SPE Projects, Facilities & Construction
Volume 6,
Number 4,
December 2011,
pp. 239-247
Summary
During the concept comparison and selection phase of capital projects,
decision makers compare development options and select one option to carry
forward to detailed engineering. This effort is often complicated by
uncertainty in one or more of the critical inputs. Therefore, project teams
typically investigate how different assumptions about the uncertainty influence
optimal decisions. In cases where initial investment decisions are costly to
change, the analysis of facility flexibility increases in importance. The goal
is to find the optimal balance between initial capacity and the allocation of
space and other resources for future expansion. This paper reports the results
of a research project in which the authors develop an integrated asset model
for a hypothetical deepwater asset and use the model to investigate various
aspects of facility design under uncertainty. The method produces estimates for
the optimal initial capacity, the likelihood of expansion, the expected size of
expansion, and the willingness to pay for the option to expand. The approach is
systematic; the model solves quickly and, thus, enables a wide scope of
uncertainty analysis. The graphical output is intuitive and facilitates
communication between the facility engineer, subsurface engineers, and
management.
© 2011. Society of Petroleum Engineers
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History
- Original manuscript received:
31 October 2010
- Meeting paper published:
20 September 2010
- Revised manuscript received:
22 March 2011
- Manuscript approved:
26 April 2011
- Published online:
14 December 2011
- Version of record:
16 December 2011
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