This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Gerchak, Y. Articles by Chungcharoen, E. Search for Related Content

When Uncertainty Is Beneficial: Interesting Implications for the Hydrocarbon Discovery Process

Department of Industrial Engineering, Tel Aviv University, Tel Aviv, 69978, Israel
Department of Industrial Engineering, DalTech, Halifax, Nova Scotia, Canada
Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada N2L 3G1
Department of Industrial and Operations Management, Thammasat University, Bangkok, Thailand
ygerchak{at}eng.tau.ac.il
qi-ming.he{at}dal.ca
dfuller{at}engmail.uwaterloo.ca
echungch{at}alpha.tu.ac.th

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.

Subject classifications: Industries; petroleum/natural gas: exploration. Natural resources; energy: discovery process. Probability models.
History: Received October 1997; revision received June 1999; revision received February 2000; revision received April 2001; accepted May 2001.