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Drill
90 MStb
$180,000
0.10
D 0.35 x -$65,000
= -$22,750
Dry hole
-$65,000
0.35
Don’t Drill
$0
Drill
90 MStb
$180,000
0.10
D 0.35 x -$65,000
= -$22,750
Dry hole
-$65,000
0.35
Don’t Drill
$0
NPV’s EMV’s
30 MStb
0.39 x $60,000 = $23,400
0.60
60 MStb
C1 0.195 x $120,000 = $23,400
0.30
Drill
90 MStb
0.065 x $180,000 = $11,700
0.10
D EMV = $35,750
0 MStb 0.35 x -$65,000 = -$22,750
0.35
X $35,750
Don’t Drill
$0
Existing 45%
Rig C Medium profit
$30
20%
Low profit
-$20
65%
Contract
Won D Decision:
$30.5
55%
High profit
$35
$27
35%
New Rig C Medium profit
$25
Subcontract
$20
Decision:
D $19.3 Contract 35%
Loss -$1.5
Don’t Bid
$10
Example-5
Exploration drilling on one of the offshore prospects has resulted in a commercial oil
discovery. To develop this field, facilities need to be designed. The studies have
indicated reserves in the range of 5 – 25 MMSbt. The geologists and engineers have
estimated that there is 30% probability of a large field with 25 MMStb reserves, 45%
probability of a medium field with 15 MMStb reserves, and 25% probability of a small
field with 5 MMStb reserves.
There are two options: (a) to design the facility based on the information available, or
(b) drill delineation wells to further improve the probability and reservoir size.
Based on the possibility of three different field sizes, three different sizes of facilities
can be installed. The economics of the different combinations of facilities are shown
below:
Field Size Probability NPV of each field size and facility, MM$
Size A Size B Size C
Large 0.30 290 350 450
Medium 0.45 90 210 160
Small 0.25 60 35 50
Cont’d...
Using the information in table above, perform the following
calculation:
1. Using the EMV criterion, select the most economical facility
size without obtaining any additional information
2. Calculate the expected value of imperfect information (EVII)
if it is decided to drill delineation well at a costs of 15 MM$
before deciding on the size of facilities. The geologists
consider that:
– There is a 90% probability that the delineation well will show a large
reservoir
– 60% probability that will show a medium reservoir
– 30% probability that will show a small reservoir
The expected value of imperfect information (EVII) is the
expected payoff with imperfect information (EPII) minus
EMV
1. The size C facility with EMV of 219.5 MM$ is the best
economic option because it is the highest of the three EMV’s
Field Size Probability NPV of each field size and facility,
MM$
Size A Size B Size C
Large 0.30 290 350 450
Medium 0.45 90 210 160
Small 0.25 60 35 50
EMV 142.5 208.3 219.5
Small
Large
Small
Large
Large
Size C Medium
Size A Medium
Small
Small
Large
No
delineation Size B Medium
wells
Small
Large
Size C Medium
Small
Bayes Theory
• Teori dengan dua penafsiran berbeda
• Teori ini menyatakan seberapa jauh derajat
kepercayaan subjektif harus berubah secara rasional
ketika ada petunjuk baru