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Retrospection on 30 Years of E&P Risk Analysis

Peter Rose
[email protected]

Retrospection on 30 years of professional involvement in the evolution and application of risk analysis principles to petroleum exploration and development convinces the writer that cognitive biases are much more prevalent, influential, and persistent than pioneers in this field originally supposed (and current E&P professionals are willing to admit). Indeed, all of the analytical remedies, tools, and 'fixes' developed since 1980 only serve to detect and constrain powerful endemic human cognitive biases, such as: Confirmation Bias (ignoring data that don't fit our theories); Overconfidence (our predictive ranges are significantly too narrow); Representativeness (use of insignificant or false analogs); Motivational Bias (personal self-interest influences technical estimates) Well-known procedural and statistical tools adopted widely since 1980 highlight and constrain provisional estimates that are unrealistic, such as: Performance Tracking; Reality and Plausibility Checks; Probabilistic rather than Deterministic Estimating; Application of the Lognormal Expectation to Geotechnical Parameters; Implementation of 'Group Wisdom' This experienced view concurs with the landmark work of Nobel Prize-winners Amos Tversky and Daniel Kahneman in the field of Behavioral Economics, summarized in Kahneman's 2011 book 'Thinking Fast and Slow'. They showed that such biases lead to poor decision-making in business as well as personal affairs, with serious financial consequences. Our most useful teaching exercises dramatically demonstrate the prevalence and power of cognitive biases to E&P professionals and decision makers.

AAPG Search and Discovery Article #90167©2013 GCAGS and GCSSEPM 63rd Annual Convention, New Orleans, Louisiana, October 6-8, 2013