Increasing Your Success Rate Using Multiple Hypotheses - Get A Second Opinion!

Abstract

Uncertainty is routinely associated with petroleum exploration ventures. Most key geotechnical parameters must be estimated (not measured) – but cognitive bias flourishes in such circumstances, and needs to recognised and addressed. Cognitive biases often produce significant inconsistencies that can lead to suboptimal exploration decisions. Being overconfident in our assessment of uncertainty has significant impact on the exploration decisions and prospect evaluation. The use of multiple “experts” can help to reduce the degree of overconfidence compared with only a single expert. Of course, this is not limited to the oil and gas sector: in my personal life, I was diagnosed with Stage IV cancer in 2012. After the initial shock and “why me” reactions, I utilised decision trees to plan the identification, diagnostic and treatment options (it also helped to reduce the emotional stress). In order to reduce the cognitive bias (and obtain a better treatment outcome) of the medical teams, I undertook diagnoses and gained recommended treatment protocols from highly-respected hospitals in Singapore, Sydney and Baltimore. All of these individual institutions, even though they had a common thread of medical knowledge (and the same data set), nevertheless were subject to biases from their different training and implementation cultures. This paper will describe the same philosophy of using multiple diagnostic interpretative hypotheses by using by different mindsets and thought processes to reduce the uncertainty in oil and gas exploration. Unfortunately, such creative methods are usually frowned upon by Government regulators. An exemption to this is the Norwegian Petroleum Directorate (NPD), who has released a report describing an analysis that compared company assessments of discovery size and the probability of success for mapped prospects with post-drilling discovery sizes and success rates. This analysis found that the industry overestimated resources expectations and understated the probability of success. Cognitive bias - usually over-optimism – affects initial estimates of geotechnical parameters underpinning exploration projects. If left undetected, this leads to poor or disappointing project outcomes. When such cognitive bias is endemic in a company’s portfolio of Exploration and Production (E & P) ventures, this portfolio underperforms, and the company’s annual performance suffers. Shareholders are usually unhappy with this outcome. Most experienced petroleum geoscientists understand Cognitive Bias - after all, they have experienced the business pressures that stimulate it, as well as the inevitable consequences of succumbing to it. They have also been exposed to many geologic “salesmen” in action, trying to sell over-hyped and carelessly researched exploration prospects.   The five most prevalent cognitive biases in E & P work are: Confirmation bias - Ignoring data that do not fit our theories (or the desired outcome). Overconfidence - Predictive ranges are too narrow, leading to many bad surprises. Representativeness - False analogs. Anchoring - Initial estimating and adjustment process is incomplete. Motivational bias – Where personal self-interest influences technical estimates. Confirmation bias is the tendency that influences all of us to put more faith in information that agrees with what we already believe, and discount opinions and data that disagree with our beliefs. Confirmation bias explains in part why it's nearly impossible to present enough factual evidence to convince a staunch Democrat or Republican that their candidate has flaws. Confirmation bias can creep into every decision we make - employee performance evaluations, major purchases, management actions, and so on – and in our business, exploration decisions. There's a lesson here for all of us - to avoid making bad decisions about investments, political candidates, exploration prospects, and many other topics, we must do two things: 1. Be aware of the danger of confirmation bias, and acknowledge that our judgment can be clouded by it. 2. Aggressively seek out and understand information that disagrees with our existing belief. The second step may involve talking to people who don't share our opinion, and listening to their reasoning rather than arguing our own point. It could be as simple as reading some of these opposing views. Regardless, it's important to evaluate the information as rationally as possible and avoid one's impulse to explain why it's wrong. Warren Buffet identifies his own confirmation bias and actively seeks alternative views - so hopefully our industry can do the same.

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