--> Inappropriate Separation of Risk and Uncertainty in Probabilistic Assessments, Norman, Charles D., #90100 (2009)

Inappropriate Separation of Risk and Uncertainty in Probabilistic Assessments

Norman, Charles D.1

1GeoKnowledge, Houston, TX.

Assessment of exploration prospect resource potential has traditionally focused on two activities: uncertainty estimation (the range of success case volumes and their associated probabilities), and risking (estimation of the chance of success). The calculations of chance of success and uncertainty are often carried out in near-isolation, independently of one another. Typically, one risks the chance of exceeding the P100 or P99 volume, or “the chance of getting on the curve.”

The process may lead to inaccurate representations of success case volumes. Since all success case probabilities are subsequently multiplied by the chance of success, focusing only on the minimum volume, without regarding the impact of the chance of success on success case probabilities such as the P90, P50, and P10, may create success case volumes with unreasonably high probabilities. As a result, economic decisions are made based on an overly optimistic assessment.

Problems may arise when an optimistic P50 to P10 range (in other words, the upper portion of the uncertainty range) is coupled with a very conservative P100 or P99 volume. The “chance of getting on the curve” may approach 100%. The chance of exceeding the P50 and P10 volumes, however, may be much less than, respectively, 50% and 10%. Since economic value, and therefore the decision to pursue the opportunity, is typically driven by volumes in the upper portion of the uncertainty curve, focusing only on the chance of exceeding the P100 or P99 volume creates an incorrect assessment of the prospect’s economic potential.

In multiple zone prospects, a traditional separation of risk and uncertainty is not possible. The success case size of the prospect is often a function of the number of zones that succeed. The number of zones that succeed is in turn a function of the chance of success estimated for each individual zone, and the geologic relationships between the zones. The size of the prospect, then, is a determined by the chance of success assigned to each zone. The prospect’s uncertainty may be driven more by risk than by volume parameters such as productive area and thickness.

AAPG Search and Discover Article #90100©2009 AAPG International Conference and Exhibition 15-18 November 2009, Rio de Janeiro, Brazil