by Peter Carragher
I have been engaged with teams in reviewing and assuring plays and prospects since the late 1990s. I think it’s important to keep the title of this brief note front and center as a constant reminder that there is always something to learn. Continuing to learn will improve your ability to be effective in prospect evaluation and remain a valued contributor. Here are four areas to consider.
A prerequisite for learning from failures is the absolute necessity for rigorous written documentation of the pre-drill assessment. That must include all the pre-drill geological and geophysical assumptions, as well as the actual parameters and chance assessment logic you and the team used to build the assessment. Particularly instructive is writing down the possible failure modes for the prospect so you can determine if the actual failure was a surprise or not. The assignment of chance to the individual elements should reflect these concerns. Over time, you can determine the dominant failure modes in your program and take steps to address those issues with technology, or with different decisions.
Over estimation of discovered resources is a common problem, sometimes offset in a portfolio by underestimation of the chance of success, a classic case of two wrongs sort of making a right. What is happening here is that the relative ranking of prospects is incorrect, and that has consequences in the management decisions about the portfolio. For example, a company decided to drill a prospect at 100% and reject a valid farm-in / interest swap offer because the prospect resource and value was estimated to be very large. Unfortunately, one of the major risks was not recognized pre-drill. Not only was the well a dry hole, but the counterparty well was a commercial discovery.
One of the benefits of positive interaction in an assurance review is that the experience of the assurance team can help the project team in their technical work, prospect description and communications. Less well appreciated, is the necessity that the assurance team learns from the project team. Project teams bring diversity of thinking, new technology, different visualizations, new interpretation models, and the details of local geoscience data to bear on prospects. Careful, respectful listening and seeking to understand that point of view is a prerequisite for long term success in assurance.
Technological advances in the geosciences contribute towards increased specialization. Special effort is required to really learn what is going on in these specialized sub-disciplines, and how they interact with each other. For example, a 3D oil and gas migration model is critically dependent not only on the geochemistry of the source rock, but also the crustal mode that drives the temperature profile, biostratigraphy determining the ages of the burial sequence, geophysics generating depth maps and sequence stratigraphy predicting the distribution of permeability that controls migration vectors.
There is also much to learn from the wider set of disciplines involved in subsurface projects. You will become a better geoscientist if you take the time and put in the effort to learn from your colleagues in reservoir engineering, reservoir modeling and simulation, drilling, and production engineering, to list some of the opportunities. Assurance teams are best served by individuals who have taken this step, integrating learning across disciplines.
Whether you are involved as an assurance team member, or as a project team member, assurance presents a series of great opportunities to learn something new. Take them!
Pete Carragher has been the Managing Partner of Rose & Associates LLP since July 2014. Prior to joining R&A in 2010, his last role at BP was VP of Geoscience and Exploration, working as a member of BP’s global exploration leadership. Pete and his team introduced systematic risk and volume assessment, and assurance, into Amoco in 1990. Since then, he has evaluated hundreds of prospects from most of the world’s productive and frontier basins.
by Juliet Irvin, Guest Contributor
As an experienced assurance professional, I have seen many different approaches to assurance over the years, some more successful than others. The first part of this article explores when and how assurance can be most effective, the role of the outsider, the importance of putting things into context and testing assumptions.
Early engagement between the assurance team and the technical team is absolutely key. For example, if the assurance team sees the prospect for the first time in the technical reviews (when usually a large proportion of the work has already been completed), it may be too late to steer the analysis and correct any errors, thus exposing a business decision to an incomplete or flawed evaluation.
Imagine an alternative approach, where a member of the assurance team is involved from the beginning of the prospect characterisation and can assist the technical team throughout. Together they can frame the business questions which must be addressed and design an evaluation that is fit for purpose and adds value. For example, there is little value to be had from a very detailed prospect assessment, separating out every fault and reservoir segment, when the business decision at hand is whether to bid a 2D seismic survey to secure a block in a frontier area. This would be a significant waste of time and resources that could have been easily avoided.
There have been many discussions about project teams conducting their own assurance process while evaluating prospects, vs. the need for external assurance. Which method works best? Having been involved with several hundred prospect assessments, I’m convinced that assurance works most effectively when an impartial and independent person is involved, and that person can contribute by:
Any prospect assessment is only as good as the inputs (“garbage in, garbage out”), so another key aspect of assurance is understanding what is behind the numbers. For example:
We will now take a closer look at each of these components to explore how impartial assurance, and hence an outsider view, can be an integrated and valuable part of project evaluation.
This may sound like an obvious question, but when this is not clearly understood, it can cause significant problems. To avoid different assumptions, it is important to describe explicitly the geologic model of the prospect being assessed. For example, are we assessing the chance of sand or the chance of a specific environment of deposition? These are not necessarily the same thing. Are there additional geologic models / scenarios, which could yield a success case? Do they need to be characterised at this stage, to maximise understanding of the value of the prospect? Drawing out this clear description up front ensures a common understanding for the technical, management, and assurance teams, and helps to mitigate erroneous assumptions.
When considering analogues, it is vital to consider how likely those scenarios are to occur. For example, if they are highly optimistic cases, management need to be aware of that for subsequent valuation and decision purposes.
When conducting a prospect assessment, the technical team will provide a range of values for each of the input parameters, e.g. porosity, net-to-gross (NTG), saturation, etc. Understanding the basis of these ranges is an important part of the assurance process.
For example: when characterising the NTG, we are usually looking to describe the full range it can average across the prospect, given success. Often the ranges in the assessment do not honour this concept – for example, we may get a maximum NTG value from a single well, or a minimum NTG value seen in a core sample, without considering if those values could represent the minimum to maximum average for the prospect as a whole.
In my experience, a useful way of testing for plausible ranges is to ask geoscientists to draw minimum and maximum NTG maps depicting the environment of deposition (Figure 1). This requires the interpreter to explicitly describe the geologic scenarios which would give rise to those extremes and consider if they are appropriate, and then modify their assessments if needed.
Figure 1. Reservoir geologic scenarios for a prospect (dashed outline) in the SE quadrant of the map
“Assess early and assess often” was a mantra often heard from one of my mentors, and it ties in directly with another one: “what business question are we trying to answer?”
Most technical evaluations have both a divergent ideas stage and a convergent stage. Initially the teams are using their creativity, seeking all available information and coming up with ideas of which areas and reservoirs may be prospective. When concepts start to converge, this is a useful stage to engage with the assurance team, to conduct an early prospect assessment, and explore which aspects of the evaluation have the biggest impact on the results. Figure 2, for example, shows that GRV has the greatest impact on the estimated resources with Recovery Factors influence being minimal.
Figure 2. Resource parameters and their influence on the resource assessment.
This can ensure the remaining work effort is focused on the most impactful inputs (in this case, GRV), thus avoiding spending time and resources on work that will make little difference to the business decision.
It is very easy to plug numbers into a volumetric software package and calculate a range of outcomes. But are the outcomes meaningful? Do they address the relevant business questions? This is where assurance can help, contributing with early and active engagement, an outside facilitator, an open listening mindset, and some techniques to practically engage with the technical team.
In my view, a key sign of success is when there are no major surprises at the final project reviews, because all relevant aspects of the assessment have already been tested, documented, and addressed along the way with an analysis that has directly addressed the business questions in order to support timely and appropriate decision making.
Management decisions are more informed when the assurance team participates as an advisor, participating in discussions to understand any concerns and provide an independent view of the technical inputs into the analysis and the associated justifications, identify any biases that may have been in play, and communicate the critical risks and uncertainties with the prospect. This can help ensure the conversation is focused on the geologic concepts underlying the analysis, rather than just the numbers coming out. If management concerns are still valid, the assurance team can work with the technical team to address and revise the evaluation if appropriate.
At the end of the day, all technical assessments should help the decision makers make better business decisions by having the right information and analysis available.
Juliet is an advanced Risk and Uncertainty Specialist and Geoscientist. She has 22 years’ experience with ExxonMobil (1998-2021) spanning Oil & Gas Exploration, Development, Production, Research and IT, and has been an Assessment and Assurance advisor / specialist for over 10 years. She also has more than 14 years’ experience running professional training classes including Risk & Uncertainty and Prospect and Play Assessment.
