“Vaguely Right or Precisely Wrong?”: Making Probabilistic Cost, Time, and Performance Estimates for Bluefields Appraisal

Tuesday, 15 November 2016 Read 3349 times
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Our focus is on an integrated geology-to-economics assessment of new prospects given catastrophically low availability of input data. It is a case study of Australia shallow offshore.



In agreement with a British philosopher of XIX century saying that "it is better to be vaguely right than precisely wrong", we consider all key asset evaluation parameters – geological interpretation, production volumes, costs and duration – from a probabilistic point of view. Having reviewed the advantages and shortcomings of excessively detailed models and the "bottom up" approach, we selected a more reliable high level assessment model and a "top down" approach for our study.


We analyzed a sample of 73 shallow offshore fields in Australia as analogs to the studied asset. The sample is a result of a query to the global field-by-field database that includes reserves, production profiles, financials, valuation, breakeven prices, ownership and other key metrics for oil and gas fields, discoveries and exploration licenses.


The reviewed facilities concepts include 40 steel platforms, 2 concrete gravity-based developments, 10 projects with extended reach drilling, 4 FPSO, and 17 subsea tie-backs. The aggregate CAPEX of projects in the sample over 1965–2015 is USD 99.1 billion (in nominal terms), which is commensurate with the total asset size of the Australian offshore petroleum industry.


The evaluated full-cycle parameters include facility CAPEX per unit peak, development phase duration and scheduling rules, drilling expenditures per barrel of oil equivalent, cost of exploration and appraisal wells, OPEX-to-CAPEX ratio, abandonment cost ratio,  fraction of hydrocarbons produced yearly at plateau, fraction of hydrocarbons remaining at end-of-plateau, terminal production rate, and fraction pre-drilled wells. Most of the above were found to be log-normally distributed.


The study confirmed a few rules-of-thumb used by IOCs for conducting quick-look upstream assets evaluations under uncertainty.


We also look into special aspects of decision making process relying on probabilistic assessment results, and review the risk-benefit balance for exploration assets in the overall upstream portfolio.


The presented workflow can be seamlessly extended to solving similar problems of new ventures evaluation in other petroleum basins of the world.



About Author:



Anton Sungurov holds M.Sc degree in Petroleum Geology from the geological faculty of Moscow State University (2007). From 2005 to 2011, Anton worked in Roxar as a geologist and senior geologist (2007). From 2009 to 2011, he was responsible for growing Roxar business in several regions of Russia, utilizing the experience and knowledge in the area of 3D geological modeling of oil and gas fields. During 2012, he worked as a country manager for Russia in SMT (Seismic Micro Technologies), during the period of integration into IHS Inc. Since 2013, Anton works in Rystad Energy as a Head of the Representation for Russia and FSU countries. Anton engaged into two main branches of company business, including development of global upstream field-by-field bottom-up databases covering business intelligence data, as well as specialized consulting in the global oil and gas industry.




Dmitry Surovtsev holds a graduate diploma from the Moscow State Institute of International Relations in international economic relations (1993) and a post

-graduate certificate in Banking and Finance from the London School of Economics and Political Sciences (1997).

His career started in 1993 as a lecturer assistant at International Petroleum Business School MGIMO. In 1997-98 he works in London as commercial coordinator with Union Texas Petroleum, an independent oil & gas producer. In 1998-99 he heads a section in Geology and Reserves Diversification Department at YUKOS doing upstream assets acquisitions and divestitures. From 1999 to 2004 Dmitry works for Agip in Aksai (Kazakhstan) as a commercial operations manager for KPO b.v. where he was in charge for commercial readiness and commissioning of Karachaganak condensate supplies via Caspian Pipeline Consortium.

In 2004 Dmitry joins CIFAL, a French consulting firm where he oversees the preparation of Competent Person's reports on upstream assets in Russia, CIS and worldwide. In 2010 Dmitry moved to ARMZ, an uranium producing arm of Rosatom state concern as a head of representation in Kazakhstan, where he was responsible for closing the acquisition of Uranium One (Canada) and a post-merger integration of six JVs. In 2012-13 Dmitry works in Norway as a chief petroleum economist of Geoknowledge AS leading the development of global fiscal templates library and promoting company software on CIS markets. Since 2013 Dmitry has been working in Moscow as the head of GeoX business in Russia and Central Asia with Schlumberger Software Integrated Solutions.



 Dmitry is a renowned expert in the field of probabilistic risk, resource, and value  assessment of exploration assets as well as exploration decision support. He is the author and co-author of more than 20 conference presentations and publications in Russian and international peer-reviewed journals, including three SPE papers. Dmitry also regularly presents at SPE Moscow section meetings.





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