I would like to welcome our subscribers to the October 2011 issue of SPE
Economics & Management. 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 my last executive summary, I
mentioned a new reprint volume recently published by the SPE. Decision
Analysis in E&P is part of the new "Getting up to Speed" series of
reprint volumes published by SPE for young engineers or experienced engineers
growing their skills in a new discipline. The volume contains 18 papers that
range across the field of decision analysis in the E&P business.
Decision Analysis in E&P is not published in print; books and
magazines are going the way of slide rules, hand-drawn maps, and stone tablets;
but it is available for download to your 21st century device by going to the SPE online bookstore.
In this issue, we have five peer-reviewed papers that represent the broad
range of topics covered by SPE E&M.
Valuation of Swing Contracts by Least-Squares Monte Carlo Simulation
by Bart Willigers, Steve Begg, and Reidar Bratvold examines how flexibility can
create value in natural-gas contracts and uses least-squares Monte Carlo
simulation to quantify that value. The authors demonstrate how gas producers
could benefit from improving their understanding of swing contracts and capture
value from price volatility that would otherwise accrue to the traders.
Optimization of Equity Redeterminations Through Fit-for-Purpose
Evaluation Procedures by Paul Worthington considers the inadequacies of
many of the technical procedures associated with equity redetermination and
suggests some high-level protocols that may avoid some of the short-comings of
current techniques and support a more efficient and effective redetermination
Through a series of five case studies, Improving Allocation and
Hydrocarbon Accounting Accuracy Using New Techniques by Ron Cramer, Dave
Schotanus, Kolin Ibrahim, and Nick Colbeck describes Shell’s experience with
improving allocation accuracy using a continuous hydrocarbon accounting process
and more effective use of available production data.
Demonstrating Reasonable Certainty under Principles-Based Oil and Gas
Reserves Regulations by Rod Sidle and John Lee examines the concept of
"reasonable certainty" of future hydrocarbon recovery and how the move from a
rules-based to a principles-based approach in the 2008 US Securities and
Exchange Commission regulations has affected reserves evaluation. The paper
describes the challenges to the reserves evaluator in which compliance to
detailed reporting rules has been replaced by adherence to the principles of
responsible business practice.
Unconventional Natural Gas Business: TSR Benchmark and Recommendations
for Prudent Management of Shareholder Value by Ruud Weijermars and Steve
Watson provides a good summary of the unconventional-gas business. The authors
compare the financial performance of unconventional-gas producers with the
performance of major oil and gas companies and draw some conclusions about the
profitability of the unconventional-gas business.
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 we believe deserves renewed attention from our readers. 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 have looked beyond the SPE literature and selected a paper
that was originally published by the American Association of Petroleum
Geologists (AAPG) in their Bulletin in July 1997. The AAPG has
graciously allowed us to republish the paper in this issue of SPE
E&M. We invite you to take a second look at A Process for Evaluating
Exploration Prospects by Robert M. Otis and Nahum Schneidermann. This paper
examines how Chevron improved its assessment of key uncertainties in their
exploration prospects and how that process improved their risk assessment.
Although the paper focuses on exploration, their techniques are broadly
appropriate for the assessment of key uncertainties in the evaluation of any
development or production project. Because of SPE's agreement with AAPG, this
paper will only be available online for 3 months, while the October issue is
current, and will not be archived. Subscribers, of course, can download the
paper during that period but, after December, will have to access the paper
through the AAPG archives and pay the appropriate download fee.
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: Dr. Steve Begg (University of
Adelaide), Dr. Reidar Bratvold (University of Stavanger), Gary Citron (Rose
& Associates), James Crompton (Chevron), John Howell (Portfolio Decisions
Incorporated), Dr. Wumi Iledare (Louisiana State University), and Dr. Chris
Jablonowski (The University of Texas at Austin).
I am happy to hear your comments and suggestions about SPE E&M,
please feel free to contact me at email@example.com.