Page 130 - Well Logging and Formation Evaluation

120 Well Logging and Formation Evaluation

60
50
40
30
Cost / Value 20 NPV+COI
COI
NPV
10
0
0 50 100 150 200
–10
–20
Information

Figure 8.1 The Value of Information

the field, since there are no decisions left to be made that can lead to
greater revenue on the basis of the information. An example would be
acquiring a core in a field one month before abandonment—the data
cannot be used to change anything, so the money is just wasted.
At this point it is important to get a feel for the relative amounts of
money one is talking about, at least with respect to the impact of logging.
Say that very early in the life of an assumed 50-MMbbl field, prior to
designing any facilities, it is decided to include nuclear magnetic reso-
nance (NMR) logs in all the early development wells. This comes at a
cost of half a million dollars, but it is assumed that the tool always gives
correct results. The logs are justified because of known concerns about
the conventional evaluations, since it is considered that there is a 30%
chance that the stock tank oil initially in place (STOIIP) is being seriously
underestimated and could be as high as 75MMbbl.
Consider what will happen if the logs are not run. The $500,000 will
not be spent. There is a 70% chance that the facilities will be designed
correctly and that the field will realize an NPV of, say, $500 million. There
is, however, a 30% chance that the STOIIP is in fact 75MMbbl. If this is
the case, then the facilities designed for 50MMbbl will be suboptimal and
will result in deferred production and slightly less ultimate recovery
factor. The economic impact of this would be such that the NPV would
be only $650 million.