--> Abstract: Prospectors, Managers, Lognormality, and Uncertainty, by P. R. Rose; #90942 (1997).

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Abstract: Prospectors, Managers, Lognormality, and Uncertainty

ROSE, PETER R

Many prospectors, as well as their managers, seem unaware of two fundamental principles that characterize exploratory oil and gas reserves: lognormality and wide predictive uncertainty (high variance).

The Central Limit Theorem, where it involves multiplication of independent variables, provides the theoretical basis for the lognormality of reserves. The three independent variables are: 1) Area of accumulation (acres); 2) Average net pay thickness (feet); 3) Hydrocarbon recovery factor (bbl or mcf/acre-foot). For new-field wildcat prospects, the P90% - P10% reserves range commonly (and properly) spans two to three orders of magnitude. Corresponding field-size distributions for plays often span four to five orders of magnitude. There is a strong tendency for prospectors and managers alike to underestimate such high variances; their P90% - P10% ranges are set too narrow.

Lognormality and wide uncertainty together allow prospectors to express exploratory reality: given discovery, the most probable outcome is a small accumulation, but there is still a small chance of a large field. Constraining prospect reserves estimates by the expectation of lognormality improves reserves predictions. Lognormal field-size distributions serve as reality checks for trend prospects and form the basis for predicting reserves of new plays.

Knowledgeable mangers know that, because of lognormality, high variance, and low chances of finding large new-fields, exploration portfolios must be large -- 60 to 200 wells -- to allow adequate statistical exposure, usefully predict program results, and fairly assess staff geotechnical performance. Such a large exploration sample appears to be incompatible with common management attitudes reflecting short-term goals and results, unrealistically high reliance on geotechnology for exploration success, and disdain for partnership ventures.

AAPG Search and Discovery Article #90942©1997 AAPG International Conference and Exhibition, Vienna, Austria