Failure to achieve planned economic performance of oil and gas production projects due to lack of risk assessment and uncertainty quantification
https://doi.org/10.7868/S2587739920030118
Abstract
Quantitative assessment of risks and uncertainty has always played the most important role in the evaluation of oil & gas projects. Any estimated, measurable or evaluable magnitude contains an uncertainty, whether it concerns measuring watercut by means of a multiphase flow meter (MPFM) or to the net present value (NPV) of a major E&P project. Evaluation of project economics, e.g. the calculation of net present value (NPV), internal rate of return (IRR), OPEX and CAPEX shall be probabilistic, i.e. carried out with the quantitative assessment of risks and uncertainty of estimated (predicted) values. Nevertheless probabilistic estimate takes place very rarely. Most commonly, assessment of risks and uncertainty would be intuitive or based on a number of deterministic scenarios mistakenly referred to as pessimistic, optimistic and most probable. This research simulates failure to achieve target economic efficiency of E&P projects with no quantitative assessment of risks and uncertainty, and reviews previous international research conducted to identify the effect of ignoring probabilistic estimates related to the evaluation of E&P projects on their final economic efficiency.
About the Authors
M. Y. Nazarenko
Gubkin Russian State University of Oil and Gas
Russian Federation
Russian Federation
A. B. Zolotukhin
Gubkin Russian State University of Oil and Gas
Russian Federation
Russian Federation
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Review
For citations:
Nazarenko M.Y., Zolotukhin A.B. Failure to achieve planned economic performance of oil and gas production projects due to lack of risk assessment and uncertainty quantification. PROneft. Professionally about Oil. 2020;(3):75-80. (In Russ.) https://doi.org/10.7868/S2587739920030118
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