Geological Risk Analysis
Exploration and development projects of oil & gas fields are considered as uncertain investments in term of economic profitability. For that the risk analysis before the decision-taking is more compulsory than recommended not only for new plays wildcat frontier areas but also for semi explored emerging areas and so called producing mature areas. Dry delineation and/or development wells are often drilled inside the appraisal and/or producing mature areas. Zero risk doesn’t exist!
For example, in exploration activity, after seismic acquisition, processing and interpretation, your technical team identified a dozen of new prospects having different location, size and OOIP or OGIP.
If you have to drill only one or two prospects, which one would you choose? Why?
“Bigger are the size and OOIP/OGIP, better is the prospect” is not basically the best business decision. My experience taught me a smaller prospect’s size and OOIP could be more commercial than a larger one.
Normally, each drilled well should flow a quantity of oil or gas reimbursing its cost but despite new technologies and geological concepts drilling remains too risky.
Risk analysis allows you to select the prospect(s) having the highest probabilistic occurrence to reduce significantly unfruitful expenses related to dry hole and seismic acquisition on your NPV by estimating your right risk contingency exploration budget to avoid going over your realistic budget.
As you know, there is no miraculous or mathematical formula to assess the right risk associated with a given issue. We are just speculating how high or low could be odds against success.
In oil & gas upstream activity the risk analysis shouldn’t be quantified by using simply credible available data and information you have but this process requires good skill, experience and knowledge in term of comprehension of the petroleum system in question.
The philosophy vision of a risk analysis is depending on the maturity stage of the area to drill: wild cat frontier area, explored emerging area, mature producing area……
I had the opportunity to note that certain mangers drill their exploration well just because there is a good reservoir or a good anticline’s closure, …a good source rock in the area, etc. Good reservoir, good structure, good souce rock…,taken separately, are not a suficient decision-making to drill a well. You should boost the odds to drill a successful well by combining all the risk components of the area. This is the risk analysis. If we try to explain the reason(s) of a negative well, we find that, at least, one geological criterion was not fulfilled.
We analyse the main geological factors controlling the component risk of a block in order to focus on prospects situated inside the low risk target area:
- Source rock (presence & quality)
- Migration timing
- Charge (migration pathway)
- Reservoir (presence & quality)
- Historical exploration success rate in explored emerging area
Based on our analysis, we classify prospects as:
- very high risk,
- high risk,
- moderate risk,
- low risk,
- very low risk.
Final prospects ranking before decision-taking should integrate any other influencing factor inherent to commercial risk such as reserves threshold to discover for a given fiscal area, infrastructures’ availability, current or predicted oil market volatility,…matching the commercial objectives and strategy of the company.