Decision & Risk Analysis – Value of Information

Course Description

Strategic and tactical decisions about information gathering activities – initiating seismic and reservoir studies, drilling appraisal wells, consulting experts – are often complex and have highly uncertain outcomes and benefits. The intuitive reason for gathering information is straightforward; to the extent that we can reduce uncertainty about future outcomes, we can make choices that give us a better chance at a good outcome. However, the actual (ex-ante or before the fact) analysis and evaluation of the information value requires an understanding of several fundamental notions from decision analysis and probability theory.

This course is concerned with decisions about gathering information in the exploration and production (E&P) industry. In this context, the main purpose for gathering information is to improve decision clarity and quality. Acquiring decision clarity in such situations means making properly framed decisions with clear alternatives, appropriate information, considered preferences, and impeccable logic. However, in most situations in the E&P world we begin with “confusion.” Should we initiate a seismic survey to better quantify the oil in place? How much should we be willing to pay for more information? What’s the value of building extra flexibility into a development? Should we drill an appraisal well to better understand the required processing capacity? Is it worthwhile delaying development for 15 months in order to run an extended well test to improve our understanding of the fault sealing?

By taking this course you will develop an understanding of the concepts and ideas behind Value-of-Information (VOI) in the upstream oil & gas business. You will also learn to use specific practical tools & processes for analyzing and calculating VOI.

The course format combines interactive lectures, group work, and individual study. A number of examples and practical information gathering decision problems will be addressed – both in the lectures as well as in the practice sessions. Microsoft Excel will be used for many of the examples and exercises.

Who Should Attend

The course is designed for anyone involved in decision-making on information gathering (and most of us are): executives, managers or technical experts; producers or users of valuations. It is suitable for people with a range of technical experience, from those who have not been exposed to decision & risk analysis methods to those who may have explored the use of the latest in valuation ideas.

This course provides participants a practical, hands-on approach to modern techniques in petroleum risk management and decision-making. The techniques presented are applicable to all aspects of petroleum exploration and production - prospect evaluation, development planning, resource allocation, diversification, risk sharing, and corporate planning.