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Brett S. Mudford1
(1) Landmark Graphics, Houston, TX

Abstract: Analyzing geologic and economic risk in multi-zone exploration prospects

The expected volumes and geologic risk of multi-zone exploration prospects are often analyzed using computational short cuts. In addition, decision trees with only a few nodes are frequently used to simplify the computational effort required to correctly analyze the economics when there are multiple zones and a number of possible development scenarios.

Stochastic methods can readily be used to analyze rigorously both the geologic and economic risk of multi-zone exploration prospects. In this paper Bayesian updating is used to develop a more realistic estimate of prospect risk in which success at the prospect level in the first zone enhances the changes of success at the prospect level in future zones, but does not guarantee it. Stochastic methods can also be used to sum together the technically recoverable volume distributions from multiple zones with inter-dependent risk factors.

The economic analysis of a multi-zone prospect is complicated because of the large number of scenarios that must be considered, depending on which of the zones are geologically successful. Standard methods of economic analysis frequently use a composite distribution of technically recoverable volumes for all zones. Decision three methods are then used to combine together a few economic cases, such as a P10, P50 and P90, to determine a mean net present value. In this paper I will show how stochastic methods can be easily applied to analyze the many possible development scenarios that can occur in a multi-zone development. The result of this is a distribution of net present values that correctly incorporates both the interdependent geologic risk and the large number of possible development scenarios.

AAPG Search and Discovery Article #90914©2000 AAPG Annual Convention, New Orleans, Louisiana