Achieving more reliable estimations of cost is desirable for the operators since the Authority for Expenditure (AFE) is likely to fail to predict the expenses within acceptable ranges due to uncertainties in the operational parameters. A new risk analysis method based on simulation of rate of penetration has been presented in this work to estimate the cost uncertainties. Variations of operational parameters are applied to provide the probability distribution of time and cost of the operations using a reliable ROP model through Monte – Carlo simulation. A real case study has been presented as well illustrating the efficiency and applicability of the methodology to mitigate and predict the embedded risks.
Risk analysis as a probabilistic approach has gained remarkable attention in a lot of engineering practices with respect to deterministic approaches. Deterministic models apply single values for parameters to obtain the results. However it is well known that parameters are not consistent and are all associated with a level of uncertainty. Therefore the final results will suffer from uncertainties which are applied to estimate the risk when the consequences are considered. Besides, there are several applications of risk analysis for which there is no deterministic procedure or model and assessment of risk can assist in estimation of probability of random events based on statistics. In the area of petroleum engineering, risk analysis has been applied in recent decades to estimate the possible outcomes. Reservoir engineering and formation evaluation practices are two areas which have utilized the probabilistic assessment procedures. Drilling engineering is also one of the areas which require probabilistic approaches since it deals with many uncertain parameters. In recent decades various applications of risk analysis in drilling operations have been developed. Newendorp and Root  as the pioneers of application of risk analysis in drilling engineering and deciding on the investments, published their first paper on the subject in 1968. In this paper they explained the advantages of application of a quantitative method with respect to qualitative decisions for drilling projects at the time when the paper was published. They stated that profitability of projects can be estimated more efficiently with risk analysis methods since there are various sources of uncertainty in the operations. By the quantitative methods, effects of unlimited number of parameters can be estimated as well as the analysis of sensitivity of the outcome with respect to these parameters. Later in 1975 , they explained the concepts of risk analysis more clearly in a separate paper. Cowan , believed that oil and gas production is associated with huge amount of uncertainties along with large investments. Therefore he recommended the application of risk analysis can measure the effects of uncertainties. He also proposed a model for risk assessment in development of hydrocarbon production. However his model was not aimed specifically for drilling engineering. His model could produce possible distribution functions of the potential outcomes of exploiting the new reserves based on probabilistic geological,engineering and economic data.