Reidar B. Bratvold and Steve Begg
2010
207 pp ; Softcover
ISBN: 978-1-55563-258-8
Society of Petroleum Engineers
(1 review)
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Description 


Making strategic and tactical decision about your company's future - oil and gas field developments, selection drilling locations, initiating seismic and reservoir studies, company acquisitions and R & D investments - is often a complex process with highly uncertain outcomes and consequences. Knowing how to make good decisions is essential whether you are a decision maker or providing information to support decision makers.  Making Good Decisions is based on commonly accepted best practices and underpinned by sound theory, stemming from the author's mix of industry and academic experience. It will help the reader to think clearly about complex and uncertain decision situations and explain such topics as decision-tree analysis, Monte Carlo simulation, value of information, and value of flexibility. This book is essential reading for technical professionals and managers alike - you might even find some good tips for making personal decisions!

 
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by John Schuyler
on 3/27/2011
E&P-specific guide to decision analysis; packed!
Making Good Decisions is written for petroleum engineers and geoscientists—using industry language and recognizable E&P examples. This book is pleasing to hold. It is nicely typeset with abundant illustrations, printed on quality paper, and well-bound. Among the 207 pages, I counted 71 pages with color figures. It’s well worth the US$70 member price. The book is intended for people who have had at least one statistics course. However, the needed probability and statistics concepts are well-explained, and a general E&P background seems sufficient. There is a surprising breadth of information in the book. The book is pleasant though not light reading. The reader is expected to work through numeric examples. Any prior decision analysis background will be useful. An expanded “two girls” problem and an optical illusion (analogous to perception bias) were especially entertaining. Chapters 1 and 2 provide an overview of decision making. Their three-phase decision process is sound. Framing the problem receives appropriate emphasis. Chapters 3-5 cover the central techniques: quantifying uncertainty, Monte Carlo simulation and decision tree analysis. Influence diagrams are presented in several chapters to show decision structuring and value of information concepts. The probability concepts are especially well-presented with playing cards, cell arrays, and Venn diagrams. Chapter 6 is “Creating Value from Uncertainty.” Value of information (VoI) opportunities exist in most decision situations. VoI is coupled with value of flexibility (VoF). VoF in the simplest view is routine project risk management. In an expanded view, VoF encompasses VoI and real options thinking. Guidance toward acquiring and interpreting additional information is excellent, especially the use of sensitivity analysis to screen whether further analysis effort may be worthwhile. Chapter 7 is about behavioral challenges. The authors nicely review common biases and judgment elicitation challenges. There were a few distractions in this first edition. • Multi-criteria decision making may be overplayed; instead, they could have talked about using monetary-equivalents for considerations ancillary to NPV. • Surprisingly, the authors revealed a simple equivalent to Bayes’ rule early on (eqn. 3.1) yet apply a typical textbook Bayes’ formula (more complex) for worked examples. • It would help if the formula variables were replaced with letter symbols matching the problems. The book embeds abundant references throughout, both for attribution and for additional study. The eight-page bibliography includes many recent works. Most chapters end with suggestions for further reading. I recommend this book for all E&P professionals interested in decision analysis—regardless of background. Reading it was a pleasure, and I found myself looking forward to each concept explanation and the next application example. For me, buying and reading the book was a good decision.
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Reidar B. Bratvold is a Professor of Petroleum Investment and Decision Analysis at the University of Stavanger, Norway. His research interests include decision analysis, representing and solving decision problems in the upstream oil and gas industry, valuation of risky projects, portfolio analysis, and behavioral challenges in decision making. Prior to entering academia, he spent 15 years in the industry in various technical and management roles. Bratvold is an associate editor for SPE Economics & Management and has twice served as an SPE Distinguished Lecturer. He was made a member of the Norwegian Academy of Technological Sciences for his work in petroleum investment and decision analysis. He holds a PhD in petroleum engineering and an MSc in mathematics, both from Stanford University.

Steve H. Begg spent 19 years in the industry in a variety of positions for Landmark, BP Exploration, and BP Research before becoming a Professor in the Australian School of Petroleum, University of Adelaide. His main interest is in asset-and-portfolio-investment decision making under uncertainty, including economic valuation and psychological factors. Begg has been an SPE Distinguished Lecturer (twice), chair of SPE’s Forum Series Coordinating Committee, and a member of the Editorial Review Committee. He is an associate editor for SPE Economics & Management and was instrumental in starting that journal. He holds a BSc in geological geophysics and a PhD in geophysics, both from Reading University, UK.

Decision making and uncertainty in the exploration and production industry ♦ How to make good decisions ♦ Quantifying uncertainty ♦ Monte Carlo simulation ♦ Structuring and solving decision problems ♦ Creating value from uncertainty ♦ Behavioral challenges in decision making