Daniel C. Zweidler¹
(1) Shell Deepwater Services, New Orleans, LA

Abstract: Geological models, development scenarios and portfolio management: An integrated approach to opportunity evaluation

Over the last decade the concept of portfolio management has been increasingly applied to the evaluation of E&P opportunities. Portfolio thinking promotes the integration of subsurface geological models and associated development scenarios for a prospect and considers its geographical and temporal dependence on other assets in the portfolio. In this model, prospects are no longer considered individual entities, whose value is assessed by applying a capital asset pricing model to the estimated ultimate recoverable hydrocarbon volumes. Rather, portfolio thinking stresses the impact of assets' interdependence on their potential value. In addition, understanding the real option value associated with an asset enables us to better manage this asset throughout its life cycle and thus create additional value. The progress in developing concepts and tools notwithstanding, the corner stones for successful E&P portfolio management remain a sound evaluation of all possible subsurface geological models. Each model carries a probability of technical success and an associated in place volume distribution. Each subsurface model, in turn, has a number of possible development scenarios, with an associated stochastic estimate of ultimate recoverable hydrocarbons and a related probability of development success. Frontier prospects in particular benefit from such an integrated approach. Their value is often dependent on the proximity and availability, present or future, of nearby infrastructure or market. Also, their value often relies on technologies not readily available.

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