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(RISK-1763) Planning and Estimating Risky Projects: Oil and Gas Exploration

Primary Author: Mr. Colin H. Cropley, Mr. Matthew D. Dodds and Mr. Grant Christie

Audience Focus: Intermediate
Application Type: Application
Venue: 2014 AACE International Annual Meeting, New Orleans, LA, USA

Abstract: Deterministic methods of planning and estimating projects tend to be inherently optimistic, for reasons set out in this paper.

After setting out the challenges of realistic planning of oil & gas exploration in PNG, the paper explores the reasons for inherent optimism in project planning. Use of probabilistic planning and estimating based on an Integrated Cost & Schedule Risk Analysis (IRA) version of the Monte Carlo Method (MCM) is shown to enable the user to take account of these reasons to produce more realistic forecasts of time and cost outcomes. IRA is contrasted with conventional separate cost and schedule risk analyses to highlight the benefits of the integrated approach.

The application of the IRA approach to produce realistic planning of exploration for oil and gas in Papua New Guinea (PNG) is then described.

While PNG represents extremes of time and cost uncertainty that demonstrate the value of probabilistic planning and estimating, the principles and approach are just as applicable to all kinds of projects where time and cost uncertainty are less extreme but still significant.