Christopher J. Jablonowski

Employing Detection Controlled Models in Health and Environmental Risk Assessment: A Case in Offshore Oil Drilling

ABSTRACT This study examines the determinants of health, safety, and environmental (HS&E) incidence and reporting behavior in Gulf of Mexico offshore drilling. One objective is to determine statistically significant variables that influence the probability of HS&E incidence and reporting. Incidence modeling employs standard qualitative response models with binary and ordered dependent variables, and a Poisson specification. A second objective is to examine the impact of imperfect reporting on inferences. Unlike previous studies, models allowing for the possibility of imperfect reporting are specified and estimated. The results of this analysis provide strong evidence to support the hypothesis that aspects of well complexity and site complexity increase the likelihood of HS&E incidents in drilling. Equally important is evidence rejecting the hypothesis that broader oil company attributes influence HS&E incidence. An analysis of reporting behavior provides mixed support for the hypothesis that well-known firms are more likely to report an incident than their more anonymous counterparts. There is weak evidence indicating differential reporting behavior between regulatory districts. Finally, the analysis provides consistent support for the conclusion that a 1996 policy change reduced HS&E incidence and increased HS&E reporting. The results of this research provide guidance to company managers and regulators on the factors driving HS&E incidence and reporting. Results also provide evidence that models of imperfect reporting can alter, in this case reverse, the interpretation of trends in reported incidents. These results can be used to support efficient resource allocation to prevention efforts, and inform regulatory policy.

Transaction Costs and Organizational Choice: Modeling Governance in Offshore Drilling

This research examines oil company decisions to vertically integrate into the drilling function using a transaction cost economics framework. Risk preference is also investigated as an explanation of organizational choice. Econometric models are specified and estimated for organizational choice and for the cost functions of competing organizational options. Estimation of the cost functions permits isolation of the effects of transaction attributes to each form of organization, shedding light on the relative impacts of hazards of exchange and internal costs. Results provide support for both the transaction cost and risk preference hypotheses as determinants of organizational form. The cost functions also enable estimation of the transaction costs and incentive gains of outsourcing.

The concentration of offshore drilling rig markets

This paper investigates the impact of market concentration on prices in the Atlantic offshore drilling rig market from 1990 to 2005. The purpose is to test whether merger and acquisition activity has increased prices, and to provide some perspective on the geographic definition of the market. The jack-up and semi-submersible markets are investigated separately. The results of this research provides strong evidence to support the conclusion that increased market concentration has resulted in increased prices. The results also suggest that the market concentration of the Atlantic market is the relevant measure of market concentration rather than the market concentrations of the regional sub-markets. The results provide insight into the industrial organisation of an important exploration and production input market and can be used by anti-trust regulators to make judgements about market competitiveness and to make decisions regarding the social desirability of prospective mergers and acquisitions.

Developing Probabilistic Well Construction Estimates Using Regression Analysis

This paper proposes regression analysis as an appropriate method to develop probabilistic estimates for well construction cost and schedule estimates. These estimates are of sufficient quality for use in portfolio management decisions, lease sales, property valuations, project feasibility studies, and in the early stages of concept selection. The paper provides a brief theoretical overview of the method and discusses potential problems encountered in its implementation. A demonstration is provided using recent deepwater drilling data from the Gulf of Mexico.

The Value of Oil and Gas Price Forecasts in the Presence of Futures

This paper develops a decision-analytic model to value commodity price forecasts in the presence of futures markets. The method is applied to a data set on crude oil prices. We find that to be valuable, forecasts must be accurate at predicting both gains and losses, and that there are positive and diminishing marginal returns to forecast value from improvement in key measures of accuracy. We also find that forecast value is specific to user class, and that value is unique to specific users within the class.

Assessing Risk Preferences in E&P Operational Settings

Risk preferences influence decision making across the entire oil and gas exploration and production (E&P) enterprise. Previous studies have examined risk preferences within this sector mainly in economic settings, where the decision maker compares dollar payoffs between two or more choices. Understanding risk preferences in the context of operational settings, where the payoffs manifest as injuries, fatalities, or environmental incidents is equally important. This research investigates risk preferences in the operational setting by examining the decision to evacuate offshore drilling rigs under the threat of hurricanes. This research develops econometric models for the evacuation decision, and explicitly incorporates risk preferences through specification of a utility function. The results provide support for the conclusion that location attributes, specifically water depth, increase the propensity to evacuate. There is also support for the conclusion that oil company experience increases the propensity to evacuate, that is, experience leads to caution. Results of a utility-based model suggest a high degree of risk aversion.

A Workflow and Estimate for the Economic Viability of Offshore Wind Projects

Wind power is the fastest growing sector of electricity generation in the world and offshore wind resources have become a key component of this growth. This paper proposes a general workflow to model offshore wind projects and demonstrates the model using hypothetical projects. It uses net present value (NPV) to indicate economic viability via specification of equations for NPV, and development of probability distributions of NPV for offshore wind projects in the United States. It also examines the probability distributions of NPV for hypothetical utility-scale offshore wind projects. The analysis performed illustrates the effect of various factors on the NPV distributions and examines thresholds that may promote investment in offshore wind projects based on electricity price and average mean wind speed. Further, the effect of tax incentives on project viability is examined. The workflow and estimation demonstrate that offshore wind projects can be economically viable.

Identification of Leading Safety Indicators in Onshore Oil Drilling

“Leading safety indicators” are variables that are known to correlate with lagging indicators such as accidents. When a leading indicator suggests that the risk of a safety incident is increasing, the safety manager can intervene and mitigate the risk. This paper presents the results of a recently completed study of leading indicators using a data set from an onshore oil and gas drilling operation. This research leverages the results of two previous studies on the same data set to identify leading indicators and to provide guidance regarding intervention. This case study is intended to demonstrate how a quantitative approach can provide specific guidance to safety managers regarding safety policy and decision-making.

Utilizing GHV Management in Field Development Planning

This paper discusses the challenges of integrating into an existing gas field a marginal field with poor gas quality that would otherwise be left stranded.

A Methodology for Gauging the Sensitivity of Project Value During Concept Comparison and Selection

Project value is highly correlated with decisions made during concept comparison and selection. Decisions as such are made amid uncertainty, putting value at risk. This study details a methodology for determining the loss in project value when inaccurate estimates are used during concept comparison and selection. The difference between net present values (NPVs) based on inaccurate estimates and those based on an alternate hypothesis that is assumed to represent the truth determines the magnitude of loss. The value of the information required to reduce uncertainty can then be obtained.