Abstract: Risk Analysis
of Prospects vs. Plays: The
Play's
the Thing!
Peter R. Rose
The most difficult and crucial decision in petroleum exploration is not which prospect to drill, but rather, which new play
to enter. Such a decision, whether ultimately profitable or not, commits the Organization to years of involvement, expenditures of $millions, and hundreds of man-years of effort. Even though uncertainties and risks are high, organizations commonly make the new-
play
decision in a disjointed, non-analytic, even superficial way. The economic consequences of a bad
play
choice can be disastrous.
Using established principles of prospect risk analysis
, modern petroleum exploration organizations routinely assign economic value to individual prospects, but they actually operate via exploration programs in plays and trends. Accordingly, the prospect is the economic unit of exploration, whereas the
play
is the operational unit.
Plays can be successfully analyzed as full-cycle economic risk ventures, however, using many principles of prospect risk analysis
. Economic measures such as Expected Present Value, DCFROR, etc. apply equally to plays or prospects. The predicted field-size distribution of the
play
is analogous to the forecast prospect reserves distribution. Economic truncation applies to both. Variance of
play
reserves is usually much greater than for prospect reserves. Geologic chance factors such as Preservoir, Pgeneration, etc., must be distinguished as independent or shared among prospects in the
play
, so they should be defined so as to apply as well to the
play
as to its constituent prospects. They are analogous to multiple objectives on a prospect, and are
andled differently in performing the risk
analysis
.
AAPG Search and Discovery Article #90950©1996 AAPG GCAGS 46th Annual Meeting, San Antonio, Texas