Download - Uncertainty management in Statoil (Risk and opportunity management) NSP 18 September 2001
Uncertainty management in Statoil(Risk and opportunity management)
NSP
18 September 2001
Requirements for uncertainty management in development projects
• AR005 - Project development in Statoil
• Classification requirements for cost estimates and schedules
Practical guidance document
Recommended practices for uncertainty management in development projects
Presentation content
• Uncertainty management trough project phases and decision gates
• The qualitative uncertainty management process
• The quantitative uncertainty management process
• Presentation to management at decision gates
• Findings and recommendations
Uncertainty management trough project phases and decision gates
Operations
Business opportunity/ Exploration
Project Development Process
Testing and commissioning
Project ExecutionConstructionDetail engineeringFeasibility
Project PlanningConcept Pre-engineering
DG3 (BoG)
DG1 (BoK)
DG2 (BoV)
DG4 (BoD)
DG0 (BoM)
DG 0: Decision to start feasibility studies (BoM).DG 1: Decision to start planning (BoK).DG 2: Provisional project sanction (BoV).DG 3: Project sanction (BoG).DG 4: Start operations (BoD).
The qualitative uncertainty management process
Continuous process
Uncertainty identification
1. Identify uncertaintiesUncertainty identification
Uncertaintyassessment
3. Prioritise/rank uncertainties
2. Analyse uncertaintiesUncertainty assessmentUncertainty
responseaction
4. Develop an uncertainty response
Uncertainty response actions
Uncertainty response control
6. Evaluate results
5. Implement uncertainty strategy
7. Document uncertainty results
Uncertainty response control
Periodicreview
New or unknown
uncertainties
Tools :
Lotus Notes
PIMS
Presentation to management at decision gates (I) Project uncertainty - Top 10 risks
Risk mapping - June 2001
0
1
2
3
4
5
6
7
8
9
10
11
0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 <--Probability-->
<--
Ne
gat
ive
Imp
act
-->
Well productivity in upper formation
Sand Control
QA for well equipment and services
HPHT Drilling and completion
Depth conversion uncertainty Technology qualif. programs
Rig availability and cost
Segmentation
Gas allocation
Gas Swing Services
Responsible : John Doe Consequence : Consequence with NPV Manageability : Potential for management via the project team or through contractors Criticality : Potential to become "Show stoppers" Probability : Probability for deviations reflected in consequence, manageability and criticality
Movement from last period:
Criticality :
Low
Medium
High
Medium low
Medium high
Manageability :
Low
Medium
High
The quantitative uncertainty management process
• The quantitative uncertainty management process consists of performing uncertainty analysis on the value chain.
• A value chain includes all the variables that affect the cash flow.
• Each uncertainty in the value chain is described with a probability distribution and linked to the economical model.
• Dependencies between variables are taken into account.
• Uncertainty in project economy is calculated through Monte-Carlo simulations.
Principle poster of the value chain analysis
Sp
ec
iali
st
too
ls
Uncertainty in drilling and well
Uncertainty in investment and operational cost
Uncertainty in reservoir and geology
SCOREPartly
Dependencies
Project framework
Results, uncertainties and dependencies from specialist tools are modelled in Excel spreadsheet
y
x0
ProductionInvestment (CAPEX)Drilling (DRILLEX)Operational cost (OPEX)Removal
Re
ven
ue
Ex
pen
dit
ure
sStatoil's economy model (Excel spreadsheet)
Info
rmati
on
Presentation to management at decision gates (II)
Mean NPV versus standard deviation
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
0.00 50.00 100.00 150.00 200.00
Standard deviation, million $
Mea
n N
PV
, mill
ion
$
NPV (1)
NPV (6) NPV (7)
NPV (5)
NPV (4) NPV (3)
NPV (2)
The numbers in brackets correspond to different scenarios
NPV, million $
.000
.250
.500
.750
1.000
0.00 150.00 300.00 450.00 600.00
Cu
mu
lati
ve
pro
ba
bil
ity
NPV after taxScenario 3
P10 = 153
P90 = 410
Mean= 291.91
STOIIP 89.3%
Well rate 7.1%
Well cost 2.4%
Recovery 1.1%
0% 25% 50% 75% 100%
Percentage contribution to variance in NPV
Sensitivity on NPVScenario 3
Qualitative vs. quantitative uncertainty management
Information flow
Uncertainty management is a continues process through all decision gates and project phases
Quantitative value chain analysis is mainly performed at important decision gates.
Continues
process
Operations
Business opportunity/ Exploration
Project Development Process
Testing and commissioning
Project ExecutionConstructionDetail engineeringFeasibility
Project PlanningConcept Pre-engineering
DG3 (BoG)
DG1 (BoK)
DG2 (BoV)
DG4 (BoD)
DG0 (BoM)
Sp
ecia
list
too
ls
Uncertainty in drilling and well
Uncertainty in investment and operational cost
Uncertainty in reservoir and geology
SCOREPartly
Dependencies
Project framework
Results, uncertainties and dependencies from specialist tools are modelled in Excel spreadsheet
y
x0
ProductionInvestment (CAPEX)Drilling (DRILLEX)Operational cost (OPEX)Removal
Re
ven
ue
Ex
pen
dit
ure
s
Statoil's economy model (Excel spreadsheet)
Info
rma
tio
n
Project ranking and portfolio management
Statoil EPAexchange rates, crude oil prices, inflation
ValueCreation
(E)NPVSØA 8/9% a.t.
Profitability
NPVCAPEX
Profitability
NPVboe
StrategicCriteria
strategic fitHSE
robustnessmateriality
technical costCAPEX/boeOPEX/boe
RiskProfile
technicalcommercialexecution
local conditions
human resources
HSEgovernance
quality of workuncertainty
management plan
x
Project Ranking
$$
Findings and recommendationsThe qualitative uncertainty management process
• The project management team must have ownership and actively support the uncertainty management process
• Uncertainty management must be established as a continuous process integrated in project management
• Uncertainty management must be delegated to the line of responsibility
• High focus and effort should be given to the implementation phase. A person responsible for facilitating the process should be appointed to secure sufficient attention
• Uncertainty management must be on the agenda in regular meetings
• Uncertainty management must focus on the total value chain and the lifetime perspective to secure an overall management of risks and opportunities
• A practical detailing and structure is needed in order to reduce the number of uncertainties
• uncertainty management must be supported by efficient methods and tools.
• Experience transfer from other projects is important
Findings and recommendationsThe quantitative uncertainty management process
• Keep the analysis simple
• Treat uncertainties on an aggregated level
• One person must be appointed to coordinate the process
• Challenge the input from the different disciplines and search for dependencies
• Make sure that the input corresponds to the uncertainty suppliers view (everybody is not familiar with statistics and statistical definitions)
• Present the results from the analysis to the project and explain in simple terms the value chain and the effect of each input on the totality as a quality assurance of the model
• Get a second opinion on the model to avoid effects of subjective interpretations
• Use benchmarking to quality assure the results