Estimating Efficiency of Exploration Program based on Value of Information Approach

Abstract

Currently oil companies are focusing more on hard-to-develop oil fields with high geological uncertainties. To develop these fields efficiently we need a sophisticated geological risk management and advanced techniques for exploration program optimization. However, having many different uncertainties poses a big challenge as it is almost impossible to completely eliminate uncertainty. In this paper we show how to build a tool to estimate economic benefit of exploration program as well as to find an optimal time to stop exploration and start development. This tool was build based of VOI (value of information) approach which calculate economic benefit of geological information. One of the first pieces of research about value of information was [Howard, 1966]. In this paper VOI was defined as the difference between expect value of target function when the information is available and when it is not. Net VOI is equal to VOI minus cost of obtaining the information. VOI approach has been used successfully for a long time in oil industry. One example is [Barros et al, 2015] paper. VOI was calculated to improve wells management. Authors found optimal time to obtain information before making field development decision. There is a good overview of VOI application in oil industry in [Bratvold et al, 2009]. In this paper we used VOI approach to optimize exploration program for an Eastern Siberia oil field. We built VOI maps showing economic benefit of building exploration well in each possible location. The benefit is calculated based on stochastic geological model. This approach is designed for finding best exploration wells location and for finding optimal number of exploration wells.