Simulation analysis for integrated evaluation of technical and commercial risk

摘要

Decisons to invest in oil and gas field acquisitions or participating interests often are based on the perceived ability to enhance the economic value of the underlying asset. SThe realization of value, however, is a function of numerous outcomes which, in combination, may or may not meet economic expectations. Comon industry evaluation practice entails estimating most likely reservoir results, development plans and costs, prices and other factors within an economic framework. The risk of the opportunity is then assessed through sensitivities to key variables such as rates and reserves or costs, often through multipliers. Such an approach fails to explicitly acknowledge the uncertainties of the project or integrate the variables such that they interact as a system. The lack of understanding of the project volatility becomes more critical when the deal structure is negotiable and could be used to reduce the economic volatility.