SPE Economics & Management
Volume 3, Number 3, July 2011, pp. 141-148

Summary

This paper outlines a method for applying stochastic representations of key macroeconomic parameters and risks in evaluating the portfolio value of resource plays. Stochastic pricing, costs forecasts, and regulatory uncertainties are often neglected or are applied improperly when evaluating what are typically considered to be low-risk resource opportunities. Portfolio allocation and project-development timing may be critically dependent upon these macroeconomic variables, particularly given the long production life and operationally intensive nature of many resource opportunities. The techniques described in this paper will allow corporate planners and exploration-and-production (E&P) executives to better leverage their opportunity inventory and ensure that resource-play development plans are in alignment with stochastic pricing or other macroeconomic forecasts. A model of a typical E&P portfolio with numerous resource plays will be used to demonstrate the basic methodologies and the insights made possible through application of these techniques. This will include analysis of leasing options, pilot-project evaluation, development-timing and -pacing options, and portfolio balance under various macroeconomic conditions. The characteristics of project-level analysis will be contrasted to the decisions and insights made possible through a holistic portfolio-based approach.

© 2011. Society of Petroleum Engineers

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History

• Original manuscript received: 21 October 2010
• Meeting paper published: 21 September 2010
• Manuscript approved: 8 December 2010
• Version of record: 14 July 2011