2020. 10. 19.

Risk tables for less biased and more consistent estimation of probability of geological success (PoS) for segments with conventio…

Risk tables for less biased and more consistent estimation of probability of
geological success (PoS) for segments with conventional oil and gas prospective
resources

Alexei V.Milkov1

Sasol, Johannesburg, South Africa

Received 17 October 2014, Revised 15 August 2015, Accepted 18 August 2015, Available online 24 August
2015.

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https://doi.org/10.1016/j.earscirev.2015.08.006 Get rights and content

Abstract
Oil and gas explorers routinely estimate the probability of success (PoS) of exploration projects,
which is used for the calculation of risked prospective resources, their expected monetary value,
ranking of the prospects and exploration portfolio management. Most often, the estimation of the
geological PoS is based on subjective judgments about probabilities for individual geological risk
factors. However, such subjective probabilities are not reliable in the low-validity environments
with significant degrees of uncertainty and unpredictability, to which many exploration projects
belong. When explorers assign probabilities for risk factors, they are geared by their variably
incomplete knowledge and fragmentary experience, use judgmental heuristics under the influence
of cognitive and motivational biases, and are prone to logical fallacies (unless they are aware of
these limitations and account for them in scientifically responsible ways). As a result, assessments
of geological PoS tend to be inconsistent across an exploration company, which leads to biased
portfolios that fail to deliver on promise. Recent research and experience from other industries
suggest that algorithms are superior to expert judgments in low-validity environments. This paper
presents a review of relevant literature on the psychology of decision making and risk assessment
methods used in petroleum exploration, and proposes a new algorithm for geological PoS
assessment, realized in the form of systematic risk tables for probabilities of six geological risk
factors (structure, presence of reservoir facies, reservoir deliverability, seal, source presence and
maturity, and migration). The risk tables enable explorers to convert geological information into
quantitative probabilities while counteracting the deficiencies of expert judgment and reducing the
effects of biases. The risk tables take into account both the data-derived and model-derived
positive, negative and neutral evidence for each of the risk factors, utilize the most elementary,
fundamental and relevant subsurface information and can be used in a wide variety of exploration
projects. The risk tables shift the focus of geological risk assessment from arguing about the
probability values to a more objective and consistent evaluation of subsurface data and models.
Probabilities are extracted from risk tables in a manner transparent to all involved, including peers,

https://www.sciencedirect.com/science/article/abs/pii/S0012825215300301 1/2
2020. 10. 19. Risk tables for less biased and more consistent estimation of probability of geological success (PoS) for segments with conventio…

managers and investors. Implementation of the risk tables will allow explorers to dispassionately
and consistently put high PoS values on relatively low-risk prospects and low PoS values on
relatively high-risk prospects, and would enable managers to make well-informed drilling
decisions. The use of risk tables will lead to less biased prospect inventories, effective portfolio
management and better long-term exploration performance.

https://www.sciencedirect.com/science/article/abs/pii/S0012825215300301 2/2