Exploration Risk Management
Authors: MacKay James 
Published: October 2008

Abstract
Exploration Risk Management is a consistent process for accurate quantification of forecasts and opinions to be used in an economic model for decision support. The successful implementation requires both management and technical commitment. The process quantifies the probability and resource range estimates for each project using an organized method based on the statistics and the principles of the petroleum system. Management will then have a portfolio of consistently and accurately assessed projects that will deliver the predicted results.

Introduction
The exploration risk assessment phase of the reservoir life cycle is an opportunity to document both the prospect specific and regional understanding of the potential reservoir. Very little may be known about the prospect specific reservoir conditions but the regional conditions are analyzed in more detail at this stage than at any other time in the life of the reservoir. At this stage there are two primary questions: What is the confidence that a hydrocarbon charged reservoir will be encountered at this location and what is the range of possible resource sizes that might be found in that reservoir? Both of these questions need quantifiable answers.
The responses are based on subjective estimates of each of the critical elements in a petroleum system. I recommend assessing separately the confidence in hydrocarbon charge, reservoir performance, structural accuracy and seal integrity. The project team, often with the support of risk assessment experts, assigns a percent confidence to each of these parameters. The opinions and comments of each assessor are recorded and discussed. Then a final consensus values are assigned. The overall confidence in a geologic success at this site is the multiplication of each of these four assessments. The reservoir specific concerns are associated with the confidence that a reservoir capable of flowing at adequate rates will be encountered at the drill site. Adequate is defined as reasonable porosity, permeability, thickness and continuity such that the reservoir will sustain flow. The documentation of this assessment as well as the supporting prospect specific and regional data become the beginning of the reservoir life cycle for the future field.
In addition to geologic confidence there must also be an assessment of the uncertainty surrounding the size of any possible accumulation. The uncertainty is captured by separately assessing the range of area, thickness and recoverable hydrocarbons per acre-foot. Each of these parameters is a function of a few to several subordinate parameters that can be assessed individually or as a group. When considering four different hydrocarbons: oil, gas, condensate and solution gas the list of parameters can expand to over twenty.
The entire process needs to be repeated for each significant zone that might be productive. Additional estimates are required regarding the extent of dependency between zones. The zone data are then combined probabilistically to give the overall confidence and range of size for the prospect. Many prospects can be combined to address the potential of a play or contract area. All of these estimates as well as the supporting data are added to the reservoir life cycle database.