Post-Investment Reviews of Oil and Gas Projects: Methodology, Lessons Learnt, and Limitations

2021 ◽  
Author(s):  
Arthur Melet
Keyword(s):  
Decision Making ◽  
Capital Investment ◽  
Oil And Gas ◽  
Stakeholder Management ◽  
Data Availability ◽  
Capital Projects ◽  
Lessons Learnt ◽  
Operation Stage ◽  
Underlying Causes ◽  
The Impact

Abstract Objectives/scope Discuss the analytical framework created by ADNOC for the implementation of post-investment reviews (PIR) of previous capital projects, and present an overview of both the results, the lessons learnt and the limitations of such exercises, based on ADNOC's return of experience on PIRs. Without sharing confidential project information, the article will focus on providing actionable insights on ADNOC's chosen approach for PIRs, including best practices in terms of data and stakeholder management. Methods, procedures, process The overall approach can be summarized as follows: Project choice: what are the tangible criteria to be used to focus PIRs on the capital projects with the highest potential in terms of learning opportunity? Data collection: what are the minimum data requirements to conduct a PIR for an O&G project? Variance analysis: what rules need to be followed to be able to generate two economics models (initial vs updated) that can be compared? Root cause analysis: how to organize the analysis process to explain the identified variances? Results, observations, conclusions PIRs can play an important role in the continuous improvement of O&G companies’ operations at the pre-investment stage, capital investment stage, and operation stage: At the investment stage, a PIR can provide insights into the effectiveness of the decision-making and, specifically, help to identify improvement areas in the valuation (project economics), assumptions, risk management, and decision-making processes. At the execution stage, PIRs can be useful to quantify the impact of project delays and cost overruns on the overall project economics, and associate such variances with the relevant underlying causes. At the operation stage, PIRs be useful to quantify the impact of OPEX, production, and price variances (actual – forecast) on overall project economics, and associate such variances with the relevant underlying causes. Limitations of PIRs Uncertainty on what projects are likely to yield the best learning opportunities. Subjectivity: PIRs are partly subjective, as the results are largely dependent on data availability and methodological choices. Applicability of recommendations and acceptance from key stakeholders

scholarly journals Die toepassing van stygende pryspeilveranderinge by kapitaalinvesteringsbesluite

1984 ◽  
Vol 15 (3) ◽  
pp. 140-143
Author(s):  
Sarah S. Visser
Keyword(s):  
Decision Making ◽  
Capital Investment ◽  
Price Level ◽  
Purchasing Power ◽  
Capital Projects ◽  
General Price Level ◽  
The Moment ◽  
The Impact ◽  
Value Of Money

The application of increasing price-level changes to capital investment decisions Inflation (the decreasing purchasing power of money) has become a reality with which one has to live, and for which one has to plan. As a result of the decrease in the purchasing power of money, the prices of production means are going up considerably, and more so where long-term capital projects are involved. The initial investment in respect of a capital project involves the least risk in accuracy, as it has to be known at the moment of decision-making and cannot be changed significantly until the decision has been realized. The other factors essential for decision-making and which will be realized in the future throughout the lifespan of the asset are subject to change in the value of money and it is important that the influence of this change be taken into account. The impact of price-level changes can be taken into account through the use of general or specific price-level changes. The application of this has led to the fact that only general price-level changes, or only specific price-level changes, or general and specific price-level changes can be used for the adjustment of items. The last includes the advantages of using both price-level changes. In each of these applications different methods have been developed which agree in principle, while there may be differences with regard to details of the applications.

scholarly journals Why are decisions for oil and gas projects not always made the way they ‘should' be?

2018 ◽  
Vol 58 (1) ◽  
pp. 130 ◽  
Author(s):  
David Newman ◽  
Steve Begg ◽  
Matthew Welsh
Keyword(s):  
Decision Making ◽  
Decision Analysis ◽  
Oil And Gas ◽  
Decision Makers ◽  
Decision Quality ◽  
Good Decision ◽  
Business Decisions ◽  
Business Outcomes ◽  
Underlying Causes ◽  
The Impact

The outcomes of many business decisions do not live up to expectations or possibilities. A literature review of neuroscience and psychological factors that affect decision making has been undertaken, highlighting many reasons why it is hard for people to be good decision makers, particularly in complex and uncertain situations such as oil and gas projects. One way to diminish the impact of these human factors is to use the structured methodology and tools of Decision Analysis, which have been developed and used over 50 years, for making good decisions. Interviews with senior personnel from oil and gas operating companies, followed up by a larger-scale survey, were conducted to determine whether or how Decision Analysis and Decision Quality are used and why they are used in particular ways. The results showed that Decision Analysis and Decision Quality are not used as often as the participants think they should be; some 90% of respondents believed that they should be used for key project decisions, but only ~50% said that they are used. Six propositions were tested for why Decision Analysis and Decision Quality are not used more, and the following three were deemed to be supported: • Decision Analysis and Decision Quality are not well understood. • There is reliance on experience and judgment for decision-making. • Projects are schedule-driven. Further research is proposed to determine the underlying causes, and tackle those, with the aim being to improve business outcomes by determining how to influence decision makers to use Decision Analysis and Decision Quality more effectively.

scholarly journals On tomography velocity uncertainty in relation with structural imaging

Geophysics ◽  
2021 ◽  
pp. 1-71
Author(s):  
Jérémie Messud ◽  
Patrice Guillaume ◽  
Gilles Lambaré
Keyword(s):  
Decision Making ◽  
Oil And Gas ◽  
Model Building ◽  
Model Space ◽  
Velocity Model ◽  
Industrial Applications ◽  
Theoretical Concepts ◽  
The North ◽  
Structural Uncertainties ◽  
The Impact

Evaluating structural uncertainties associated with seismic imaging and target horizonscan be of critical importance for decision-making related to oil and gas exploration andproduction. An important breakthrough for industrial applications has been madewith the development of industrial approaches to velocity model building. We proposean extension of these approaches, sampling an equi-probable contour of the tomographyposterior probability density function (pdf) rather than the full pdf, and usingnon-linear slope tomography. Our approach allows to assess the quality of uncertainty relatedassumptions (linearity and Gaussian hypothesis within the Bayesian theory)and estimate volumetric migration positioning uncertainties (a generalization of horizonuncertainties), in addition to the advantages in terms of computational efficiency.We derive the theoretical concepts underlying this approach and unify our derivationswith those of previous publications. As the method works in the full model space ratherthan in a preconditioned one, we split the analysis into the resolved and unresolvedtomography spaces. We argue that the resolved space uncertainties are to be used infurther steps leading to decision-making and can be related to the output of methodsthat work in a preconditioned model space. The unresolved space uncertainties representa qualitative byproduct specific to our method, strongly highlighting the mostuncertain gross areas, thus useful for QCs. These concepts are demonstrated on asynthetic dataset. In addition, the industrial viability of the method is illustrated ontwo different 3D field datasets. The first one consists of a merge of different seismic surveys in the North Sea and shows corresponding structural uncertainties. The second one consists of a marine dataset and shows the impact of structural uncertainties on gross-rock volume computation.

The planning fallacy in oil and gas decision-making

2010 ◽  
Vol 50 (1) ◽  
pp. 389
Author(s):  
Matthew B. Welsh ◽  
Nigel Rees ◽  
Hugh Ringwood ◽  
Stephen (Steve) H. Begg
Keyword(s):  
Decision Making ◽  
Oil And Gas ◽  
Psychological Research ◽  
Personal Traits ◽  
Time Estimates ◽  
Complex Projects ◽  
Potential Problems ◽  
Planning Fallacy ◽  
Time Required ◽  
The Impact

The ‘planning fallacy’ describes the tendency of people to underestimate costs and times required for the completion of complex projects. Psychological research has demonstrated that a key component of this results from the packing/unpacking bias—where options or problems that are not specifically stated tend to be ignored by people when making estimates or assigning probabilities to events. We have investigated this effect as it relates to oil and gas decision making, highlighted by experimental results comparing estimates of drilling times made by both student and industry participants. Specifically, participants were provided with a drilling scenario and asked to estimate the time required to drill the well—including drilling, tripping, rigging and all potential problems. In the packed condition the options were given as just stated while, in the unpacked condition the ‘all potential problems’ category was divided into a list of specific problems. The packing effect was shown to markedly alter the time estimates made by all groups of participants—altering estimates of problem times by more than 100 hours on average. Additional analyses assessed the interactions between the packing/unpacking effect and personal traits such as optimism, tendency to procrastinate and industry experience. These findings are discussed in terms of their import for oil and gas decision makers desiring to improve prediction accuracy and, thus, economic outcomes by avoiding, or limiting, the impact of the planning fallacy.

A network-centric approach to managing risk

2014 ◽  
Vol 54 (2) ◽  
pp. 483
Author(s):  
Bruce Hankinson
Keyword(s):  
Decision Making ◽  
Oil And Gas ◽  
Cognitive Biases ◽  
Stakeholder Management ◽  
Predictive Modelling ◽  
Division Of Labour ◽  
Playing Field ◽  
Business Units ◽  
Systems Research ◽  
Managing Risk

The strategies of many large organisations are underpinned by top down, hierarchical management, complex forecasting and predictive modelling, standardised processes, siloed business units, division of labour, information biases and disjointed stakeholder management. Rigid and inflexible, organisations are struggling to respond to the risks associated with unpredictable, ever changing and complex operational environments. Budget blowouts into the billions of dollars, stretched resources, increasing governance, social and political interdependencies and a complex playing field that is constantly changing as it grows and matures is what oil and gas companies in Australia today face. Proponents of Australia’s massive LNG boom are doing the hard yards and they are feeling the pressure. Unfortunately with pressure comes poor decision making. Lack of access to evidence based and up to date, real time information means decisions are often made based on intuition or unqualified, out of date information due to immature systems. Research has clearly proven that intuitive decision making results in cognitive biases. These biases results in perceptual blindness or distortion (seeing things that aren’t really there), illogical interpretation (being non-sensical) and inaccurate judgments (being just plain wrong). Without a system in place to manage risks in it’s operational space, companies will continue to make poor decisions that only increase the risks they try so hard to control. This paper proposes a new approach to better understanding organisational interdependency and risk management through adoption of a network centric approach. It explores the benefits of a network centric approach and how this it can be applied in a multi dimensional environment to not only reduce risk events and costs but enable a truly resilient and competitive business.

The Impact of Shadow IT Systems on Perceived Information Credibility and Managerial Decision Making

2017 ◽  
Vol 31 (3) ◽  
pp. 105-123 ◽  
Author(s):  
Noah Myers ◽  
Matthew W. Starliper ◽  
Scott L. Summers ◽  
David A. Wood
Keyword(s):  
Decision Making ◽  
Data Availability ◽  
Managerial Decision ◽  
Managerial Decision Making ◽  
It Systems ◽  
Information Credibility ◽  
It Department ◽  
Shadow Systems ◽  
Shadow It ◽  
The Impact

SYNOPSIS Business trends show that more and more employees are creating shadow IT systems—IT systems that are not sanctioned or monitored by the IT department. This paper examines how the use of shadow IT in product costing impacts managers' perceptions of information credibility and managerial decision making. Using two experiments, we find that participants view information from shadow IT systems as less credible and they are less impacted by and less willing to rely on costing reports produced from shadow IT systems versus non-shadow IT systems. We also find that although participants are concerned about the credibility of shadow IT systems, they are not more likely to find simple mathematical errors embedded in shadow IT costing reports relative to non-shadow IT reports. This suggests that although concerned about shadow IT systems, managers still do not exercise sufficient care in evaluating reports created using these systems. The results of our study should prove informative as shadow systems become more prevalent in organizations. Data Availability: Contact the authors.

APPLICATION OF SUPERBLOCKS FOR INCREASING EFFICIENCY OF PROJECT IMPLEMENTATION

2020 ◽  
pp. 40-43
Author(s):  
A.V. Trifonov ◽  
M.S. Volodkin ◽  
D.N.. Poltavskiy
Keyword(s):  
Capital Investment ◽  
Oil And Gas ◽  
Construction Process ◽  
Highly Qualified ◽  
Time Saving ◽  
Capital Projects ◽  
High Productivity ◽  
Oil And Gas Fields ◽  
Gas Fields

The works associated with the construction of infrastructure facilities in the field require significant involvement of highly qualified specialists, high-quality implementation of these works and it requires adjustment of the developed project documentation directly in the construction process. PJSC «Gazprom neft» is faced with the task of increasing the efficiency of capital projects, in particular, reducing the time for their implementation. The faster the field is equipped and ready to start production, the sooner the capital investment in the project will pay off. The article discusses the method of organizing the construction (arrangement) using block-complete devices, namely one of its methods – superblocks. The essence of the method is the manufacture in the factory of modules, enlarged mounting assemblies, instrumentation and automation devices and their subsequent enlarged assembly into a large-capacity unit (superblock). The mass of the superblock can reach up to 1000 tons. The use of superblocks in the development of oil and gas fields guarantees high productivity, time saving and the quality of the facilities being built.

scholarly journals The Role of Tax Incentives in Capital Investment and R&D Decisions

2010 ◽  
Vol 28 (2) ◽  
pp. 241-256 ◽  
Author(s):  
Francis Chittenden ◽  
Mohsen Derregia
Keyword(s):  
Decision Making ◽  
Capital Investment ◽  
Investment Decision ◽  
Investment Decisions ◽  
Tax Incentives ◽  
Business Owners ◽  
Business Plans ◽  
Investment Decision Making ◽  
Potential Benefits ◽  
The Impact

In this paper we present the results from a study of the role that tax incentives play in business owners' decisions on capital investment and research and development (R&D) expenditure. We use semistructured interviews with fifteen business owners and directors and five financial advisers to establish the extent to which tax incentives are considered in capital and R&D investment decisions, and to identify obstacles that might prevent UK capital allowances and R&D tax policies from achieving their goals. First, we investigate whether incentives are sufficient to encourage investment and whether the costs of accessing the incentives faced by similar firms limit the potential benefits of the policy. Second, we explore the stage in the process of investment decision making at which tax issues are considered and the degree of importance attached to tax incentives. For example, is the tax treatment integral to the decision-making process or only a ‘final consideration’ at the end? Third, we investigate the impact of uncertainty on the tax incentives, since this can be an important aspect of investment decisions, and may diminish the effectiveness of policy. It is not clear whether the incentives offered are effective in generating additional investment and in helping financially constrained firms. Under uncertainty the incentives need to be substantial to influence the decision to invest. Effective policy should assist firms who would otherwise struggle to realise their business plans.

scholarly journals Capital budgeting practices and political risk: evidence from Lebanon

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmed Bakri ◽  
Suzanne G. M. Fifield ◽  
David M. Power
Keyword(s):  
Capital Investment ◽  
Political Risk ◽  
Capital Budgeting ◽  
Capital Projects ◽  
Content Type ◽  
Corporate Managers ◽  
Investment Projects ◽  
Investment Appraisal ◽  
High Level ◽  
The Impact

Purpose This paper aims to examine how capital investment projects are appraised in Lebanon; whether the risk is incorporated into this process by Lebanese firms and the impact of political risk on the capital budgeting process. Design/methodology/approach This paper uses a questionnaire survey to investigate the capital budgeting practices of companies located in Lebanon, which is a country characterised by a high level of political risk. Findings Lebanese companies tend to use more than one method of investment appraisal and, increasingly, they are using sophisticated discounted cashflow techniques alongside the payback period. The most widely used methods to evaluate risk include scenario and sensitivity analysis. Finally, political risk plays an important role in the capital budgeting processes of Lebanese companies. Originality/value The paper reports on whether the methods of capital investment appraisal used throughout advanced Western economies are used in the context of an emerging economy. In addition, Lebanon is an ideal research site to study capital budgeting as the conflicts in the country of the past 50 years have required sizeable new expenditure on capital projects; the country is characterised by high levels of political risk which may lead corporate managers to use different approaches to investment appraisal and it provides an opportunity to study capital budgeting decisions by private, unlisted firms.

scholarly journals Assessment of the impact of the northern territories of oil and gas facilities on the environment

2020 ◽  
Vol 164 ◽  
pp. 07020
Author(s):  
Larisa Gilyova ◽  
Marina Podkovyrova
Keyword(s):  
Decision Making ◽  
Land Use ◽  
Environmental Impact ◽  
Impact Assessment ◽  
Environmental Impact Assessment ◽  
Anthropogenic Impact ◽  
Oil And Gas ◽  
Negative Impact ◽  
Northern Territories ◽  
The Impact

The article highlights the problems of the negative impact of oil and gas facilities on the environment Northern territories this necessitates the development of measures for the greening of land use based on the results of an environmental impact assessment and decision-making to minimize or eliminate them. The article presents the results of the environmental impact assessment of oil and gas facilities, zoning is conducted by the degree of impact and criteria for the degree of impact are defined. The results of the environmental impact assessment made it possible to assess the degree of anthropogenic impact of the study object and to develop recommendations for reducing adverse industrial effects in order to protect the environment.

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