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SPE-DL at Columbia

Don’t miss our next SPE Distinguished Lecturer - in NYC!!

 

Creating Value from Uncertainty and Flexibility

 

Reidar B Bratvold

Wednesday, Sept 21, 2016

10:30am

SPE-NYNE Petroleum Section

Columbia University

New York City, NY

Room: TBA

Abstract:

An increasing number of oil & gas companies use decision analytic methods to deal with complex and uncertain decisions, but still they get consistent under-performance in typical business metrics (cost, production rates, time to start, … ) leading to less value than expected, or, more perniciously, than possible. Uncertainty per se is not the culprit, rather a failure to make the best decisions under uncertainty – which are often non-intuitive. The real value-destroyers are bias and failing to plan for, and exploit, the different ways reality might evolve - if you under-estimate the real uncertainty, you are likely to under-invest in managing its consequences. Making the best decisions requires an accurate assessment of uncertainty (unbiased, neither optimistic nor pessimistic) – and an unbiased approach to managing its consequences – putting as much effort on capturing upside opportunities as mitigating risks.  

We often make decisions to live up to expectations rather than to live up to possibilities. Despite the ubiquity of options in the oil & gas industry, in practice these embedded options are often overlooked in the formulation and evaluation of investment opportunities, even when uncertainties are explicitly modeled.

This talk will illustrate and discuss how to create value from uncertainty and flexibility by applying an option pricing methodology that explicitly focuses on upside possibilities. To properly value flexibility, we must model not only the possible future decisions, but also the information available at the time these decisions are made.

Biography:

Reidar B. Bratvold is Professor of Petroleum Investment and Decision Analysis at the University of Stavanger. His research interests include decision analysis, project valuation, portfolio analysis, real-option valuation, and behavioral challenges in decision-making. Prior to academia, he spent 15 years in the industry in various technical and management roles. He is a co-author of the SPE book Making Good Decisions. Professor Bratvold has previously twice served as an SPE Distinguished Lecturer. He is the 2015 recipient of the North Sea Region SPE Management & Information Award and currently serves as the executive editor for the SPE Economics & Management journal. He is a Fellow of the Society of Decision Professionals and a member of the Norwegian Academy of Technological Sciences. He holds a PhD in petroleum engineering and an MSc in mathematics, both from Stanford University and has studied business and management science at INSEAD and Stanford University.


UPCOMING EVENTS

What: Tour of the MIT Plasma Science and Fusion Center/High-Energy-Density Physics Lab Tour 

When: Monday August 29, 2016.  10:45am.

Where: 175 Albany St (Building NW17), Cambridge MA

Limited Space: RSVP required! 

Agenda of the Tour

 

What: SPE-NYNE Presentation  by Reidar B Bratvold, Ph.D

Title:Commercial Fundamentals of the US Gas Business: From Source to Burner Tip

When: 10:30, Wednesday, September 21

Where: Columbia University, New York, New York.  Room TBA.

 

ANNOUNCEMENTS

Presentation on Economics of Oil Production by Robert Klienberg is now available for downloading.