We describe an integrated framework for exploration risk management, driven by business reserves<br>and production requirements. A structured approach to play fairway evaluation should underpin<br>strategies to manage exploration risk. Sub-optimal decision-making results through failure to articulate<br>geoscience risks. Managing exploration integrates technical evaluation and business needs.<br>We describe the exploration decision-making framework. The company's reserves and production<br>growth requirements should drive all exploration investment decisions. The exploration funnel (basin<br>entry through to production) should be managed so that there are enough high quality opportunities to<br>meet current and future demand.<br>Exploration is a risk business and the ability to predict outcomes at portfolio basis is fundamental to<br>exploration success. We present examples of how a company's risk and volume estimates should be<br>continually calibrated against past performance. Management must believe in the cost/volume<br>projections provided by the explorers!<br>Most companies start a portfolio review exercise by mapping current assets against business demands.<br>It is vital to take a hard look at the existing portfolio and test its ability to deliver. If it can’t, it will need reshaping.<br>Geoscience understanding, and the ability to de-risk plays underpin the whole business of exploration.<br>In most companies staff are the critical resource that needs rationing, not capital. We describe a<br>structured approach to play fairway evaluation in which we use this as a tool for de-risking plays and<br>planning investments in time and capital.<br>We have suggested that the business requirements be presented in terms of a production profile. This<br>means that exploration outcomes should also be modelled in this way. The classic way of modelling an<br>outcome of an exploration portfolio is through presenting the risked weighted sum of the production<br>profiles arising out of the given drilling campaign. However we find that this does not adequately<br>represent the likely outcomes. Most companies have some high volume wells in their portfolio (perhaps<br>associated with high risk). Success in these would transform the shape of a company as happens in<br>most successful exploration companies. We therefore prefer the scenario modelling approach in which<br>we model success/failure in certain wells.<br>The story outlined above shows how a structured approach to geoscience enables informed business decision making.


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