Ricardo Furtado

Quantifying the value of technological, environmental and financial gain in decision models for offshore oil exploration

Abstract This paper suggests a framework to improve the quality of investment decisions in petroleum exploration. The proposed model enables the decision-maker to consider explicitly three major objectives when evaluating new petroleum ventures—financial, environmental and technological gain. The MultiAttribute Utility Theory (MAUT) provides a logical mean of decision for conflicting objectives. The MAUT is based on the risk preference of the firm, combining the objectives in the unique additive or multiplicative model. A high-dimensional sensitivity analysis technique is used for evaluating the weights of multicriteria decision models. The main advantage of this approach is that it allows a better simultaneous change of the weights and provides indications for a robustness control. The weights are obtained by a random process and are hierarchically adjusted using the analyst preferences. This paper proposes a study case comparing the application of this methodology in exploration projects located at five different offshore oil provinces in the Brazilian Continental Shelf. The MAUT methodology presented in this work demonstrates that, in some mature areas, the advantages of exploration are restricted only to financial gain. On the other hand, other seemingly less attractive areas, such as deep horizons in deep-water basins, may represent attractive targets for new exploration as a result of the interaction of technological advancement, and financial and market factors. The proposed approach allows the investigation of sensitivity for several options and alternatives. It also provides a rational tool for managers to make decisions according to firm preferences and objectives in complex oil prospects.

A method to estimate block values through competitive bidding

The bidding process is a mechanism that has been widely used by different countries to optimally distribute their oil exploratory acreages. One of the big challenges for both companies and government agencies is the estimation of the block values. Considering that the bid value is by and large a fraction of the estimated unknown reserve, the objective of this article is to reach a set of proxies of unknown values of the blocks through the successful bids. The estimation value of the block is calculated through a stochastic simulation of bid fractions using a compound probability distribution. The model was tested and validated using the public data available from the Brazilian seven licensing rounds. For these competitive bids, areas widespread in 22 sedimentary basins were offered to more than 50 oil companies that retained 610 blocks, paying

Obituary: Saul B. Suslick (1950-2009)

1.4 billion as a cash bonus. The model output was restricted to the Campos Basin because it is one of the most attractive areas for oil and gas opportunities, concentrating approximately 80% of the Brazilian national oil production with a supply of 1.8 million bbl/day. The simulation model indicated that this approach can be used as an auxiliary decision framework by oil companies for new investments and bidding strategies as well as by the regulatory agency to evaluate bid performance in different world regions and geological settings possessing similar competitive bidding schemes.

ABSTRACT: A Lognormal Model for the Bidding Process in Brazil

Saul Barisnik Suslick passed away on the morning of April 11th, 2009 due to complications of a heart attack. He was born on May 17th, 1950, in Sao Paulo, Brazil. After a significant life of scholarship, he died prematurely at the age of 58 in Campinas, Brazil, where he had taught and researched at the State University of Campinas for more than 20 years. This article offers a short biography of Saul B. Suslick, an introduction to some of his central research and thoughts and a few reflections on how his work may be carried forward. [Received: September 2, 2009; Accepted: November 7, 2009].

Forecasting the Development of Heavy-Oil Reserves in Ultra-Deep Waters Using Technological Risk Models

The recent changes of the legal framework in Brazil created new forms of exploration process and acreage availability after the first bid round in 1998. Since this period three bids rounds were accomplished in Brazil, where 103 blocks were leased and collected about of US

Bidding as a Proxy Estimation of Real Block Value in the New Offshore Frontiers: The Brazilian Case

700 million, involving more than 43 oil companies. This paper attempts to delineate the main features and statistics of those bids and the impacts on the exploratory efforts for new oil and gas discoveries. Based upon the winners curse theory, a lognormal model is fitting to the data set in order to explain the competitors’ behavior in a typical competitive lease environment. The lognormal model provides an optimum region in the curve where bidders can both avoid the winners curse and win the lease, considering the budget restriction and the their own goals. The simulation of the last two bids indicate a new exploration pattern towards the frontier areas, where a high risk/high return zones are expected. Introduction The new concession process for oil and gas exploration through competitive bidding marks a significant step in the opening of Brazil’s petroleum sector. The range of opportunities on offer is considerable, with most of the geological provinces being represented. The blocks covered the main basin settings: onshore rift, offshore rift to passive margin, and passive/wrench margin. The Brazilian National Petroleum Agency (ANP) grants the rights of blocks exploration through sealed bidding method, i.e., bonus are made by the participants without knowing the other competitor bonus and how many competitors will go to play the game. Since 1998 three bids rounds were accomplished in Brazil, where 103 blocks were leased and collected about of US

An Appraisal of Corporate Risk Tolerance in the Oil Exploration and Production

700 million, involving more than 43 oil companies and 280 Km of area (Simões Filho, 1999; ANP,2001). Figure 1 indicated the main rules using by ANP in the licensing rounds. Rose (2001) pointed out that this method is most detrimental to operators and brings some advantages to the government. The sealed bonus bidding has two main unavoidable constraints to the operators – the winner’s curse and the ubiquitous AAPG Search and Discovery Article #90007©2002 AAPG Annual Meeting, Houston, Texas, March 1-13, 2002