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Circum-Arctic Resource Appraisal: Valuation Methodology

White, Red 1; Verma, Mahendra 1; Gautier, Don 1
1 Energy Team, US Geological Survey, Houston, TX.

The Circum-Arctic Resource Appraisal (CARA) has three major components: a resource map, a resource assessment, and a resource valuation. This presentation will review the USGS methodology for estimating a comparative economic measure of resource value for each Assessment Unit (AU) in the CARA Assessment. A companion presentation by Mahendra Verma (Circum-Artic Resource Appraisal: Engineering Methodology) will review the USGS methodology for estimating the capital and operating costs (CAPX & OPX) for developing, producing, and transporting Arctic oil and gas to markets.

The goals for the CARA Valuation - objective, clear, unbiased, comparable, and probabilistic required that we develop a methodology for mathematically integrating the geology, engineering, and economics dimensions of the Arctic. Our approach has been to integrate the results of three mathematical models - assessment (Gautier), engineering (Verma), and statistical cost (White) - within a full-cycle simulation to provide probabilistic oil & gas resource cost curves for each AU. The AU results are aggregated to province and Circum-Arctic totals.

The Assessment Model provides the requisite probability distributions for numbers, sizes, and risks for potential oil and gas deposits in each AU. The Engineering Model provides the requisite estimates of CAPX and OPX for a selected set of hypothetical oil & gas fields. The Cost Model provides the requisite statistical cost functions for both oil & gas fields.

The Simulation Model uses the results of the Assessment Model to generate a unique geologic state of nature (GSON) in each AU for each trial in the simulation. The GSON for a trial consists of a sampled portfolio of oil and gas deposits with specific volumes, flow rates, water depths, drilling depths, and distances to shore. Next, the Simulation Model uses the results of the Cost Model to generate an estimate of CAPX & OPX for each individual field in the GSON portfolio for the trial. Finally, the Simulation Model generates a pair of oil & gas resource cost curves for each AU. A resource cost curve displays the increasing aggregate volume of oil or gas available at increasing unit cost - a good comparative economic measure of resource value - and is a precursor to a supply curve.

An example for the Northeast Greenland Province is developed.


AAPG Search and Discovery Article #90090©2009 AAPG Annual Convention and Exhibition, Denver, Colorado, June 7-10, 2009