FLEXIBILITY IN DESIGN - Title Page - MIT

de Neufville + Scholtes D R A F T September 30, 2009Box 2.3_____________________________________________________________________________Variation in the estimate of oil reservesFigure 2.1 represents experience with two oil fields in the North Sea, normalized around the sizeof the original estimate. 7 The P50 represents the median or most likely estimate at any time, andthe P10 and P90 are the limits defining the range that the actual quantity expected to occur 80%of the time (the 80% confidence limits). Although one might imagine that the estimates wouldsteadily converge on some value as more experience and information develops, it often happensthat this experience reveals new finds or difficulties that trigger a “jump” in the estimates, asFigure 2.1 shows.[Figure 2.1 here]This figure is hard to interpret – needs to be redoneIn the case on the left, the range of the estimate does eventually narrow considerably, butthe most likely P50 estimate is less than half the original amount. In the case on the right, therange of estimates hardly narrows, and the most likely estimate nearly doubles. Notice moreoverthat over one year the best estimate rises dramatically; far exceeding what was considered theprevious range of likely possibilities.In this context, we note that design teams often focus on the original best estimates – theP50 values -- to design the platforms and wells for the field. For the 2 fields shown in the figure,this practice means that the resulting platform designs would be off by almost a factor of 2 --about double the desirable size for the case on the left, and only half what would be needed forthe case on the right. Although the geologists know from experience that estimates can jump overtime, and although operators constantly struggle with production uncertainties, standard designpractice does not account for this uncertainty.____________________________________________________________________________Part 1: Chapters 1 to 3 Page 35 of 69