Another year on and we are still, unsurprisingly, facing the same challenges—increased environment emissions and decommissioning regulations, more localization requirements, increasingly complex projects with new permutations of value chains from the wellhead to consumption, and continually increasing pressures to improve performance with limited resources.
This year, my selection of papers has a strong thematic overlap with last year. Honestly, that is not by design, but it clearly shows where the interest lies in the economics, the Petroleum Resources Management System (PRMS), and management decision-making.
Considering my day job as an acquisitions and divestment adviser, I thought to include a paper that tries to raise the bar for economic analysis of asset transactions. Paper SPE 221033 takes the normal deterministic analysis of a deal and includes a Monte Carlo overlay on the normal model. This has been an available approach since I joined the industry in the late ’80s, but it never fails to surprise me how little probabilistic analysis (Monte Carlo) and its big brother, decision analysis, is undertaken in our industry given the relatively minor effort to undertake the analysis against the enormous sums we invest and the potential learnings and investment optimization that can be undertaken for relatively limited time and effort.
My second selection, paper SPE 215224, tries to highlight what is commonly discussed around the coffee machine regarding how estimated ultimate recovery may evolve over time. As military strategists have long said, “The plan of attack rarely survives first contact with the enemy.” We know the basic concept that the P10–90 range should converge on the central estimate as we acquire more data, but does that really happen? We hear anecdotally of examples that defy that logic to a startling degree, and this paper discusses a couple of cases that remind us not to be complacent.
My last choice, paper SPE 219309, inevitably looks at the trend, and oftentimes requirement, of considering carbon management. I have had little to do with carbon capture, use, and storage projects directly, but the rise in regulations is making this activity more and more common, and we are seeing obligations and guidance appear in more regimes, such as the recent Indonesian production-sharing contract drafts. It is necessary for producers to introduce internal systems and guidance to evaluate the additional effect of carbon regulations and investment decisions on conventional hydrocarbon projects, and this paper illustrates some of the additional thinking that is required.
Suggested additional reading references papers that discuss PRMS Contingent Resource subclassification disclosure and the hidden commercial information therein, an example of including subsurface uncertainty in project economics, and an approach to deriving failure occurrence for production wells.
This Month’s Technical Papers
Study Illustrates Evolution of EUR Estimates Over Project Life Cycle
Study of Merger Highlights Use of Probabilistic Financial Analysis
Study Examines Economics of CCUS Projects in Conjunction With Large Offshore Gas Projects
Recommended Additional Reading
SPE 215462 The Contingent Resources Class: Nondifferentiation of Contingent Resources and Its Implications by Katarina Van Der Haar, RISC
OTC 32804 Integration of Subsurface Uncertainty With Project Economics Using Probabilistic Risk Modeling and Global Benchmarking of Oil and Gas Projects by A.N. Bansal, Oil India, et al.
OTC 32723 Probabilistic Failure Occurrence Estimation Based on Survival Analysis Modeling: First Approach by I.G.P. Vianna, Halliburton, et al.
David Gurney, SPE, is an acquisitions and divestments adviser for the Kuwait Foreign Petroleum Exploration Company. He has worked in the upstream oil and gas sector for 36 years, starting as a geophysicist with BP. Gurney has worked for a variety of operating and consulting companies, including BG, PricewaterhouseCoopers, and Mubadala. His areas of interest include economics, commercial analysis of gas and liquefied natural gas, and transactions for the major hydrocarbon provinces, especially southeast Asia. Gurney is a member of the JPT Editorial Review Board and has chaired and served on many SPE workshop committees, mostly for reserves and economics, over the past 20 years. He holds a BS degree in geology from St. Andrews University, an MS degree in exploration geophysics from Leeds University, and an MBA degree from Cranfield University.