Chance of Development: Definition, Estimation, and Use

Topics: Petroleum reserves
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Chance of Development (CoD) is commonly used as an input to economic assessments and valuations where it is often quoted with little explanation of the framework used. In such circumstances, it may be misleading and overly simplistic to multiply the project net present value (NPV) by a single CoD factor to derive a risked NPV as a proxy for value. This paper will examine ways in which CoD can be defined better, methods for its estimation, and its appropriate application along with common misuses.

Introduction

The Petroleum Resources Management System (PRMS) is an international standard petroleum-reserves-and-resources classification system based on industry best practices and is described in detail in the complete paper. The PRMS encourages the use of subclasses that provide some qualitative assessment of CoD. These subclasses include

This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper SPE 170747, “Chance of Development: What Is It? Can We Estimate It? How Should We Use It?,” by Doug Peacock, SPE, and Tracey Jennings, SPE, Gaffney, Cline & Associates, prepared for the 2014 SPE Annual Technical Conference and Exhibition, Amsterdam, 27–29 October. The paper has not been peer reviewed.
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Chance of Development: Definition, Estimation, and Use

25 November 2015

Volume: 67 | Issue: 12