Acquiring additional data in a basin (for example seismic acquisition or reprocessing) tends to be a costly and time-consuming affair. In many cases data acquisition programmes are simply considered an essential pre-requisite for doing exploration. However, justification to carry out such work can also be based on Value of Information (VoI) assessments.

Data acquisition for risk reduction

The VoI approach is often based on what is called ‘risk reduction’. We may be faced with a prospect that is commercially not very attractive because of a low POS. With a higher POS it might be of interest.

We can determine the commercial value of a prospect with the current POS and compare that with its value if the POS would be higher. A simple formula that can be used for such a calculation is:

Where: EMV = Expected Monetary Value

NPV = Net Present Value (the value of a discovery in today’s money)

COF = Cost of failure (the costs of an unsuccessful exploration campaign)

If the EMV is positive, it makes commercial sense to drill the prospect. If we could drill it many times, then, on average, we would come out with a profit.  The higher the POS, the greater the chance that the EMV is positive, and the greater the value of the prospect. With an estimate of the increased POS after the newly acquired data we can calculate the VoI of the data acquisition.

There is something strange about this. If we would indeed know that by acquiring additional data risks will be reduced, we shouldn’t need to acquire that data anymore. Why spend the money if we already know the outcome?

Preliminary versus final POS assessments

The point is, of course, that we have no guarantee whatsoever that a prospect POS will go up with new data. With more data we will probably better understand the prospect risks and its potential. We may be able to assess the POS and volumes with more confidence. But …, the point is that the POS may end up higher or lower. We cannot be sure without the data that we do not yet have.

Early on in exploration projects we may carry out a preliminary assessment of the POS of several prospects, as our company needs an early indication of the potential of an exploration opportunity. There may not be much hard data and understanding still needs to develop. Nevertheless, the assessment should be as sound and as realistic as possible. If we do a good job, then one should hope that on average our preliminary assessments are realistic. With additional data and better understanding the potential of some prospects will go up, and in others we may identify some critical risks that were not noticed earlier, and their potential goes down. But if we have done a good job, the average of all early assessments should not differ consistently from the average of all final assessments. With limited amounts of hard data, the POS values are more uncertain than in a final pre-drill POS assessment that is based on more data. But there is no guarantee that prospect risks will become lower (and that the POS will go up) with newly acquired data.

Data acquisition for POS polarisation

Additional data should improve our ability to distinguish the winners from the losers: on the one hand prospects that have a good chance to end up as a discovery, on the other hand the ones that are more likely to result in a dry well. If because of newly acquired data the POS of a prospect goes down making it unattractive to drill, then we have saved our company from wasting good money on a bad prospect.

The objective of new data acquisition should thus not be risk reduction, but POS polarisation.

Read the next volume of the blog series:

  1. Rethinking Trap Distribution Through Seal Effectiveness
  2. Reporting Risk & Volume Assessments: Key Insights and Best Practices
  3. The Bull’s Head Risk Matrix: A Data-Driven Approach to Risk Assessment
  4. Prospect Police versus the Socratic Method
  5. Exploring Stratigraphic and Combination Traps: Definitions, Risks, and Applications
  6. Optimizing Risk & Volume Assessments in Mixed Hydrocarbon Fields

View upcoming related courses:

Trap & Fault-Seal Analysis, Modeling for Oil & Gas and CO2

Prospect Risks & Volumes Assessment

Prospect Maturation

Play-based Exploration