Measuring value
/Often in upstream oil and gas we are challenged with a simple question: what's the value? What's the value of that 3D seismic? What's the NPV of this study? How does your professional network affect our bottom line?
Sometimes, at least for me, the first reaction is indignation. Let's take the seismic example; it goes like this:
Finance guy - So, this $28M... 3D seismic. What's the value of this data set?
Geoscientist - What's the value? Of that 3D? That state-of-the-art, high-fold, wide-azimuth, long-offset, high-bandwidth, eco-friendly, ultra-safe 3D seismic survey I just spent four months designing and soliciting bids on?
Finance guy - Yeah
Geoscientist - We have four wells on twenty square kilometres of land. We want to drill forty more. The wells cost $10M each. The seismic will allow us to pick the best locations. It's 3D seismic, the best quality. We always do it. Everyone does it. We can't do subsurface science without it, not very well anyway.
Finance guy - Yeah... Sorry, what's the value of the seismic? Dollars will do.
Finance guy just wants a number. The value is clear to everyone involved. But maybe money is tight this year and finance would like to defer some costs to next year. Maybe we can lower the cost by making the survey smaller, or reducing the fold. Before too long someone utters the unspeakable: 'Value of Information'. The next month of your life becomes a frustrating spreadsheet nightmare of trying to get the process to yield the answer your team wants so you can get on with finding oil and gas.
I think there is a better way. What do you think?