Which Prospects to Drill?
Downloads Resources| Exercise Files
- Printing Instructions:
- one document, 4 pages, letter size, B&W
- one pair of dice, pencils or pen
- 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)
- 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
- Our geological and …….
- Geoscientists will …..
- The volume ….
- The range ….
- The chance ….
- All this ….
- 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)
- 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.
- Remember, you have a drilling budget of $400 million
- You can use alll of it for drilling with the information on hand, or spend some to improve your seismic data and predictions
- You can reprocess the existing seismic data over a prospect at a cost of 10% of the well cost
- Alternatively, you can acquire better seismic data at a cost for acquisition and processing of 25% of the well cost
- We will divide you up into 3 (or 4) teams
- We'll review the instructions/rules
- Your team has 5 minutes to develop a strategy
- After 5 minutes, the first team will be selected
- That team can do one of the following:
- Drill one prospect without additional data Ask for reprocessing on a prospect, see the new estimates, an
- d then either drill the same prospect or pass
- Ask for a new survey, see the new estimates, and then either drill the same prospect or pass
- NOTE: No clear decision after 30 seconds is an automatic pass
- The first team to discover 500 million barrels of oil WINS
- If we run out of time, after a complete round, the team with the lowest finding cost ($/barrel) WINS
When it is your team's turn, you go through a 3-step process:
- Decide if you want to spend money on new seismic data, which may give you more accurate numbers to work with
- Drill a well by rolling 2 dice and determining if it is a discovery or dry hole
- If your well is a discovery, then roll the dice a second time to get the oil volume
- 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
- 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
What happens if your team decides to re-acquire or re-process the seismic data?
- Money will be subtracted from your total
- You will get a revised set of numbers (privately) for the prospect
- Given the updated most-likely volume of oil (could be higher or lower) and a new chance of success (always higher), your team can drill the prospect or pass.
- If you make a discovery, a revised set of multipliers will be used
- We will keep a running total of the money spent and the volumes of oil discovered for each team.
- We will continue drilling until:
- one team discovers 500+ MBO, OR
- we get close to running out of time.
- If time is going to run out, after a round is completed, we will use the lowest finding cost (MBO/Dollars spent) to determine the winning team