Decisions and Uncertainty Management: Expertise Matters

Decisions and Uncertainty Management: Expertise Matters Vinod Malhotra; Vinod Malhotra University of Adelaide Search for other works by this author on: This Site Google Scholar Michael D. Lee; Michael D. Lee University of Adelaide Search for other works by this author on: This Site Google Scholar Ashok Khurana Ashok Khurana University of Adelaide Search for other works by this author on: This Site Google Scholar Paper presented at the SPE Asia Pacific Oil and Gas Conference and Exhibition, Perth, Australia, October 2004. Paper Number: SPE-88511-MS https://doi.org/10.2118/88511-MS Published: October 18 2004 Cite View This Citation Add to Citation Manager Share Icon Share Twitter LinkedIn Get Permissions Search Site Citation Malhotra, Vinod, Lee, Michael D., and Ashok Khurana. "Decisions and Uncertainty Management: Expertise Matters." Paper presented at the SPE Asia Pacific Oil and Gas Conference and Exhibition, Perth, Australia, October 2004. doi: https://doi.org/10.2118/88511-MS Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex Search nav search search input Search input auto suggest search filter All ContentAll ProceedingsSociety of Petroleum Engineers (SPE)SPE Asia Pacific Oil and Gas Conference and Exhibition Search Advanced Search AbstractThe oil industry loses an estimated US$30 billion or about 25% of its annual upstream expenditure due to poor decision outcomes1. This provides a strong incentive to study decision improvement initiatives. While there has been a significant improvement in decision-making, it has been slow and in small steps. Perhaps a paradigm shift maybe necessary to cope with an environment that is likely to become even harsher in future. We believe industry decision experts have overworked the technical and economic factors while largely ignoring individual expertise, which is the third key factor in improving decision-outcomes under conditions of uncertainty in the real world environment. Most failure stories can be largely ascribed to the lack of application of appropriate expertise in judgements. This paper questions the common industry practice of placing decision-making responsibility according to organizational hierarchy rather than expertise. In this first part of a continuing study, relying on two experiments, the paper illustrates two points. First, that decision-makers invariably superimpose their experience and expertise onto the results of normative tools and adjust them. This makes it imperative that they possess the requisite expertise. Secondly, we argue it is possible to develop a methodology to distinguish experts from intermediates and novices in the oil and gas industry. We assert that while years of experience help build expertise, by itself it is an unreliable indicator of the level of expertise.IntroductionWhen Jackson Grayson Jr. undertook pioneering research in applying normative decision analysis aids such as linear programming, queuing theory, simulation, and stochastic models to the ‘real world’ of the oil industry2, he raised hopes in an industry that was searching for strategies to improve decision outcomes. But forty-four years on and despite efforts of several decision experts, the results are at best mixed. While significant improvements have been made there is little doubt that they have been slow and in small steps. Two separate studies, at the turn of the century, found that few oil and gas companies routinely use probabilistic models even while being technically capable of doing so3,4. And while Bratvold, Begg, and Campbell (2003)5 report that procedural progress is at last being made, perhaps the industry needs a paradigm shift if it is to cope with an environment that in the forty years has become harsh and is likely to become even more so in future.We believe that progress has been slow because normative tools such as geological interpretation models, reservoir models, Monte Carlo simulation, decision trees, and so on, necessarily ignore many of the complexities of decision-making in the real world. They therefore address only part of the picture and leave gaps that nonetheless have to be bridged. While normative tools alone maybe good strategy for conditions of certainty, making decisions solely based on normative tools is at best an incomplete strategy in conditions of uncertainty in the real world environment. Keywords: conclusion, real world, consistency, information, reservoir simulation, expertise, shanteau, experiment, superimpose, aspiration level Subjects: Reservoir Characterization, Reservoir Simulation, Risk Management and Decision-Making, Evaluation of uncertainties, Decision-making processes This content is only available via PDF. 2004. Society of Petroleum Engineers You can access this article if you purchase or spend a download.