Which Prospects to Drill?

Slide 1

• This unit has a dice game to convey the challenge of meeting a new discovery target with a limited drilling budget
• It was originally designed for a "100 series" course – undergrad intro course
• Some slides from units 1 and 2 can be added to form a short introduction
  • e.g., some slides about the 5 play elements (source, reservoir, trap, seal, migration)

Slide 2

• A prospect is a location and depth that has been identified as a good place to drill for oil and/or gas
• For us to find oil or gas, certain conditions must be meet
  • There needs to be a source for the oil or gas
  • The source rocks need to be 'cooked' to the right degree
  • There needs to be a porous rock to hold the oil or gas
  • There needs to be a subsurface trapping geometry
  • There need to be a seal
  • There needs to be 'plumbing' connecting source and reservoir

Slide 3

• Our geological and …….
• Geoscientists will …..
  • The volume ….
  • The range ….
  • The chance ….
• All this ….

Slide 4

• Now you are going to be the management team
• I will divide you into about 4 teams
• Each team will be a management committee would has 20 prospects under review
• These prospects vary considerably in their predicted size (volume of oil) and in their risk (chance of success)
• Smaller volumes have lower risk (more certain)
• Large volumes have a high risk (more likely to have no oil)

• Your challenge:
  • You have a drilling budget of $400 million.
  • Headquarters has set a goal for you to discover 500 million barrels of oil.
  • You want to keep the cost per barrel as low as possible (< $1.00/barrel)

Slide 5

• For each prospect, your staff has
  • An estimated drilling cost
  • A prediction of the most-likely amount of oil (in millions of barrels, MBO)
  • The likely range of possible oil volumes (high-side and low-side cases)
  • An estimate of the chance of success for the prospect.
• These data are provided on tables
• If you only drill the low risk prospects, the probability of your reaching your goal is extremely low - but not zero.

Slide 6

• Remember, you have a drilling budget of $400 million
• You can use alll of it for drilling with the information on hand, or spend some to improve your seismic data and predictions
  • You can reprocess the existing seismic data over a prospect at a cost of 10% of the well cost
  • Alternatively, you can acquire better seismic data at a cost for acquisition and processing of 25% of the well cost

Slide 7

• We will divide you up into 3 (or 4) teams
• We'll review the instructions/rules
• Your team has 5 minutes to develop a strategy
• After 5 minutes, the first team will be selected
• That team can do one of the following:
  • Drill one prospect without additional data Ask for reprocessing on a prospect, see the new estimates, an
  • d then either drill the same prospect or pass
  • Ask for a new survey, see the new estimates, and then either drill the same prospect or pass

• NOTE: No clear decision after 30 seconds is an automatic pass
• The first team to discover 500 million barrels of oil WINS
• If we run out of time, after a complete round, the team with the lowest finding cost ($/barrel) WINS

Slide 8

When it is your team's turn, you go through a 3-step process:

1. Decide if you want to spend money on new seismic data, which may give you more accurate numbers to work with
2. Drill a well by rolling 2 dice and determining if it is a discovery or dry hole
3. If your well is a discovery, then roll the dice a second time to get the oil volume

Slide 9

• Here is the chart that is based on the existing seismic data
• Note that each prospect has a drilling cost and a Most-Likely volume
• The range in volume is also indicated along with the chance of success
• The last column is how we determine if the well is a discovery based on the roll of the 2 dice
  e.g., the Bull prospect (#8) is dry if the total on the 2 dice is 2 – 5; a discovery if 6 or greater

Slide 10

• If the well discovers oil (e.g., for Bull the total is > 6), then we have to determine the recoverable volume of oil
• The total on a second roll of the dice determines what we multiple the most-likely volume by to get the recoverable volume
  e.g., for Bull (#8), the most-likely volume is 9 MBO and if the second roll has a total of 10, the volume = 9 * 1.25 = 11.25 MBO