Case Petroil

In 1 of Its outgrowth projects, the OLL exploration company Petrol was eng block offering devil come ins for two 011 exploration surfaces. Only one may be punctured. The cost of cut the place Numerous 1 was $ 100,000. prelude geologic data indicated that the well could be dry, or be of execrable productivity or be senior highschool gearly productive. He had gestural a contract with a development company to barter for the lay if a well by cut 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 bear $ 100,000 of the cost of cut. By that time, the company geologist,Jane Good pull up stakesing, was timid about the initiation of a geomorphologic dome that site. A dome twist is a kind of anticlines (geological rock torsion formed as a veer folds as strata tectonic stress issueing from mixed types) raised to a certain insight by the accumulation of crude oil color and the growth of the pressure produced by the natural botch up . Structures are ideal for the accumulation of oil. She assign 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 shows the odds by estimated conditions. The geologist would 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. turn off 1 Geological structure rise up With No Doom Doom teetotal 0. 60 0. 85 Low 0. 25 0. 125 High 0. 025 0. 15 1. 00 1. 00 Furthermore, the site No. 2 was quite different, the theater had been thoroughly examined using seismic testing and core samples.A core sample Is a method directly by pickings witnesses or cores (cores), collect rock samples interpreted within drill pipe, In which you shtup perform direct measurements of the petrochemical characteristics of the geological formation. at that p lace was almost certainly oil. The geologist assigned a probability of 0. 8 of finding oil there. The drawback to this place was that drilling costs 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 religious service decide between the two sites, distributively drill site. Using the decision maneuver plot A decision guide diagram should be developed for this paradox using the concepts and the necessary rules. You must gear up the uncertain numbers that will be revealed sticking(p) on each decision. The random multivariate of interest is the elucidate contribution dejection be searchd at the end of each alternative or growth of the decision tree. Therefore in the branches of the diagram decision alternatives were presented with their respective probability and net contribution as a summation or loss. The deci sion alternatives with uncertain probabilities for drilling Site No. Events are unattached and would be appropriate to show them on the decision tree diagram (see extension phone 1). What would be the likely 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 dismiss adjust the chart for evaluation inserting other uncertain event as the geological structure (with or without dome). By including this pleonastic node, the description of the branches of the decision tree will expand to calculate the return (you barely need dry, low or high to calculate the net contribution). Now take on the status of the geological structure.With the expanded tree diagram decision is straightforward to calculate the probabilities required by the electric chair of the many. Therefore, this task has to insert the additional uncertain event (geological structure) so that the probability can be c alculated. The uncertain event should be displayed in the diagram to have an observable result where not only the state of well productivity, but also the state of the vestigial structure is found. Addition should be include because the geologist of the company wanted to use it as a basis for probabilistic assessments to the president of the company.