Koch

I would like to welcome our subscribers to the July 2012 issue of SPE Economics & Management. SPE Econ &Mgmt 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 peer reviewed papers that represent the broad range of topics covered by SPE Econ & Mgmt:

Jumps in Proved Unconventional Gas Reserves Present Challenges to Reserves Auditing by Ruud Weijermars provides a challenging and perhaps controversial perspective on the effects that optimistic reporting of proved undeveloped reserves may have on volatility of gas price and resulting reserves revisions. The author compares the performance of four unconventional gas companies with four majors, which he represents as conventional gas producers. In concluding, the paper makes suggestions to improve the reliability of proved undeveloped reserves.

The Potential Pitfalls of Using North American Tight and Shale Gas Development Techniques in the North African and Middle Eastern Environments by Anthony Martin contrasts tight gas and shale gas development in North America with that of North Africa and the Middle East. He considers technical, economic, commercial and political differences. In addition to identifying the pitfalls of transferring North American development techniques, the author suggests areas where there is potential for tight and shale gas development in North Africa if some of the pitfalls can be overcome.

Two Factor Oil Price Model and Real Option Valuation: An Example of Oil Field Abandonment by Babak Jafarizadeh and Reidar Bratvold examines the flexibility of abandonment timing and the impact on asset value using a least-squares Monte Carlo method. The authors model future oil prices with an approach that considers both mean reverting short term prices and long term uncertainty of the equilibrium price. They demonstrate how increasing flexibility of the abandonment time can significantly increase value.

Is There Evidence of Super Cycles in Oil Prices? by Abdel Zellou and John Cuddington examines the long term trends and behavior of oil prices over time. In particular they suggest the their empirical analysis provides evidence of a super cycle in the period following World War II. They compare the timing of oil price super cycles with the timing of super cycles in metals prices and to the timing of industrialization and urbanization in global economic development.

Well Performance Monitoring (WPM): Creating Added Value from Raw Data--Application to the Girassol Deepwater Field Case by Furqan Khan, Victor Goujard, Pierre-Henry Tincelin, Marc Tison, Hugues Foucault and Nicolas Kessler is a case study describing the early results of the deployment of the Well Performance Monitoring pilot at Total’s Girassol Field in Angola. The authors illustrate the benefits in terms of improved well production and enhanced well diagnosis.

What the Mating Behavior of Birds Can Teach Us about Corporate Decision Making by John Lehman presents a somewhat provocative analogy between corporate decision makers and Australian bowerbirds. He looks at corporate decision making through a biological evolutionary lens and suggests that many of the approaches used in capital approval processes have evolved in ways to signal the project team’s suitability to the decision makers much in the same ways that mating behavior in birds indicates the suitability and survivability of the potential mate’s genetic strain. This paper presents a refreshing perspective on how a decision making culture develops in a corporation.

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 (Shell).

I am happy to hear your comments and suggestions about SPE Econ & Mgmt, please feel free to contact me at frank@kochdecisions.com.

– Frank Koch