Reward and Uncertainty in Exploration Programs1
Published:January 01, 1973
The attractiveness of a petroleum exploration program depends on the expected return and the associated risk. Previous analyses of drilling programs have dealt with particular aspects of uncertainty. The variable which has received the most attention has been size of reservoirs. Various skewed probability density functions have proved consistent with empirical observation. Estimates of the expected value and variance of this variable have been casually interpreted as measures of the economic reward and the degree of risk, respectively, of specific exploration programs. The size of reservoir found, however, is only one aspect of the uncertainty in exploratory drilling. Among the other variables which have an important bearing on the economics of the program are the probability of making a discovery, the depth of the producing formation, and the productivity of the wells. The possible stochastic descriptions of the most significant variables have combined effects on the attractiveness of a venture.
Figures & Tables
Following the discovery of Prudhoe Bay oil field in 1968, much attention was turned to the Arctic in the search for giant hydrocarbon accumulations. The Soviets had already proved giant reserves in their West Siberian Basin, and exploration was moving ahead quickly in the Canadian Arctic. Plans were drawn up for an AAPG Symposium on Arctic Geology and held in February 1971. Papers were selected from the Symposium for this publication and cover seven topical groupings: Regional Arctic Geology of Canada, Regional Arctic Geology of the Nordic Countries, Regional Arctic Geology of the USSR, Regional Arctic Geology of Alaska, Comparisons in the North Atlantic Borders, Evolution of the Arctic Ocean Basin, and Economics of Petroleum Exploration and Production in the Arctic.