me the data" is a key phrase I've used for three decades in making
technical evaluations on exploration prospects that lead to business
decisions. Exploration teams must be aware of all available technical
information and thoroughly "know the data" when opportunities are
studied, assessed and added to a company's E&P portfolio.
part of a risk analysis process is to inventory and assemble all
the available geologic, geophysical and engineering data in the
area — including both regional data and prospect specific data.
the "big picture" concerning structure, reservoir and hydrocarbon
charge. Only then should you focus on specific prospective area.
Regional knowledge often requires use of paper documents (yes, paper
data is still important!), such as long regional seismic lines and
well log correlations are best made using paper logs. Workstation
technology — especially visualization — is a must for detail prospect
studies and selecting drill sites.
to dismiss old seismic data as being worthless in an interpretation
of a prospect area. But regional 2-D seismic is important in establishing
the geologic framework for a prospect. After new data is acquired
and studied, old data often can be re-interpreted to fill in gaps
in new data. And sometimes the old seismic data processing is better
than new data processing (need to ask why?).
the data is inventoried and assembled, decisions can be made about
the usefulness of all the data in making a new interpretation.
phrase I like is "use all the appropriate technical tools" to study
and risk exploration prospects.
words, use an integrated approach.
technical review of a prospect should be on geologic merits, followed
by detail geophysical studies. Then combine the geology and geophysics,
including rock physics, for an integrated interpretation and risk
where many wells are present, engineering data such as production
history and ultimate recovery per well is required.
geophysical prospects end up as failures.
gimmick words such as "an amplitude" or "AVO anomaly" are meaningless
without additional information. Interpreters sometimes use these
words to attract management attention to "get a well drilled," but
there is no "silver bullet" in oil and gas exploration.
data and other technologies need to be understood before making
a detail interpretation of a seismic amplitude anomaly. The amplitude
and/or AVO anomaly must be studied, risked and presented to management
in the total context of the geology as well as the adequacy of the
seismic and rock physics data.
staff and management must agree on definition of "Pg" — that is,
the probability of geologic success, or flowable hydrocarbons with
oil and gas reserve potential greater than the minimum HC-volumes
(often called P99 reserves case).
Pg is not
the probability of a most likely reserve; it's not the probability
of commercial success. This sounds easy to understand, but the flowable
hydrocarbons definition of Pg is often misunderstood and misused.
The probability of commercial success (Pc) is a second step in the
risking process and is accomplished by truncating the parent geological
reserve distribution with the minimum commercial reserve size.
to say, "use the entire range of Pg" in risk analysis studies. Almost
pro forma, explorers tend to use 10 percent to 15 percent for high-risk
prospects; in reality, however, most should be 1 percent to 5 percent.
other hand, good prospects in a known petroliferous area of great
geologic and geophysical knowledge and experience are often routinely
given Pg of 50 percent, whereas perhaps their Pg should be more
properly estimated at 70 to 80 percent.
about the portfolio" is another useful phrase.
portfolio is the most important product of geological/geophysical
studies. The portfolio is always a moving target, as new prospects
are constantly being added to the list. How many companies have
periodic portfolio reviews where prospects are re-ranked, with some
moving up on the list to be drilled, some eliminated from the list
and some sent back to the technical staff for additional studies
(more seismic, more advanced processing, rock physics studies)?
interpreters, including myself, make the mistake of stating, "this
prospect is good enough to drill now." Compared to what? The portfolio!
It is important
to use experienced geoscientists as members of a peer review group
or prospect review committee to consider alternative interpretations
of the geologic and geophysical data and "normalize" the Pg estimates
made by technical staff. An experienced staff plays a valuable role
in the "check and balance" process of prospects in an exploration
of a systematic risk analysis process is improving the quality of
the exploration portfolio, so the economic success from drilling
a number of prospects can be much improved over past performance.
Business decisions sometimes are influenced by other factors, such
as lease expiration date, the desire to drill wells for new information
in rank wildcat areas and strategic reasons. But ranking of opportunities
for the exploration portfolio must be kept a technical process.
companies have systematic "lookback" reviews (often called post-mortems)
after drilling a number of prospects?
of dry holes, though painful, is an especially good learning exercise.
Continuous learning is a prerequisite for a continuously improving
exploration portfolio and increasing economic success.
A key phrase
here is: "What did we learn from this well?"
often need to be reminded of the risk analysis process in the heat
and hurry of exploration, as we all easily drift away from these
principles of portfolio management that are needed for making good
data + Integrated technical studies + Technology applications +
Systematic risk analysis + Portfolio management + Lookbacks = GOOD
from Pete on this month's business reading recommendation: Against
the Gods, by Peter Bernstein (1996), Wiley.
an excellent review of the basis and evolution of various mathematical
and financial techniques that allow us to reduce economic uncertainty
and manage financial risk.
you'll like it!