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| Welcome to Eikos Project Systems Limited |
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| 1st November 2009 |
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JPT article - Reality Checks for Well Time and Cost Estimates
This article describes a novel method developed by EPSL to quality check stochastic estimates for the duration and cost of new well projects.
Much has been written to explain the origins of the credit crisis that has engulfed the international financial system. At the heart of each explanation is the failure to quantify commercial risks. The companies at the centre of the crisis were often long-established, considered profitable, and were endowed with great resources to make mathematical models of their activities. Despite this, it is safe to conclude that
many of their models were wrong. Risk is a feature of financial transactions and drilling wells that no amount of engineering will completely remove. From the crisis in banking
it is obvious that the skills required to build a credible model of activities inclusive of risk are in short supply.
It would be convenient to assume that because the energy industry employs lots of numerate people it is good at quantifying uncertainty; unfortunately, many of the time and cost models used for well planning can be easily disproven. The reasons for this go beyond the tools available to the human bias toward optimism. There is a tendency to treat each well project as unique and disregard the fact that past performances will not only inform us about averages but also about uncertainty.
Click here for full article
The Planning Fallacy (Buehler, Griffin & Ross, 2002)
Black Swan Theory
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For further information about
Eikos Project Systems Limited
please contact... |
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| Contact: |
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John McIntosh |
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| Email: |
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JBM@eikossystem.com |
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+44 (0)7790 067 598 |
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| Skype: |
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john.b.mcintosh |
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| Linked-in: |
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> view profile |
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