Application of Decision Theory in Assessing Marginal Oilfield Risks: Niger Delta Hub Example

Alaneme, Charles Ezemonye; Igboanugo, Anthony Clement
August 2012
Journal of Emerging Trends in Engineering & Applied Sciences;Aug2012, Vol. 3 Issue 4, p594
Academic Journal
Decision theory valuation methodology has been identified as an effective tool in the analysis and management of risks for decision making in marginal oilfield exploitation. Numerous conventional methods in the employ of most international oil companies seem an aberration in marginal oilfield operation due to the uniqueness of the risks and the high cost of implementation. This short coming has resulted in the inability to optimally unlock the economic potentials of marginal oilfields that has remained untapped to replenish fast declining oilfields on account of their low economies of scale. A decision theory approach was successfully deployed in theoretically analyzing decision alternatives with Isiekenesi Oilfield, one of 251 remotely located marginal oilfields in the Nigeria Niger Delta. The study yielded corresponding payoff values for different reserve expectations of low, medium, and high cases in barrels of crude oil. Despite its limitations in not aptly defining the risks in crisp numbers, it successfully predicted the risk ratios of fundamental decision alternatives guided by basic assumptions on state of nature. This approach provides a cost effective first-pass appraisal mechanism needful for decision making process open to investment capitalists engaged in marginal oilfield exploitation.


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