When uncertainty is beneficial: Interesting implications for the hydrocarbon discovery process

Yigal Gerchak, Qi Ming He, J. David Fuller, Ekachidd Chungcharoen

Research output: Contribution to journalArticlepeer-review

Abstract

Consider a basin with remaining undiscovered fields, in which both field sizes and their number are uncertain. Assuming that the probability of finding a field is increasing in its size, we show that the expected size of the first remaining field discovered, which is of particular importance, is increasing in the variability of field sizes, and results from a simulation model of exploration illustrate this trend for the first several fields discovered. We also provide simple bounds on the expected size of the first field discovered. It seems that more information (less variability) leads to less value-something unexpected. We explore and explain this seemingly counterintuitive result.

Original languageEnglish
Pages (from-to)1068-1072+1077
JournalOperations Research
Volume50
Issue number6
DOIs
StatePublished - 2002

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