How to understand and report Prospect Volumes
The results of Risk & Volume assessments of prospects are often communicated by quoting the POS and the MSV. For example: The POS of the prospect is 45%, and the MSV is 14.7 million barrels of oil.
It looks like this says that there is a chance of 45% to find 14.7 MMBO; doesn’t it?
But that is not what it is! What it really means is that there is a chance of 45% to make a discovery, and that the average of the volumes that we could find is 14.7 MMBO.
I know that most of us know this, but we do not always realise it – and neither do our bosses!
A more complete way to report the results of an R&V assessment is to mention the POS together with the P90, P50 and P10 volumes that have been calculated. Then we get an impression of the range of volumes that may be fund. The P90 is a ‘reasonable’ indication of the low-side volume, the P10 is a ‘reasonable’ indication of the upside volume.
A more compete answer still is to also show the Expectation Curve that has been constructed by the probabilistic tool we have used:
The Expectation Curve gives almost the full picture of the volume we may find.
Note that I have also indicated the MSV volume on this plot.
Next to the expectation curve our R&V tools illustrate the probabilistically calculated volumes in the form of a probability density function (PDF). That representation is also very useful, as from it we can see the ‘mode’ (= most likely) of the volume distribution, and the range of most likely volumes:
In this example, the Mode is approximately 8.5 MMBO.
Interestingly, the MSV is much higher. In this case the MSV is about 1.7 times the Mode.
As the Mode is the centre point of the most likely range of volumes, are we not fooling ourselves by quoting the MSV (which falls just outside the range of most likely volumes)?
Yes we are; at least to some extent. If we could drill the prospect 100 times, then we would find on average the MSV (the average of all discovered volumes). But unfortunately, we can drill the prospect only once.
If you are a betting man or girl, you would place your bet for the volumes we could find on a number around the mode: in the range of most likely volumes, which we can see from the PDF plot.
We can also see from the first figure that the MSV volume is approximately a P36 volume. This means that in case of success, there is just a 36% chance to find a volume more than the MSV, and a 64% chance to find less. If you had reported just the MSV to your boss, then this is more likely to result in disappointment when a discovery has been made than in a pleasant surprise.
It gets worse!
We also want to know what the POS is for making a commercial discovery. After all, we are not here to find ‘technical successes’; we are a business. Let’s say that the minimum volume for commerciality is 10 MMBO.
Applying a commercial cut-off to the expectation curve eliminates all smaller volumes.
The expectation plot shows that 10 MMBO (the commercial cut-off volume) is a P60 volume. This means that in case of a (technical) success, there is a 60% chance to find more than the commercial cut-off. This simply means that the POScom is 60% of 45% (the POSg) = 17.5%
The MSVcom (the MSV after having applied the cut-off) is higher than the MSV without a cut-off. After all, we don’t count the small volumes anymore. In this case the MSVc = 20.4 MMBO: a P22 volume. In case of success there is only a 22% chance to find more than the MSVcom.
If we had mentioned just the POScom and MSVcom to our bosses, then he/she is even more likely to be disappointed with the discovered volume. There is a 78% probability that the discovered volume is less than the MSVcom.
Our probabilistically calculated prospect volumes always display a lognormal shape, and this means that the Mode < P50 < MSV. And the MSVcom is even further in the tail of the Expectation Curve. We may find a volume close to the MSVc,om but there is a (very) high chance to find less.
The best way to report prospect volumes is to show the Expectation Curve and PDF of the calculated volume range, and to mention not only the MSV, but also the P90, P50 and P10.
The MSVcom is used for exploration economics but is best not reported in any other context.
If you can just report just one number, then it is best to choose the P50 (equal chance to find more or less). Maybe you would prefer choosing the Mode, but that is not a very stable number. I know it is tempting to mention the larger volumes, but then you do set yourself up for disappointment.
Read the next volume of the blog series:
- Rethinking Trap Distribution Through Seal Effectiveness
- The Bull’s Head Risk Matrix: A Data-Driven Approach to Risk Assessment
- Prospect Police versus the Socratic Method
- Data Acquisition for Exploration: Risk Reduction or POS Polarisation?
- Exploring Stratigraphic and Combination Traps: Definitions, Risks, and Applications
- Optimizing Risk & Volume Assessments in Mixed Hydrocarbon Fields
View upcoming related courses:
Trap & Fault-Seal Analysis, Modeling for Oil & Gas and CO2
