American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.
A number of authors have discussed the application of Monte Carlo simulation methods to the economic evaluation of exploration ventures. The ultimate results of such simulation will be directly proportional to the dry-hole risk associated with the venture. This paper deals, first, with a method of evaluating dry-hole risk and, second, with a method of minimizing the impact of bias or emotion on the probability estimates used.
It is suggested that the occurrence of hydrocarbon reservoirs requires the simultaneous occurrence of a means of entrapment, porous and permeable rock, and hydrocarbon accumulation. permeable rock, and hydrocarbon accumulation. With respect to an individual prospective hydrocarbon reservoir, the probabilities of each of these events will be independent. In evaluating the probability of occurrence of any one of these events, the explorationist may have more than one independent analytical method at his disposal. To evaluate the probability of occurrence of accumulation, for example, the explorationist may have statistical data regarding the occurrence of hydrocarbons in traps within a particular formation, and may also have "bright spot" or seismic amplitude data that each provide independent indications of an accumulation in the prospect considered. The method proposed makes use of statistical-set theory, first, to combine independent indicators of each of the required three events (trap, porous and permeable rock, accumulation) and, porous and permeable rock, accumulation) and, second, to evaluate the probability of the simultaneous occurrence of the three events. Once dry-hole risk is determined, Monte Carlo simulation methods, widely discussed in the literature can be used to determine an "expected value" and a profitability distribution for the successful ventures.
Also proposed is a method that the authors believe may tend to reduce the impact of bias or emotion on the necessarily subjective probability estimates used. A "check list" has been devised to arrange possible indicators of entrapment, rock characteristics and accumulation in a probability related order. Use of the check list probability related order. Use of the check list tends to reduce the range of probability estimates that might be made by different explorationists if a less structured approach were used.