Case Petroil

In one of Its first projects, the OLL exploration company Petrol was engendering devil sites for two 011 exploration come up. Only one may be punctured. The woo of bore the Site Numerous 1 was $ 100,000. Preliminary geological info indicated that the hale could be dry, or be of little productivity or be highly productive. He had signed a signalize with a development company to buy the site if a well by drilling success you had. The buyer would pay $ 250,000 for a well of low productivity and $ 600,000 for high productivity well.If the well was dry, Petrol lose $ 100,000 of the represent of drilling. By that time, the company geologist,Jane Goodwill, was unsure about the existence of a morphologic dome that site. A dome structure is a kind of anticlines (geological reel deformation formed as a curved folds as strata tectonic stress takeing from various types) raised to a certain depth by the accumulation of oil and the increase of the pressure produced by the natural bun gle . Structures are ideal for the accumulation of oil. She assigned a probably of 0. 6 to the existence of a structural dome.Their assessments for dry, low, or high productivity wells were conditioned to geological structure. Table 1 fates the odds by estimated conditions. The geologist would ethyl ether give the information in this way though as she said, we will never know for sure if there is a structural dome, up to drill. TABLE 1 Geological structure Well With No fate Doom Dry 0. 60 0. 85 Low 0. 25 0. one hundred twenty-five High 0. 025 0. 15 1. 00 1. 00 Furthermore, the site No. 2 was quite different, the celestial orbit had been thoroughly examined using seismic testing and core auditions.A core sample Is a method directly by taking witnesses or cores (cores), cache rock samples taken within drill pipe, In which you scum bag achieve direct measurements of the petrochemical characteristics of the geological formation. There was almost certainly oil. The geologist as signed a probability of 0. 8 of finding oil there. The drawback to this place was that drilling cost were high, $ 200,000, and if oil is found, the well would be low productivity of oil. A contract was also signed with the same development company to buy the well of low production at Site No. 2 for $ 250,000.To supporter decide between the two sites, each drill site. Using the finale tree diagram A stopping point tree diagram should be developed for this problem using the concepts and the necessary rules. You must specify the indefinite events that will be revealed eased on each decision. The random variant of interest is the net region can be calculated at the end of each alternative or branch of the decision tree. and then in the branches of the diagram decision alternatives were presented with their respective probability and net contribution as a gain or loss. The decision alternatives with ambivalent probabilities for drilling Site No. Events are purchasable and would be appropriate to show them on the decision tree diagram (see Annex 1). What would be the apparent alternatives Drilling Site Number 1? They are not available erectly. We know the odds of having high, low or that the well is dry productivity. However, we can adjust the chart for evaluation inserting another uncertain event as the geological structure (with or without dome). By including this extra node, the description of the branches of the decision tree will expand to calculate the return (you only privation dry, low or high to calculate the net contribution). Now acknowledge the status of the geological structure.With the expanded tree diagram decision is aboveboard to calculate the probabilities required by the president of the many. Therefore, this problem has to insert the additive uncertain event (geological structure) so that the probability can be calculated. The uncertain event should be displayed in the diagram to have an observable result where not only the convey of well productivity, but also the state of the underlying structure is found. Addition should be included because the geologist of the company precious to use it as a basis for probabilistic assessments to the president of the company.