New methodologies to improve Decision and Risk Analysis (D&RA) are gradually gaining ground in the E&P industry. For good reasons, since the E&P industry has a poor track record in delivering upon promise. Problem framing, uncertainty modelling, designing options as a function of the quantified uncertainties, and full value chain modelling are key to this new approach.
We will discuss why the new generation of petroleum engineers may have advantage in moving away from detailed, “accurate” (or precise) models containing a lot of spatial detail and physics. Such models too often result in poor predictions, with few learning opportunities. Depending on the decision to be made, simpler though still representative models may yield better results, provided that they are integrated with the entire value chain (from static modelling up to portfolio modelling) and that they model all significant uncertainties (“fully probabilistic”). These simple models need to capture the “essence” of the physics.
Such holistic approach should enable us to weigh decision alternatives in their full context and allow more value to be added to the investments we make. The "bias" that characterizes the current practice would be reduced. A work process would be created that allows improved learning from the past (we repeat again and again the same mistakes of systematically inflated expectations).
To achieve this, however, a paradigm shift to more integrated and more probabilistic models is required. In this process, "adding value" is everybody's prime consideration. Our generation of engineers is trained primarily with a technical focus. We learn to look at technology first and economy later, almost as an afterthought. During those crucial years of formal education (university, early career at an oil company), the different multi-disciplines in oil/gas Exploration & Production shape their different paradigms and languages. We tend to forget the primary binding factor, however, viz. the common language of adding value. We need to learn that language from the onset of our training so as to allow truly multidisciplinary work later. Technology is just a means, not a goal. What the industry therefore needs is engineers who have followed the inverse approach: how does the process of 'adding value' work exactly, and how can we exploit available or new technologies to achieve this goal?
That is where a new professional is shaped: the Petroleum Business Engineer. First the business, then the engineering.