Elsevier S & T

Economic Risk in Hydrocarbon Exploration

Lerche, Ian; MacKay, John A.

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Table of contents
  • Cover
  • Contentsv
  • Prefacexiii
  • CHAPTER 1. INTRODUCTION1
  • I. Overview1
  • II. Geologic Uncertainty3
  • III. Some Statistical Concerns5
  • IV. Geotechnical Estimates8
  • V. Economic Estimates9
  • VI. Risk Estimates10
  • VII. Practical Concerns12
  • CHAPTER 2. RISK-ADJUSTED VALUE AND WORKING INTEREST17
  • I. Introduction17
  • II. General Methods of Constructing Working Interest and RAV Formulas18
  • III. A Numerical Illustration23
  • IV. Negative Expected Values28
  • V. Conclusions30
  • CHAPTER 3. UNCERTAINTY AND PROBABILITY ESTIMATES FOR RISK-ADJUSTED VALUES AND WORKING INTEREST31
  • I. Introduction31
  • II. RAV Estimates with Uncertainties33
  • III. Discussion and Conclusions51
  • CHAPTER 4. PORTFOLIO BALANCING AND RISK-ADJUSTED VALUES UNDER CONSTRAINED BUDGET CONDITIONS55
  • I. Introduction55
  • II. Deterministic Portfolio Balancing56
  • III. Numerical Illustrations with Fixed Parameters: Comparison of Three Opportunities64
  • IV. Probabilistic Portfolio Balancing66
  • V. Numerical Illustrations with Variable Parameters68
  • VI. Comparison of Parabolic and Cozzolino RAV Results78
  • VII. Discussion and Conclusions83
  • VIII. Appendix: Weighted RAV Optimization85
  • CHAPTER 5. SIMILARITY, DEPENDENCE , AND CORRELATlON CONSIDERATIONS FOR RISK-ADJUSTED VALUES AND WORK87
  • I. Introduction87
  • II. General Arguments89
  • III. Correlated Behavior93
  • IV. Numerical Illustrations104
  • V. Discussion and Conclusions133
  • VI. Appendix: Cumulative Depth Considerations for a Single Opportunity135
  • CHAPTER 6. MODIFICATIONS TO RISK AVERSION IN HIGH GAIN SITUATIONS137
  • I. Introduction137
  • II. Modifications to the Cozzolino RAV Formula140
  • III. Discussion and Conclusions158
  • IV. Appendix A: Modifying Risk Formulas159
  • V. Appendix B: Modifications to the Parabolic Risk Aversion Formula161
  • CHAPTER 7. CORPORATE FUNDING REQUESTS, FIXED BUDGETS, AND COST BALANCING163
  • I. Introduction163
  • II. Specific Project Requests164
  • III. General Project Requests167
  • IV. Multiple Requests, Fixed Budgets, and Funding Strategies172
  • V. Appendix: Approximate Probability Behavior for B < Bo182
  • CHAPTER 8. MAXIMIZING OIL FIELD PROFIT IN THE FACE OF UNCERTAINTY187
  • I. Introduction187
  • II. Nind’s Formula for Present-Day Worth188
  • III. Probability and Relative Importance193
  • IV. Numerical Example194
  • V. Discussion and Conclusions208
  • CHAPTER 9. THE VALUE OF ADDED INFORMATION: CATEGORIES OF WORTH211
  • I. Introduction211
  • II. Increased Expected Value and Decreased Uncertainty213
  • III. Constant or Decreased Expected Value and Decreased Uncertainty220
  • IV. Unanticipated Benefits of Data Acquisition225
  • CHAPTER 10. COUNTING SUCCESSES AND BIDDING STATISTICS ANALYSES227
  • I. Introduction227
  • II. Corporate Successes and Failures: Simpson’s Paradox228
  • III. Bid Analysis and Inferred Corporate Strategies for Lease Sale232
  • IV. Block Statistics for Lease Sale 157 and Bid Ratios242
  • V. What Is a Bid Worth?249
  • CHAPTER 11. ECONOMIC MODEL UNCERTAINTIES267
  • I. Introduction267
  • II. A Simple Production Model268
  • III. A Simple Economic Model270
  • IV. Combined Production and Economic Models274
  • V. Minimum Average Selling Price275
  • VI. Probable Profit Including Uncertainties276
  • VII. Numerical Illustrations278
  • CHAPTER 12. BAYESIAN UPDATING OF AN OPPORTUNITY281
  • I. Introduction281
  • II. General Concepts of Bayesian Updating282
  • III. Numerical Illustrations283
  • IV. Oil Pipeline Spills294
  • CHAPTER 13. OPTIONS IN EXPLORATION RISK ANALYSIS301
  • I. Introduction301
  • II. An Example of Current Option Value and Future Decisions303
  • III. Option Value Based on Available Information Only306
  • IV. Option Values Based on Future Models342
  • V. Appendix A: Including Option Value in Costs345
  • VI. Appendix B: Portfolio Balancing Using the Cozzolino Formula347
  • VII. Appendix C: Portfolio Balancing with Conservative Optioning348
  • Epilogue351
  • Appendix: Numerical Methods and Spreadsheets353
  • Bibliography393
  • Index401
Book details
  • Vendor Elsevier S & T
  • SKU 9780124441651
  • ISBN-13 9780080505008
  • Author Lerche, Ian; MacKay, John A.
  • Category Technology & Engineering
  • Subject Industrial Technology

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Description eBook delivery & access Reviews
Economic Risk in Hydrocarbon Exploration provides a total framework for assessing the uncertainties associated with exploration risk from beginning to end. Numerous examples with accompanying microcomputer algorithms illustrate how to quantitatively approach economic risk. The text compares detailed assumptions and models of economic risk, and presents numerical examples throughout to facilitate hands-on calculations using popular spread-sheet packages on personal computers.

Key Features
* Covers economic risk from exploration through production models
* Brings methods to a level where all can be done on a PC
* Analyzes numerical examples from the real world
* Removes "mystery" from how economics is done
* Addresses assumptions in models and shows how they influence projections