Oil and gas exploration has always had a strong element of risk, not only in terms of making a discovery but also from fluctuating oil prices, turbulent exchange rates and changing geopolitics. There are many variables that can affect the potential value of a hydrocarbon find, and evaluation of exploration acreage for investment judgements is always complicated by the limited amount of data available to make an informed decision. The potential value of a prospect is not necessarily related to its volume, especially in today’s volatile economic and political environments, so the need to understand and quantify the geological risks and the complexities of petroleum economics is imperative.
Sabinas – Rio Grande Volumetric Heat Map. Source: EV2, mean volume estimates. Credit: CGG
EV2 is an exploration valuation platform that has been specifically designed to assist this decision-making process. It has been jointly developed by CGG and Wood MacKenzie to provide an independent, transparent and consistent analysis of undrilled acreage. EV2 uses the latest economic data and commercial insight from Wood MacKenzie, combined with Robertson’s unique basis of geological knowledge and expertise within CGG’s GeoConsulting group, to provide a user-friendly economic-modelling tool. Currently it contains block-level geological risk, volume and value data for 100 prospective basins and by early 2017 this will increase to over 180 basins and so provide a global assessment tool for exploration.
EV2 allows geologic assumptions to be changed to accommodate different views of play risk or lead density. Different scenarios can be tested to provide a range of possible outcomes so that budgets and resources can be planned. Play and basin metrics can be compared in a transparent and objective manner in order to evaluate corporate portfolios for petroleum economists and financial institutions.
Where additional proprietary information is available, this can be used to edit the underlying geological assumptions in EV2 to refine the baseline volumetric assessments. This enables users to create their own customized scenarios quickly, in a confidential, in-house environment and so maximize their competitive advantage. EV2 provides the means for New Ventures and Exploration teams to compare prospects in a consistent manner in order to guide license round screening and farm-in evaluation.
Evaluation of the blocks on offer in Mexico’s licensing Round One provides a good example of where using EV2 for the fast assessment of potential volume and value of the exploration blocks on offer could provide valuable insight to inform bidding strategies. Investigation of the EV2 data for the Sabinas-Rio Grande basin identifies eight geologic plays, based on the interpretation of a number of data sources by Robertson’s regional experts. Most of the yet-to-find reserves (over 80%) are expected to be found in the Upper Oligocene, Lower Oligocene and Upper Paleocene to Lower Eocene plays. EV2 identifies the most exciting play to be the Upper Paleocene to Lower Eocene, with potential volumes of between 6 bnboe and 10 bnboe estimated.
However, value depends on more than just volume, and EV2 enables pre-tax and post-tax Net Present Value (NPV) to be assessed at various price and exchange rate scenarios so that economic attractiveness can be evaluated quickly. The assessment of the Sabinas-Rio Grande basin reveals that, as it is closer to shore and in shallower waters, the Upper Oligocene play in fact has greater potential value than the Upper Paleocene to Lower Eocene play. EV2 provides understanding of how all the plays intersect with the license blocks on offer and the mapping can guide further efforts in analysing opportunities. As more work is done on the blocks on offer and more data are acquired, extra information can be incorporated into EV2 to give additional insight to those owning the new data.
This fast but rigorous evaluation demonstrates that EV2 can be used to analyse exploration acreage and provide valuable insight to New Ventures teams. The flexibility of the EV2 platform, enabling assumptions to be changed and different scenarios to be tested, provides answers quickly for informed decision-making.
