An Offshore Development Planning Model Incorporating Risk Analysis

This paper describes an Offshore Development Planning Model which is designed to evaluate numerous alternative methods of developing an offshore discovery. A decision tree approach is employed to organize the sequence of inter-related decisions involved in drilling, production and transport of oil and gas. Each path through the decision tree represents a particular development plan or alternative. A closed-form method of calculating the expected value and the variance of net present worth (NPW) for each alternative is used, and a measure of economic risk is obtained using these values. Comparison of the NPW and the risk values for each development plant provides a convenient method of ranking the alternatives.