Koch

Here I sit at the start of January 2011 trying to get my mind around a new year. It has been sunny but freezing in Eugene, Oregon, and I am currently sipping a cappuccino in my favorite coffee shop while the Eugene old-timers sit outside exhaling steamy breaths while soaking up the rare rays of January sunshine, knowing that clouds and rain are only a few days away. 2010 was a year of change for me. I bought a home in Eugene, Oregon, sold our home of 20 years in The Woodlands, Texas, and currently live on sofas in Continental Airline's Presidents' Clubs; talk about living with uncertainty! Early in 2011, change will continue as I plan to retire from Chevron after a 31-year career. This will allow me to spend more time on my various projects with SPE, the Institute for Operations Research and Management Sciences (INFORMS)/Decision Analysis Society (a society within INFORMS), and the Society of Decision Professionals, maybe even get my executive summaries submitted to SPE before the deadline! This is also a month of significant change for SPE Economics & Management as we move from semiannual to quarterly in 2011. I would like to welcome those who have recently subscribed to our growing readership. For continuing subscribers, with twice the number of issues per year your subscription has doubled in value at no increase in cost! Who says we're not in recovery? SPE E&M covers a wide range of topics of interest to petroleum engineers, managers, and others involved in the energy business, including resource and reserve evaluation, portfolio and asset management, project valuation, strategic decision-making and processes, uncertainty/risk assessment and mitigation, systems modeling and forecasting, benchmarking and performance indicators, information and knowledge management, digital energy, and petroleum economics. In this issue, we have six very diverse and interesting papers. The papers cover the full range of the oil and gas field lifecycle from initial unitization of a field and reserves definition, integrated oil and gas field operations to abandonment and decommissioning. We have five new peer-reviewed papers:

Contemporary Challenges in Unitization and Equity Redetermination of Petroleum Accumulations by Paul Worthington examines unitization of fields that straddle license or international boundaries and how issues such as field marginality, market volatility, reservoir complexity, hidden pay, and the presence of multiphase hydrocarbons might challenge the value added because of the efficiencies of development as a result of unitization. The paper examines alternatives to unitization that may benefit the owners of straddled licenses with some illustrations from North Sea case studies.

The "Reliable Technologies" Rule: What Did the SEC Intend? by John Lee presents an analysis of SEC publications to provide insight into the definition of "reliable technologies" and their role in the US SEC's new regulations for reporting oil and gas reserves. The SEC's new regulations are more flexible and less prescriptive than prior regulations, and Dr. Lee's paper helps bring some clarity to the practical application of the new rules.

A Risk-Adjusted Method for Determining OCS Lease Abandonment Liability in the Gulf of Mexico for BOEMRE Supplemental Bonding by Mark Kaiser and Bernard Kruse III is a very relevant paper given the increased focus on the liabilities associated with offshore oil and gas development. Since the early 1990s, the Minerals Management Service has required supplemental bonds to be posted to help protect the government from the cost of decommissioning offshore infrastructure in cases where the lease owners cannot meet the financial liability themselves. This paper proposes an improvement to the bonding formula with some risk-adjusted alternatives that balance the need of the government to minimize its decommissioning exposure at an acceptable level of risk.

Realizing Value From Implementing i-field™ in Agbami--A Deepwater Greenfield in an Offshore Nigeria Development by Sathish Sankaran, Moses Olise, David Meinert, and Ankur Awasthi presents a case study of methodology used to implement a "digital oil field" program in the deepwater Agbami field in offshore Nigeria. The paper describes the value realized from the program, including reduction of lost production, increased efficiency, improved ultimate recovery, and improved performance because of standardization of base business work processes. It also describes the change management approaches used to ensure end-user acceptance.

The Future of Integrated Operations by Jim Crompton and Helen Gilman reflects on the implementation of integrated operations, as illustrated in the Agbami paper above for example, and considers how the industry can build on what it has learned and ensure that integrated operations does not become a passing technology fad. The paper documents Chevron's experiences and lessons learned and makes some predictions about future trends and challenges.

In addition to our peer-reviewed papers, we are continuing our feature called "Worth a Second Look." In each issue, we include a significant paper that SPE has published in the past that we believe deserves renewed attention. Many of our current members may not be aware of these papers, or may not have read them in a long time. Although our thinking in economics, decision making, and management has evolved over the years, many of these articles have true relevance today. For this issue, we take a second look at Paul Newendorp’s paper Bayesian Analysis--A Method for Updating Risk Estimates originally published in JPT in February 1972. This paper is one of the early SPE manuscripts on using Bayes' theorem for updating our beliefs about uncertainties. Updating our beliefs as we learn during the exploration for and development of hydrocarbon resources is a process where I still see many errors and biases resulting in poor decisions. Take a look at Newendorp's paper and think about how you use, or misuse, Bayes' theorem.

As a subscriber to SPE E&M you may be interested in a reprint volume has recently been published. Oil and Gas Property Valuation and Economics is a collaboration between the SPE and the Society of Petroleum Evaluation Engineers (SPEE) that has collected 30 papers published over the past 30 years. I would also like to remind you that we have a call for papers for our upcoming special issue dedicated to management issues related to CO₂. The focus will be on the current state of play with respect to regulation, legal, tools for economic analysis, and other management challenges. Sean McCoy of Carnegie Mellon University has agreed to serve as the editor of this special volume. If you are working in this critically relevant area, please consider submitting a manuscript to our special issue.

As always I would like to thank and acknowledge our editorial review committee for their continuing hard work. This group is made up of a distinguished group of seven associate editors: Stephen Begg (University of Adelaide), Reidar Bratvold (University of Stavanger), Gary Citron (Rose & Associates), James Crompton (Chevron), John Howell (Portfolio Decisions Incorporated), Omowumi Iledare (Louisiana State University), and. Christopher Jablonowski (University of Texas, Austin).

I am happy to hear your comments and suggestions about SPE E&M, please feel free to contact me at fgko@chevron.com. – Frank Koch