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The Leading Edge; February 2004; v. 23; no. 2; p. 165-168; DOI: 10.1190/1.1651465
© 2004 Society of Exploration Geophysicists
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Delivering on our E&P promises

P. R. Rose

Rose & Associates, LLP, Austin, Texas, U.S.

The first 20% of the full text of this article appears below.

Over the last twenty years of the 20th century, exploration departments of most E&P companies habitually delivered only about half of the new reserves they promised to their directors. In the Norwegian sector of the North Sea, over an extended period, all active participants together delivered only 38% of expected reserves (Figure 1).
Rose


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  		Figure 1. Habitual under-delivery: 8th to 14th licensing rounds, Norwegian North Sea.

 
As BP showed, technology is not solving the problem: for 125 consecutive global deepwater prospects drilled in the 1990s decade—a campaign that utilized state-of-art technologies—BP's exploration delivered only 45% of expected reserves (Figure 2).


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  		Figure 2. Habitual under-delivery: global deepwater.

 
Furthermore, this is not just an "exploration problem"—many of our clients also privately confess a persistent inability to achieve their annual production goals. John Campbell (Figure 3) showed that nearly all production projects fail to meet their forecast rates—and the "good news" to the right doesn't begin to compensate for the "bad news" to the left.


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  		Figure 3. Errors in production volume estimates.

 
Ed Merrow of IPA, a widely recognized benchmarking authority, recently summarized performance criteria from more than 1000 development projects (Figure 4), 2/3 of them offshore: On average, costs are underestimated by about 10%, schedules slip by about 10%, and first-year operating capacity is a little less than 75% of forecasts. For larger projects—those costing a billion dollars or more—the record is even worse. Again, we don't seem to be able to estimate our project parameters very well.


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  		Figure 4. Industry performance on development projects (after Merrow, IPA, 2003).

 
What about the financial performance of the E&P sector relative to the overall market? In the 1990s decade, the S&P 500 group of companies outperformed all but two of the 18 largest E&P companies. While the average annual shareholder return was about 16% . . . [Full Text of this Article]




This article has been cited by other articles:


Home page
 AAPG BulletinHome page
P. R. Rose
Measuring what we think we have found: Advantages of probabilistic over deterministic methods for estimating oil and gas reserves and resources in exploration and production
AAPG Bulletin, January 1, 2007; 91(1): 21 - 29.
[Abstract] [Full Text] [PDF]


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