Value of Information (VOI) Concept to Systematically Justify Observation and Appraisal Wells

Abstract

Oil and gas industry is a world full of uncertainties which covers a wide spectrum starting from reservoir parameters (static, dynamic) as well as optimal development options and operating conditions. Business decision (whether to execute project, size of development, etc) often cannot be done amidst uncertainties so that activities to reduce them deemed necessary to ensure the success of a project. It was thought previously that exponentially growing computing power and data storage capacity we have in this era will easily tackle the job but it was found out that these facts just add complexities to the existing problem. We tend to incorporate more data and variables with uncertainties so that realistic results can be obtained. Subsurface project is a classic examples of how data can easily grow out and quickly become unmanageable for the purpose of decision making process. Uncertainties can arise here and there requiring reduction by the use of data gathering. Surveillance technologies also improve significantly giving more options and add motivation to the field operator to pursue a run. In order to justify this extra cost, is it a necessity or a mere ‘nice to know’. Therefore a robust flow process need to be established in order to communicate effectively with the stake holder for the decision making process. Decision whether to conduct activities such as drilling appraisal well, placing an observation wells, shoot a seismic survey, obtain core samples, conduct PVT often difficult to make because they typically involve relatively high cost compared to the project size and remaining reserves. There is a point where cost of additional information (drill new wells, seismic survey, etc.) exceed its benefits. VOI analysis provides structured way to quantify whether a information gathering activity is wasteful or worth the cost. Therefore at the end it will improve the economics of the project. This paper demonstrate typical method to address this problem thru the use of VOI (Value of Information) concept with example from appraisal and observation wells. This method involves translating probabilistic production forecast of the project into economics parameters such as DPI, NPV, pay out time. A decision tree is constructed and examined then a node in the tree then is selected to represent the activities of gathering additional information. The calculation is performed to obtain value of the information which then is compared to the cost of the activity to determine whether it is justifiable or not to conduct such activity.

AAPG Datapages/Search and Discovery Article #90354 © 2019 AAPG Asia Pacific Technical Symposium, The Art of Hydrocarbon Prediction: Managing Uncertainties, Bogor, (Greater Jakarta), Indonesia, August 7-8, 2019