engleski

Using of Exponential Function in Risk Assessment for Investment in Potential Hydrocarbon Discovery

Every potential hydrocarbon discovery could be evaluated through several geological categories that describe existence of geological conditions for reservoir creation and preservation. Such evaluation, the most often, is performed for five geological categories including probability of trap, reservoir and source rocks existence as well as possibilities for migration and hydrocarbon preservation. Final result is expressed as Probability of Success (POS) to discover assumed hydrocarbons (given numerical in interval 0-1). Based on this value, it can be possible to calculate the worth for further investments, adding new parameters for risk describing. Such economic risk depends on exploration budget and company costs, geological probability, expected value and, of course, expected profit vs. risk. Exploration and drilling feasibility studies are based on net present value (NPV) and expected value (EV) for potential discovery. Utility function is tool for evaluation of discover utility, regarding invested money and risk. Numerical result describes possible profit that could be reached regarding company's financial strength and financial obligations. Utility function, in general, represents attitude toward exploration risk, derived from different approaches and possibilities that company applied through some period in the past. Different types of utility function, especially exponential, has been using through decades in different petroleum companies and expert teams. Here is presented hypothetical case for using of such function in purpose of evaluation of potential discovery in Croatian part of Pannonian Basin.

exponential function; utilities; certain equivalents; discoveries

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