. Shell, Mobil and Amoco each
reported that frontier exploration in this period destroyed value
rather than creating it!
We lost credibility with directors, and we lost money
for our stockholders.
By the 1990s, exploration was becoming global in
scope and needed badly to become more efficient:
- Seismic breakthroughs improved our performance
- Deep-water technologies opened up new
- Drilling and completion advances made
mediocre reservoirs commercial.
- Consistent, objective, probabilistic
procedures for assessing prospect reserve potential and chance
of success began to constrain the optimistic exuberances indulged
by intuition and the Prospector Myth.
Today, most substantial companies consider inventories
of many projects from which they select their annual drilling portfolios,
comprising those prospects that together offer the best chance of
achieving key corporate goals. We try to manage exploration by managing
the exploration portfolio.
With this concept comes the realization that each
opportunity must be assessed consistently and objectively. The inherent
uncertainties can be dealt with using geotechnology and geostatistics.
What kills the portfolio is bias, which overvalues
some prospects, so the value of the portfolio is not optimized.
Unconstrained, the Prospector Myth short-changes the stockholder.
Nevertheless, many experienced prospectors still
find it difficult to accept that systematic portfolio management
selects a better mix of prospects than does their personal intuition.
So, as professional explorationists, we have a dilemma
— reconciling the energy and inspiration generated by the Prospector
Myth with the systematic probabilistic evaluation of prospects that
enables the portfolio to deliver what was promised to the stockholders.
Pragmatic measures employed commonly in the past
proved to be ineffective:
- Assigning engineers to be “economic gatekeepers”
for exploration projects.
- Arbitrarily elevating the discount rate
to compensate for risk.
- Employing “Hidden Hurdles” in higher
levels of the decision-chain to screen out “inferior” projects.
Trouble was, prospectors became adept at sniffing
out such screening measures, and devising ingenious ways to generate
geotechnical numbers adequate to get their prospects drilled. Explorationists
in top management exercised their own privileged intuition in the
prospect selection process. And since almost no one kept systematic
records documenting actual results (compared with geotechnical predictions),
everyone in the chain — prospectors, engineers, local managers,
and senior executives — could avoid facing the consequences of
widespread systematic bias!
But we really are getting better. Professional explorationists
now routinely accept two responsibilities:
- Finding oil and gas prospects.
- Measuring them objectively.
We routinely examine our mistakes and calibrate our
predictions. The manifest need for objectivity stimulates a long
overdue concern about professionalism.
Some prospectors today mourn the diminished influence
of the Prospector Myth. But increasingly, astute explorers acknowledge
the need for increased exploration efficiency as the global resource
base continues to shrink.
Systematic risk analysis must go hand-in-hand with
But the Prospector Myth stills lingers, and properly
so, if it can inspire our courage, persistence and imagination in
petroleum exploration, without biasing our prospect evaluations.
Our ongoing challenge is to harness the energy of
the Prospector Myth without compromising our scientific integrity
and business objectivity.
Recommended Reading: Wealth and Democracy, by Kevin
Phillips (2002, Broadway Books). What are the necessary and appropriate
constraints that democratic societies should place on the functioning
free market so as to balance its benefits against the excesses that
can harm an open society? A thought-provoking, fact-loaded book
that forces serious evaluation about limits on the free market.
Read it, you’ll like it!