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ASSESSMENT METHODOLOGY - AN INDUSTRY VIEWPOINT Harry M Gehman, Robert A Baker, and David A White Exxon Production Research Com

any P! Box "#$% Houston &exas ''((# Ban)kok, #%$(, *nited +ations E,CAP, *,A CC!P &echnica- Pub-ication #(, . ##/0#"# Ex -orin) 1or oi- and )as is a risky business. Risk is the chance o1 1ai-ure, and there are many more dry 2i-dcats than there are 2e--s that make discoveries. &he 3uanti1ication o1 risk in re-ation to re2ard is one o1 the main bene1its o1 1orma- assessments o1 undiscovered oiand )as otentia-s. &here are di11erent kinds o1 risk4 )eo-o)ic risks )overn the existence o1 oi- and )as5 1indin) risks dictate 2hether or not any existent hydrocarbons 2i-- be 1ound5 and economic risks determine 2hether the discoveries can be roduced. &here a-so are environmenta- and o-itica- risks, but in this a er 2e consider on-y the )eo-o)ic existence risks. 6ndustry has many reasons 1or makin) 3uantitative assessments o1 undiscovered oiand )as. 7irst and 1oremost, assessments can )uide ex -oration by rankin) the o ortunities and otentia- re2ards in terms o1 barre-s or cubic metres. Economic ana-yses can convert these amounts into monetary ex ectations, 2hich stron)-y in1-uence se-ective acrea)e ac3uisition, biddin) strate)y, and choice o1 2e-- -ocations. Broader assessments o1 countries, or o1 the 2ho-e 2or-d, in1-uence -on)0ran)e ex -oration -annin), inc-udin) techno-o)ic re3uirements and ca ita- needs. +othin) ex oses data re3uirements and research needs more e11ective-y than attem ts to 3uanti1y the many )eo-o)ic contro-s o1 oi- and )as. Additiona- im ortant uses are discovery0rate rediction and su -y 1orecastin). &he eva-uation o1 )eo-o)ic risk -ies at the 1oundation o1 every one o1 these assessment a -ications. Assessors may eva-uate risk at severa- -eve-s. &hey may eva-uate risks 1or a sin)-e otentia- reservoir at a sin)-e ros ect, or they may study a )rou o1 otentiareservoirs at a sin)-e ros ect. &hey may ana-y8e a 2ho-e -ay, 2hich is a )rou o1 re-ated ros ects havin) basica--y the same )eo-o)ic contro-s o1 tra , reservoir, and source 1or hydrocarbons, or they may eva-uate an entire basin. Risk eva-uation o1 )rou s o1 reservoirs or ros ects or -ays is a sub9ect that 2e 2i-- touch on -ater. &he best 2ay to i--ustrate riskin) rinci -es, ho2ever, is to consider the assessment o1 a sin)-e otentia- reservoir at a sin)-e ros ect. &he method described here is a systematic assessment o1 otentia- ex -oration re2ards in terms o1 barre-s or cubic metres, and o1 the associated )eo-o)ic risks that may deny these re2ards. A-- basic )eo-o)ic data and inter retations are -aid out 1or mana)ement:s use in com arin) ros ects rea-istica--y and 1or 9ud)in) the re-iabi-ity o1 the estimates. A b-ock dia)ram o1 a sim -i1ied but ty ica- exam -e, Pros ect A- ha, an undri--ed antic-ine that may contain oi-, is sho2n in 1i)ure #(0#. &he tota- tra vo-ume avai-ab-e 1or oi- is the roduct o1 the area o1 c-osure at the s i-- oint, the avera)e reservoir thickness, and the avera)e e11ective orosity. &his vo-ume mu-ti -ied by an estimate o1 the de)ree o1 oi-01i-- in the tra )ives the amount o1 oi- in -ace. Mu-ti -yin) the oi- in -ace by the -ast 1actor, recovery e11iciency, )ives the 1ina- ans2er in terms o1 otentia--y recoverab-e oi-.

6t is convenient to divide the method into t2o arts, estimatin) 1irst the vo-ume 1actors and second the risk 1actors. &he vo-ume 1actors on the -e1t o1 1i)ure #(0" are the same as those in 1i)ure #(0#, inc-udin), ho2ever, some other necessary items. &he estimate 1or avera)e net reservoir thickness re3uires inc-usion o1 a net0to0)ross ratio and a )eometry correction that accounts 1or any thinnin) at the ed)es o1 the oi- co-umn. &he estimate 1or net e11ective orosity must a--o2 1or the irreducib-e 2ater saturation and 1or the vo-ume shrinka)e o1 oi- brou)ht 1rom the reservoir to the sur1ace. HYDROCARBON VOLUME FACTORS CLOSURE AREA (C) AVERAGE RESERVOIR THICKNESS (T) % POROSITY % OIL FILL % RECOVERY

T SPILL LEVEL

TA

Figure 10-1

Diagram of prospect Alpha and volume factors used in assessment

VOLUME FACTORS

RELATED RISK FACTORS

C;!,*RE AREA RE,ER>!6R &H6C?+E,,


6+C;. +E&@GR!,, GE!ME&R=

E<6,&E+CE !7 7!;D !R 7A*;&.


7AC6E, !R *+C!+7!RM6&= P6+CH!*& 7AC6E, CHA+GE. &R*+CA&6!+. 7A*;&6+G ,!;*&6!+ !R 7RAC&*R6+G

P!R!,6&=. 6+C;. ,A&*RA&6!+.


,HR6+?AGE

CEME+&A&6!+. AB,E+CE !7 ,!*RCE4 A*A;6&=. A*A+&6&=.


MA&*RA&6!+, M6GRA&6!+ ,EA; A+D &6M6+G PRE,ER>A&6!+ 7R!M 7;*,H6+G. C!!?6+G. B6!DEGRADA&6!+

&RAP 76;;

REC!>ER=
Figure 10-2 Prospect risk assessment

PERMEAB6;6&=, >6,C!,6&=. DR6>E

A-- the vo-ume 1actors must be mu-ti -ied to)ether to determine the otentia- re2ard. !bvious-y, i1 any one o1 the 1actors is 8ero, there is no re2ard. &his re-ation sets u the second assessment ste , that o1 risk ana-ysis. ;isted on the ri)ht are the )eo-o)ic contro-s o1 each o1 the vo-ume 1actors. 61 any one o1 these contro-s or risk 1actors is inade3uate, makin) the re-ated vo-ume 1actor 8ero or near 8ero, then the chance 1or the ros ect:s success is 2i ed out. &he c-osure area de ends on the actua- existence o1 the ostu-ated structura- or strati)ra hic 1eature. 61 the antic-ine turns out to be a ve-ocity anoma-y and there is no c-osure, there is no ros ect. ,imi-ar-y, 1ai-ure resu-ts i1 the tar)et reservoir chan)es 1acies to sha-e or is missin) by truncation or 1au-tin). Cementation may destroy the orosity, or orosity deve-o ment by so-ution or 1racturin) may not be resent. &he bi))est 3uestion in any assessment is 2hether or not hydrocarbons are avai-ab-e and can be retained in the tra . &he de)ree o1 tra 1i-- is de endent on the amount and ty e o1 or)anic matter in the source rock, the maturation -eve-, ade3uate mi)ration, -umbin) 2ith res ect to tra timin) and sea-, and reservation 1rom 1-ushin), overcookin), and biode)radation. 61 the ros ect asses a-- these ru))ed tests and indeed contains hydrocarbons in -ace, the ermeabi-ity, 1-uid viscosity, and drive must a-- be ade3uate 1or e11ective recovery. We 2i-- no2 make 3uantitative estimates o1 these 1ive vo-ume 1actors and the 1ive re-ated risk 1actors 1or Pros ect A- ha. A-- estimates dea- 2ith much uncertainty, so 2e 2i-use ran)es o1 va-ues and a robabi-ity a roach. We 2i-- a-so sho2 the c-ose re-ation bet2een the vo-ume and risk 1actors. ,ince none o1 these vo-ume 1actors is kno2n exact-y, it is im ortant that 2e make not on-y our best or most -ike-y estimate but a-so inc-ude an estimate o1 the minimum and maximum 1or each vo-ume 1actor B1i)ure #(0/C. &he ran)e in the estimates inc-udes the uncertainty in our seismic and 1acies ma s and in our historica- ex erience 2ith orosity, hydrocarbon 1i--, and recovery e11iciency. &he ran)e not on-y serves to record the re-ative uncertainty in each estimate but a-so a--o2s 1or the ossibi-ity that the re2ard 2i-- be )reater than indicated by the most -ike-y va-ues a-one. MINIMUM MOST MAXIMUM LIKELY
C;!,*RE AREA. ,A*ARE M6;E, A>G RE,ER>!6R &H6C?+E,,. 7EE& A>G E77EC&6>E P!R!,6&= H=DR!CARB!+ 76;; !7 &RAP >!;*ME REC!>ER= AB,!;*&E PR!D*C&. M6;;6!+ BB; M!+&E CAR;! PR!D*C&. M6;;6!+ BB;
Figure 10-3 Volume-factor estimates, prospect Alpha

#( #( .#" ." ./D F "(

#D D( .#E .E .F( #F( #F(

"( %( ."( #.( FD $(( F"(

A Monte Car-o com uter ro)ram is used to combine the individua- ran)es into an overa-- robabi-ity distribution 1or A- ha:s otentia- oi-. &he com uter makes many tria-s5 in

each tria- it se-ects at random a va-ue 1rom each o1 the 1ive vo-ume01actor ran)es and mu-ti -ies them to)ether to )et a ossib-e number o1 barre-s. !n one tria-, 1or exam -e, the com uter may se-ect a re-ative-y sma-- c-osure area, a -ar)e reservoir thickness, a mid0ran)e orosity, a -ar)e hydrocarbon 1i--, and a sma-- recovery.

Each o1 the vo-ume 1actors is re resented as a trian)u-ar distribution 1unction 2ith the a ex at the most -ike-y va-ue. &hus, the com uter:s random se-ections 1rom each vo-ume 1actor tend to be most 1re3uent near the a ex va-ue and dec-ine to 8ero at the extremes. ,o there is no rea- chance that the com uter 2ou-d ever se-ect all 1ive minimum or all 1ive maximum va-ues in any one tria-. &hus the Monte Car-o minimum is a-2ays -ar)er than the abso-ute roduct o1 a-- minimum va-ues. And the Monte Car-o maximum is a-2ays sma--er than the abso-ute roduct o1 a-- the maximum va-ues. Each o1 the com uter:s many tria-s G say, D(( G rovides a ossib-e va-ue 1or recoverab-e barre-s. &hese va-ues are ordered and -otted 1rom sma--est to -ar)est in 1i)ure #(0F to )ive a cumu-ative01re3uency curve. &he hori8onta- sca-e sho2s the ossib-e ran)e o1 Monte Car-o ans2ers 1rom "( to F"( mi--ion barre-s, based on the vo-ume01actor assum tions )iven in 1i)ure #(0/. &he vertica- sca-e sho2s the 1raction o1 the tota- ans2ers that are -ar)er than each corres ondin) va-ue on the curve. 7or exam -e, "(( o1 the D(( Monte Car-o ans2ers, or a 1raction (.F, or F( ercent, axe -ar)er than #D( mi--ion barre-s. &he -ar)est o1 the D(( tria-s is F"( mi--ion barre-s, 2hich is the maximum otentia-. A-- ans2ers are )reater than the sma--est va-ue o1 "( mi--ion barre-s. We ca-- this curve our HunriskedH curve, because none o1 the vo-ume01actor ran)es, as sho2n on the revious s-ide, inc-uded any 8eroes.

1"0 "# "$ CHANCE GREATER THAN "

MINIMUM 20

RISKED ASSESSMENT CURVE

UNRISKED MEAN 1 0

"2 0 0

MAXIMUM POTENTIAL 20

100

200

!00

00

MILLION BBL POTENTIALLY RECOVERABLE


Figure 10!nrisked assessment curve, prospect Alpha

61 the estimates o1 the vo-ume 1actors 2ere ri)ht, the unrisked curve 2ou-d itse-1 sho2 the chances that the ros ect contains each di11erent -eve- or more o1 recoverab-e barre-s. &he ana-ysis o1 )eo-o)ic risk is used to estimate the chances that the vo-ume01actor ran)es are ri)ht.

We have 1ound it convenient to )rou in 1i)ure #(0D the )eo-o)ic risks under the same 1ive basic contro-s o1 hydrocarbon occurrence that are embodied in our vo-ume 1actors. &hese 1ive contro-s are the existence o1 c-osure, reservoir, orosity, source or hydrocarbon 1i--, and recovery. As discussed revious-y, i1 any o1 these contro-s is missin) or inade3uate, the ros ect is dry and there is no re2ard. What 2e estimate here is the chance that the vo-ume 1actors, as -isted on the revious s-ide, actua--y are ade3uate. By Hade3uateH, 2e mean s eci1ica--y the chance that the minimum o1 each vo-ume 1actor 2i-- be exceeded. Ade3uacy is one minus risk. Iust as the vo-ume 1actors are mu-ti -ied to)ether to )et the overa-- otentia- o1 the ros ect, so are the individua- ade3uacies mu-ti -ied to )et the overa-chance o1 exceedin) the minimum ros ect otentia- 1rom the Monte Car-o simu-ation.

GEOLOGIC CONTROL &RAP C;!,*RE RE,ER>!6R P!R!,6&= ,!*RCE. 6+C;. ,EA;. &6M6+G. PRE,ER>A&6!+ REC!>ER=

CHANCE OF ADE%UACY (1"0 & RISK) #.( .D #.( .D #.(

!>ERA;; CHA+CE !7 E<CEED6+G M6+6M*M P!&E+&6A; J #.( < .D < #.( < .D < #.( J ."D
Figure 10-" #isk anal$sis, prospect Alpha

&here is a substantia- chance that the reservoir 1ades is missin) in Pros ect A- ha. &he re)iona- ma sho2s sand thickness to be hi)h-y variab-e in the area 2here it is -ocated. 6n estimatin) reservoir01acies thickness as a vo-ume 1actor, the best inter retation is an avera)e o1 D( 1eet 2ith the ossibi-ity o1 u to %( 1eet, if the sand is there. Ho2ever, about ha-1 o1 the ossib-e inter retations sho2ed -itt-e or no sand to be resent. &he rob-em is to ex ress this very rea- risk that there 2i-- be -itt-e or no reservoir sand in the ros ect. &he t2o0ste a roach used in this method re3uires that some kind o1 non0 8ero minimum be set 1or the vo-ume01actor estimate. &he associated ade3uacy 1actor is then used to assi)n the robabi-ity o1 exceedin) that minimum. &he e11ect is to treat anythin) -ess than the minimum as 8ero. 6n A- ha, a minimum o1 #( 1eet 2as set 1or reservoir thickness, and the chance o1 exceedin) that minimum is here s eci1ied as D( er cent. &he key to settin) a minimum is to have it -o2 enou)h to inc-ude a-- thicknesses that 2ou-d have economic otentia- under the circumstances. &he advanta)e is that it exc-udes the 2ho-e ran)e o1 very thin reservoir units that are hard to observe re)iona--y and 2ou-d be uneconomic even i1 1ound. &he minimum tra c-osure 2as not set arbitrari-y, ho2ever, since the sma--est )eo hysica- estimate o1 #( s3uare mi-es 2as 3uite ade3uate. Minimums 2ith 9usti1iab-e and ade3uate non08ero minimums are not chan)ed.

,ource ade3uacy is a-so a risk at A- ha because the ros ect -ies bet2een kno2n roduction and tested dry structures 2hich a arent-y -ack source. ,ource obvious-y is one o1 the e-ements that contributes to the vo-ume 1actor ca--ed hydrocarbon 1i--, and the most -ike-y and maximum cases 2ere based on observin) nearby roductive structures. &he minimum case, ho2ever, 2as set rather arbitrari-y. &he minimum 2as ad9usted by tria- and error to )ive a "( mi--ion barre- minimum to the resu-tin) cumu-ative0 robabi-ity curve G a va-ue that 2as c-ose to the economic thresho-d 1or the ros ect. &his minimum va-ue is the one a)ainst 2hich our 9ud)ment o1 source ade3uacy can be )au)ed. A- ha 2as assi)ned a D( ercent robabi-ity o1 achievin) that minimum 1or source otentia-. &he other contro1actors a ear to o11er no rob-ems. &hey re resent 8ero risk, or #.( ade3uacy. We can combine the risk ana-ysis 2ith the vo-ume ana-ysis to roduce the 1inaassessment o1 Pros ect A- ha. As sho2n in 1i)ure #(0E, 2hen the overa-- chance o1 "D ercent 1or achievin) the minimum "( mi--ion barre-s is a -ied to the unrisked robabi-ity curve, the robabi-ity o1 achievin) each reserve -eve- is reduced corres ondin)-y. &he risked mean is reduced to "D ercent o1 the unrisked mean. We are sayin) by this risked curve that i1 2e had a hundred A- has, 'D o1 them 2ou-d contain 8ero barre-s and on-y "D 2ou-d contain the ran)e o1 barre-s sho2n by the unrisked curve. 6nc-udin) the 'D ercent o1 8ero cases reduces the risked mean as sho2n.

1"0 "# "$ CHANCE GREATER THAN "

MINIMUM 20

RISKED ASSESSMENT CURVE

RISKED MEAN !'

UNRISKED MEAN 1 0

"2 0 0

MAXIMUM POTENTIAL 20

100

200

!00

00

MILLION BBL POTENTIALLY RECOVERABLE


Figure 10-% !nrisked and risked assessment curves, prospect Alpha

&he )a in the curve be-o2 "( mi--ion barre-s resu-ts 1rom our se-ection o1 minimum va-ues, but since it -ies at the economic thresho-d, it causes no rob-ems and moreover has the advanta)e o1 se aratin) roductive 1rom non roductive cases. !bvious-y there is no 1ixed minimum. 6t must be tai-ored to the )eo-o)y and economics o1 each ros ect, but certain-y it 2i-- be si)ni1icant-y -ar)er than 8ero.

A ma9or advanta)e o1 the t2o0ste assessment is that an economic eva-uation can be made o1 the unrisked curve to determine the re2ard i1 the ros ect is actua--y a 1ie-d as mode-ed by the vo-ume 1actors. &his eva-uation can be 2ei)hted accordin) to the risk ana-ysis a)ainst the economic estimate o1 ex -oration costs i1 the ros ect roves to be dry. Another advanta)e o1 se aratin) out the risk is that it a--o2s 1or an ana-ysis o1 the inter0 action o1 the )eo-o)ic contro-s. ,uch a care1u- ana-ysis is im ortant, 1or exam -e, 2hen the assessment curves 1or a )rou o1 ros ects are to be summed to)ether to rovide an assessment o1 a concession. A sim -e exam -e 2ou-d be the summation o1 six ros ects -ike A- ha, 2ith individua- )eo-o)ic contro- 1actors as tabu-ated in 1i)ure #(0'. Ho2 these ros ects are summed de ends on ho2 2e treat the individua- chances o1 ade3uacy o1 the contro- 1actors. 61 2e consider a-- the risk in each ros ect to be inde endent o1 the others, then there 2ou-d be an $" ercent chance o1 havin) at -east one roductive ros ect in the concession. 61, ho2ever, 2e consider that the risk o1 inade3uate source a -ies to the )rou as a 2ho-e, then that art o1 the risk is a -ied a1ter the summation, and chance o1 havin) at -east one roductive ros ect is reduced to about F% ercent. GEOLOGIC CONTROL &RAP C;!,*RE RE,ER>!6R P!R!,6&= ,!*RCE REC!>ER= ADE%UACY CHANCES FOR EACH PROSPECT A # .D # .D # B # # # .D .D C .D # # .D # D # # .D .D # E .D # # .D # F # .D # .D #

CHA+CE !7 A& ;EA,& !+E PR!D*C&6>E

67 R6,?, 6+DEPE+DE+& J # G B#0."DCE J .$" W6&H ,!*RCE A, GR!*P R6,? J (.D K# G B#0.DCEL J .F%
Figure 10-& #isk anal$sts of prospect group A-F

&he im act o1 inde endent versus )rou risk on assessment curves is sho2n in 1i)ure #(0$. &he mean va-ues o1 the t2o curves are the same, but the sma-- and -ar)e ends o1 the curves are 3uite di11erent. And the chance o1 at -east one ros ect bein) roductive is much )reater i1 the risks are treated as bein) inde endent. &his does not a ear rea-istic 1or this articu-ar exam -e, since the ostu-ated source bed is the same 1or a-- ros ects. 61 the source bed is inade3uate 1or one ros ect, it is a t to be inade3uate 1or a--. !n the other hand, i1 the source is )ood at one ros ect it is -ike-y to be )ood 1or a--, so the maximum otentia- is much )reater 2here the )rou risk is a -ied. &his di11erent conce t o1 risk mi)ht -ead to an entire-y di11erent economic ana-ysis. &here are no easy ru-es 1or decidin) 2hen to a -y inde endent and 2hen to a -y )rou risks. Each )rou must be ana-y8ed on its o2n merits, and the rob-em is a )eo-o)ica- rather than statistica- one.

1"0

0"#

INDEPENDENT RISK

0"$ CHANCE GREATER THAN 0"

MEAN ( 1)* MM BBLS

0"2

SOURCE RISK APPLIED TO GROUP

0"0

200

00

$00

#00

1000

1200

MILLION BBL POTENTIALLY RECOVERABLE


Figure 10-' (um of prospects A-F

&here are many variations o1 interre-ated risk 2ithin ros ect )rou s. &hese interre-ations re3uire a care1u- ana-ysis o1 2hether risk is to be a -ied be1ore or a1ter Monte Car-o summation. !nce that is done, it is a re-ative-y sim -e rocedure to com ute an assessment. By reco)ni8in) that risk interre-ations reduce to the 3uestion o1 2hen each risk is to be a -ied in summation, the )eo-o)ist makes his rob-em o1 dea-in) 2ith interre-ations sim -er. &hou)h sim -e, it is a o2er1u- means o1 a -yin) our understandin) o1 )eo-o)ic events to make a better ana-ysis o1 the economic otentia- o1 the )rou . Assessment is a tou)h 9ob that has its inherent -imitations. 6t has to dea- 2ith a-- the oor-y understood variab-es in the )eneration, mi)ration, and entra ment o1 etro-eum. &he a--0im ortant riskin) ste is sti-- 3uite sub9ective, even 2hen )uided by ex erience. We o1ten are ab-e to ut ros ects in a )ood re-ative order o1 risk, but the correct abso-ute va-ues are sometimes e-usive. We must usua--y be content i1 the rea- ans2er 1a--s any2here 2ithin our ostu-ated ran)e. ,ince 2e cannot kno2 this rea- ans2er ahead o1 the dri--, 2e are 1orced to -ay the avera)es, in both the vo-ume and risk 1actors. &he end resu-t is that our mean assessments o1 individua- ros ects or -ays tend to overestimate the 1ai-ures and underestimate the successes. !n-y in the -on) run, i1 our riskin) -eve-s are correct, 2i-- the sum o1 the risked mean assessments 1or many ventures come c-ose to trackin) rea-ity. 6n s ite o1 these rob-ems, most com anies re)ard some kind o1 3uantitative assessment as essentia- 1or rankin) ex -oration o ortunities and 1or )uidin) the out-ay o1

ex -oration 1unds. Methods such as the one described here have the advanta)e o1 systematica--y -ayin) out and sca-in) the key 1actors contro--in) the otentia- si8e and chances 1or success o1 a venture. Geo-o)ists, )eo hysicists, and )eochemists can contribute to the 3uanti1ication o1 the individua- 1actors about 2hich each kno2s most. &he assessment curves can be used direct-y in economic ana-yses. Mana)ement can revie2 the resu-ts, render 9ud)ments, and determine the acce tab-e -eve-s o1 risk versus re2ard.

D+,-.,,+/0
Sinding-Larsen: Do you a 1ai-uresM -y any co--ection to com ensate 1or the systematic over0estimation o1

Gehman: At the end o1 dri--in) a se3uence o1 ros ects in the *? art o1 the +orth ,ea, 2hen 2e added u the risked means, 2e came 1air-y c-ose to 2hat 2as actua--y 1ound5 a-thou)h in each ros ect our risked mean has been either over or under. &he correction comes in the trade record not in any one 1eature. We have ut into our assessment everythin) 2e kno2 ho2 to ut in. Charan: Do you inter ret a-- the seismic data be1ore constructin) the assessment curveM Gehman: =es. Most ros ect assessments invo-ve a )ood dea- o1 seismic inter retation as to area o1 c-osure, 1ades thickness and so on. Brooks: 6n rankin) your individua- ros ects o1 a concession, ho2 much is the 1act that you are not usin) in1ormation outside that concession reducin) your number o1 ossibi-itiesM A concession is in e11ect a sma-- sub0set o1 the avai-ab-e structures. 61 it 2ere ossib-e to eva-uate a-- these, 2ou-d it not )ive you a di11erent risk 1actor, either -ar)er or sma--erM Gehman: Certain-y 2e use as much in1ormation as 2e can )et, 2hich inc-udes data 1rom nei)hbourin) dri--ed concessions. Du Bois: &ake the case o1 a concession bounded by an internationa- boundary, beyond 2hich there is -itt-e or no in1ormation avai-ab-e. 6s there any 2ay o1 3uanti1yin) 2hat ha ens under those circumstancesM Gehman: 6t ha ens 3uite o1ten that data is -ackin) across some boundary. An exam -e is a shore-ine, and there are many such cases in the Gu-1 Coast o1 the *,A 2here a trend has been success1u--y ex -ored on shore, and 1or a-- 2e kno2 the )eo-o)y continues o11shore. We ty ica--y a -y the same estimates o11shore as onshore. &he main oint is4 does the )eo-o)y chan)eM Most assessment is 9ust )eo-o)ic reasonin)5 there is very -itt-e : ma)icH invo-ved. 6t is an attem t to 3uanti1y the sorts o1 thin)s 2e )eo-o)ists do a-- the time. Clark: About ho2 many eo -e eo -e artici ate in one o1 these eva-uationsM Gehman: Perha s Iack Armita)e 2ou-d -ike to commentM Armitage: +orma--y our assessment is done by the ex -orationist, 2ho 2i-- be the )eo-o)ist or )eo hysicist 2ho in our com any is most-y a )eo-o)ist, too. He 2i-- use the data to construct a robabi-ity curve. &hat 2i-- be revie2ed by mana)ement at various -eve-s. 6 think the Hma)icH invo-ved is the ex erience o1 the individua- )eo-o)ist 2ho estimates the va-ues o1 the unkno2n arameters. Bubb: =es, the assessment is done by one or t2o men, but they can dra2 on the re)iona- in1ormation and ex erience o1 the com any, 2hich is very substantia-. Armitage: !ne can reason back 1rom the 1i)ure o1 si8e o1 reserves 2hich you kno2 to be the minimum needed 1or a articu-ar ros ect to be economic, and ca-cu-ate, 1or exam -e, ho2 much orosity 2i-be needed to roduce this. &hen one can ask 2hether it is reasonab-e to ex ect such a va-ue in the area.

Gehman: =es, 6 2ant to stress that this is not 9ust a one0)uess, one0 ass0throu)h0the0com uter o eration. 6t is a continuin) rocess, 2ith in ut 1rom many eo -e in any or)ani8ation as the com any:s ex erience )ro2s. Charan: Ho2 do you se-ect the most romisin) structure 1or dri--in)M Armitage: 6dea--y, i1 you had the time, you 2ou-d )o throu)h your basin and com -ete the seismic surveys and inter retation and rank your ros ects in si8e, and start 2ith the -ar)est5 but this is rare-y the case. =ou may a-so )rou the ros ects into -ay ty es and dri-- 1our or 1ive, so you )et a 1ee-in) 1or the )eo-o)y o1 the basin, and then you re0assess a-- the ros ects in the -i)ht o1 the kno2-ed)e )ained, 1or the next round o1 dri--in). Gehman: =es. 6 2ou-d say that the 1irst ros ect you dri-- shou-d be the one that )ives you the most in1ormation about risk, rather than the bi))est. &his is an ans2er 1rom the researcher:s oint o1 vie2, but Iack Armita)e has )iven the o erationa- stand0 oint.