Economics of Petroleum Production -
A Compendium

Volume 1: Profit & Risk • Volume 2: Value & Worth

by Ian Lerche & Sheila Noeth
Vol. 1: published March 2004 • ISBN 0 906522 23 4 • pp. vi + 332 • 62
Vol. 2: published July 2004 • ISBN 0 906522 24 2 • pp. vi + 284 • £62


There is an oil industry adage that exploration for hydrocarbons always loses money, while production of hydrocarbons always makes money. To what extent that statement is true, is at the heart of this work. Production may indeed always make money, but it is always possible to make more or to make less! To maximise a given opportunity, the skills of a geologist alone are not sufficient, neither are just an economist's skills enough. This Compendium recognises the complexity of petroleum production economic risk problems, and offers itself as both an introduction and a foundation for further thought and research.


Message from the authors

"In our opinion, the body of work presented in the compendium should be of benefit to professionals in the oil industry who are actively involved in the economic risk theatre; and also to graduate students studying hydrocarbon production."

I Lerche & S Noeth


Contents - Volume 1: Profit & Risk

Relative Contributions to Uncertainties in Reserve Estimates

A Note on Optimization of Deviated Well Drilling Angles

Potential Leaks in Hydrocarbon Reservoirs: Impact on Resource Assessments Costs, Profits and Uncertainties

Maximizing Probable Oil Field Profit: Uncertainties on Well Spacing

Maximization Techniques for Oilfield Development Profits

Insurance for Hydrocarbon Exploration and Development Projects

Uncertainties in Hydrocarbon Exploration Assessments in both the Absence and Presence of Optioning

Economic Assessment of Multiple Reservoirs in Oil Field Development

Sidetrack and Recompletion Risks in Oil Fields:
I. Recompletion Decisions based on Estimated Net Present Value
II. Economics of Sidetrack Development
III. Recompletion and Production Modelling with Time
IV. Recompletion Decisions and Effects of Uncertain Parameter Values and Distribution Choices
V. Sidetrack Uncertainties and Parameter Sensitivities
VI. Decisions to Abandon based on Further Data Collection
VII. Sidetrack and Production Modelling with Time
VIII. Reviving the Nearly Dead


Contents - Volume 2: Value & Worth

Unconventional Gas Traps: Low Permeability Sands and Gas Accumulations

Application of Hydrodynamic Modelling to Investigate the Origin of an Observed Tilted Oil-Water Contact

Hydrocarbon Accumulation Control by Predominant Migration Pathways

On Economic Resolution and Uncertainty in Hydrocarbon Exploration Assessment

Value Change in Oil and Gas Production:
I. Additional Information at Fixed Cost but Variable Resolution Probability
II. Additional Information with Variable Cost and Variable Success Probability
III. A Time to Buy, A Time to Sell, A Time to Decide
IV. Unresolved Options with New Information Acquisition
V. Incorporation of Uncertainties and Determination of Relative Importance
VI. Buy-Out, Farm-Out, or Stand

Production from Multiple Horizons:
I. Costs, Return on Investment and Chances of Multiple Success
II. Correlation and Uncertainty Considerations
III. Budget Constraints and Minimum Involvement


About the authors...

Professor Ian Lerche is currently Deutscher Acadmischer Austausch Dienst (DAAD) Visiting Professor of Geology at the University of Leipzig, on leave from the University of South Carolina. Previously, he was with Gulf Oil from 1979 to 1984 and the University of Chicago from 1965 to 1979. He has published 18 books on a variety of geological subjects and more than 720 papers. The recipient of several awards, Professor Lerche currently serves on several editorial boards, is technical editor of one journal and European editor of another. His main research interests are risk and hazard analysis, environmental problems, basin analysis, astrophysics, petroleum production economics, salt dynamics and hydrodynamic flow of oil and gas. Professor Lerche was educated at the University of Manchester, England, where he received his BSc in Physics in 1962 and his PhD in 1965.

Dr. Sheila Noeth is a geologist and is currently working with the Geomechanics Group of the Data and Consulting Services with Schlumberger in Houston, Texas. Previously she was at Texas A & M University from 1999 to 2001, where she was a postdoctoral researcher and later a visiting Assistant Professor in the Department of Geology and Geophysics. She joined the Organic Geochemistry and Environmental Geology Group at the University of Cologne, Germany, where she worked as an Assistant Professor. Her interests are focused on pore pressure modelling, basin modelling, geomechanics, petroleum geology and quantitative assessments of uncertainties related to numerical modelling. She is a member of the American Association of Petroleum Geologists (AAPG), the Deutsche Geologische Vereinigung and the Deutsche Geologische Gesellschaft. Dr. Noeth received her doctorate in Geology from the University of Bochum, Germany, in 1991.


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Target Markets:

Oil companies
research departments
economic/reserves/ forecasting

Oil companies
exploration & production divisions


departments of petroleum geology/geoscience/ earth science


Subject Keywords

drilling costs
production methods
economic risk
field development


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