We’ve spoken before about how explorers need to be optimistic about oil and gas opportunities (otherwise they’ll dismiss them too readily) and how they also need to temper their natural optimism. But how do we do just that, temper our optimism?
In part, we do it through serious geological forensic work, but we also do it by talking about failure.
We’ve previously explored how numbers can be misleading in our article on due diligence – what goes wrong and why. Assessments of uncertain parameters and forecasts can be optimistic. Recoverable volumes can be inflated and it’s easy for inexperienced teams to confuse the real, the improbable and the impossible.
You can understand why it happens in a Sales Case – because one company is trying to convince another to buy. But explorers too, within their own company, are trying to sell their careers – and the teams around them are often too willing to be convinced.
Where it can go wrong: A case of stratigraphic traps
Too often we describe our strategic intent, place our prospects in a spreadsheet, and then we perform the risk analysis that will become the justification for our strategy. But what we sometimes miss in the numbers is the detailed geological reasoning behind them – and that’s the most important element. Get the geology wrong and the numbers are meaningless.
As an example let’s talk about stratigraphic traps, or strat traps, since they are still in vogue across our industry right now.
On one level, the news that strat traps might have a similar risk profile to conventional traps sounds like a cause for rejoicing. One of the issues in our industry, however, is there’s not a wealth of information published on the precise details of how individual strat traps work. So if you have to rely on analogues and synthesise information to help understand their risk profile, how do you know if you have chosen your analogues correctly?
Colin Grant, a member of Rockflow, spent 15 years working with a supermajor as one of their specialists on strat traps, and he’ll tell you that although companies have said they have a similar risk profile to conventional hydrocarbon traps, this does not mean you can rely on apparently similar success-case analogues in your decision-making.
What can happen is that one analogue gets presented or becomes the focal point of conversation. And it’s typically an optimistic one, leading to conformational bias.
It probably won’t tell you whether you’ve picked the right petroleum system, or if the geothermal gradients are good and the purported source rocks are buried deeply enough to expel hydrocarbon from the plausible fetch area.
Then there’s the big question: Can you migrate the hydrocarbons from the kitchen area and track them into the trap you want to explore? Have the hydrocarbons had enough time to migrate to where you want them to go? Or have they gone into a deeper reservoir and leaked away elsewhere – leaving your trap or block shadowed? In deep water basins, this is fairly common.
To answer these questions you can’t look at a single analogue, or even several success cases, you need to be familiar with the failures too. In other words, you need to recall the times when you drilled a well in a similar basin or similar setting and found it dry.
We need to analyse failures as well as success cases
As an industry, unless there’s a catastrophic failure that hits the headlines, we tend to talk mostly about our successes, not the times when our efforts didn’t pay off.
Ultimately, though, we learn far more from a failure than we do from successes – because failures are what make us aware of our blind spots.
Ideally, you’ll have learned from failures first-hand, but at a minimum, you should be looking at the failure case analogues that are just as appropriate to describe what you’re looking at as the successful ones.
Understanding failure and success cases is what will help you to ask the right questions in your forensic analysis of the geology of your basin – which is where the value lies.
In other words, ask yourself: are you employing the right experience whether you’re doing evaluation work pre-bid or pre-farming? Are you doing the right evaluation work once you’ve acquired the block? Even if you’re a partner, are you making sure that you’re shadowing the company that you’re partnering with – making sure you’ve got a full understanding of what you’re looking at just in case they don’t?
If you don’t know where the gaps are in your understanding, you risk filling the gaps with optimism
Analogues then, are a tool to help you see where the gaps are in your understanding, ask the right questions, and do your forensic work in order to form a sound geological story. You can’t create a sound geological story simply by invoking a solitary analogue.
Some of the most successful exploration companies we’ve seen in recent years have been populated by very experienced people who are able to ask the right questions and find the right answers. Lundin is one example. The Swedish company used experienced hires to unlock new opportunities in the North Sea. And because these people had seen enough success and failures to learn from both, they knew what to look for and where to look for it.
This is also the value that Rockflow brings to exploration teams. Most of our geoscientists and engineers have upwards of 25 years’ specialist experience in the industry – and they’re able to review your strategic intent, your ambition, and the realistic chance of achieving it with your portfolio and assets.
For more on how we can help, see our subsurface evaluation and reserves evaluation services or check out our guide on the myths surrounding assurance in oil and gas.
