Oil & Gas

A New Feature that makes Sequential Drilling Decisions Easy

6 Well Sequential Drilling Problem

A common and challenging decision problem in the oil & gas industry is to decide how to explore an oil field. Typically there is a cluster of prospects, giving rise to a highly dependent set of uncertainties, according to their proximity and the geology of the area. For example, if you drill a well at one site and strike oil, it's more likely that a nearby prospect will also have oil. If you drill a few "dry holes", you'll probably give up on the field rather than throw good money at potentially poor prospects. This makes intuitive sense, but until recently it was tough to model in a decision tree.

Would You Like Fries with that? Reflecting on the Value of Cheap Information

Larry Neal's recent column in September's Decision Analysis Today talks about the value proposition of Decision Quality (DQ), and a key point is the Value of Information (VOI). One of the most powerful things about decision analytic methods is the ability to explicitly calculate the value of information, in order to make an intelligent choice about whether to buy it.

Building Long-lived Decision Models

Are you building a house, or just pitching a tent?

When you read about decision analysis models in case studies, they're usually described in the narrative as part of an epic process, one that begins with organizational angst and ends with a resounding consensus to pull the lever on that "irrevocable allocation of resources". Right, and sometimes that really happens! But more often, the allocation of those resources is gradual, and even when a single large chunk of capital has been committed, there are steps along the path where the project is reevaluated.

Backcasting: Telling a Story of $20/bbl Oil

Back in January, I wrote a post about falling oil prices, which were then dipping below $50. While your friendly neighborhood analytic software vendor is not in the business of forecasting commodity prices, we hate to pass up an opportunity to talk about ubiquitous uncertainty, and oil prices are a classic example.

HBR on Chevron's Approach to Decision Making

Larry Neal and Carl Spetzler have a recent article in Harvard Business Review which explains Chevron's multi-decade commitment to Decision Quality (of which Decision Analysis is a key part).

This is a bit like when that alternative band you've been listening to forever ends up playing on Saturday Night Live -- you think "Gee, I thought nobody else knew they were good".

Oil prices are so not surprising

We don't usually use this space to comment on swings in the commodity markets, but the recent and ongoing plunge in oil prices is hard to ignore. For people in the energy industry, the news is generally bad, whether they're in petroleum or its alternatives. For most others, the news is good, akin to the economic tailwind provided by a broad based tax cut.

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