Basin and play exploration are inherently governed by the management of risk and uncertainty at the portfolio level. Exploration investment decisions biased by risk-averse teams are susceptible to first-order basin statistics which may reflect a historical “poor” exploration history and exhaustion of existing play concepts. New concepts, new models, new thinking, and consideration of alternatives often result in a paradigm shift despite previous negative results.
For companies contemplating a Basin Entry, whether it is a basin previously unexplored or a basin new to the company, a number of key questions come to the fore:
Why? Does it fit with our corporate growth strategy and risk profile?Do we have a differentiated insight into the basin? Do we think it aligns with our capital exposure thresholds?
How? Minimal Entry Cost/Later Expansion? Partner or Solo? How will we improve the likelihood of success (see “differentiated insights”)?
What does success look like, or on the flip side When do we Know we have Failed? What is our dry hole tolerance?
To better understand these issues, U3 Explore have initiated a series of live virtual topical conversations with experienced E&P professionals. The first seminar on June 25th 2020 considered cognitive bias and the use of basin exploration statistics, in particular, a synthesis of discovery “creaming curve” analysis - a statistical method designed to review the sequential basin drilling history. One question uppermost in the minds of many participants was how this look-back methodology developed in extensively explored basins might be deployed as a predictive tool for yet-to-find (YTF) volumes in the basin and, by extension,as possible analog guiding new basin entry decisions.
Historically,exploration activities accelerate after a successful play opening discovery,often as a result of multiple corporate re-entries. This is an interesting commentary on the “fast-follower” low risk mentality of the larger industry, as FOTU (Fear of the Unknown) is overcome by FOMO (Fear of Missing Out), and a reflection of the number of true explorers/original thinkers and risk-takers therein.
It is our belief that it is possible to use creaming curves by recognizing them as manifestations of success/failure analysis and examining the data in the context of questions such as "Why/when were these wells drilled/what play(s) were they targeting”; “did they succeed in optimally testing the targeted play" and “are there serendipitous indications of a potential new play”? Did the campaign de-risk the portfolio dependencies adequately or was failure linked to an independent variable?
Basin and play exploration are inherently governed by the management of risk and uncertainty at the portfolio level. Exploration investment decisions biased by risk averse teams are susceptible to first-order basin statistics which may reflect a historical “poor”exploration history and exhaustion of existing play concepts. New concepts, new models, new thinking, and consideration of alternatives often result in a paradigm shift despite previous negative results.
Building on our first discussion, we will move the conversation to a case study in the Suriname-Guyana basin, where >50 dry holes were drilled before the Lisa discovery complex was announced, as a material petroleum basin dominated by “high-risk” stratigraphic plays at the basin margin.
We will review this case study to discuss the required understanding of geology that leads to exploration success. We will share our experiences with acreage selection processes we have witnessed and participated in while working for a variety of E&P companies and examine how, by learning from the past as objectively as possible, we can improve the likelihood of a successful outcome.