The ability to show the management that the calculated well costs are based on realistic operations and prices for services is important as this allows them to see that the risks have also been identified and quantified.
Clearer overview of costs' division gives a higher level of confidence for the investment decision to be made by the management.
Probabilistic vs Deterministic Planning
There is some confusion as to what the difference is between probabilistic and deterministic planning. The normal deterministic approach allows for only one course of events. This approach makes it very hard to address all of the possibilities that may arise during an operation.
Using probabilistic planning based on a simple spreadsheet offers benefits of ranges for time and cost, it is, however, difficult to enter information on the different paths that may present themselves during the planning operation.
Using probabilistic software that is designed for drilling operations allows the identification of various operational paths and assignment of probability of their occurring. For example, by applying AGR's P1™ software, the drilling teams are able to achieve a comprehensive understanding of the time-cost risk spread in well projects. This can help provide detailed answers to the three basic questions in managing well investment decisions:
What is the likelihood of overrunning the budget?
What is the level of exposure associated with any overrun that may occur?
Where do the individual risks lie that need to be mitigated against in order to avoid overrun?
If the risks can be mitigated, then the level of exposure can be reduced and projects can be delivered with greater budgetary certainty.
With the detailed output available interested parties can see exactly what risks have been taken into account and the cost impact.
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