Page 382 - Hydrocarbon Exploration and Production Second Edition
P. 382
Risk Analysis 369
TRUE 0.3
Develop
Appraisal Cost 10 60 50
30.0% Decision
55 MMb 60
0
FALSE 0
Do not develop
0 0
TRUE Risk weighted outcome
Appraise
0 108
TRUE 0.4
Develop
100 90
40.0% Decision
101 MMb 100
0
FALSE 0
Do not develop
0 0
TRUE 0.3
Develop
200 190
30.0% Decision
174 MMb 200
0
FALSE 0
Do not develop
0 0
EMV of decision
Appraise Discovery A
108
FALSE 0
Do nothing
0 0
30.0% 0
55 MMb
40 40
FALSE Risk weighted outcome
Develop
0 94
40.0% 0
101 MMb
100 100
30.0% 0
174 MMb
140 140
Fig. 15.3 Value of information calculation using decision tree analysis.
15.3. Risk Analysis for Major Capital Investments in
Projects
Risks can represent potential negative impact or upside opportunity, and are
identified in order to plan mitigation against those with a potential negative impact
and to take advantage of upsides identified.
For major capital projects, it is common to perform risk analysis at several stages
of the development planning, so that risk items can be identified early and actions
planned accordingly. A general criticism of the industry is that companies progress
too far with planning of projects which eventually prove to be unfeasible – early
identification of this is clearly more efficient. To assist this, a stage-gate process is used
by many companies.
The stage-gate process breaks the project into phases, with an approval required
at each stage before progressing through this ‘gate’ to the next stage. The earlier a