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Abstract:
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This thesis presents a methodology to incorporate reservoir uncertainties and estimate the loss in project value when facility planning decisions are based on erroneous estimates of input variables . We propose a tank model along with integrated asset development model to simulate the concept selection process . The model endogenizes drilling decisions and includes an option to expand . Key decision variables included in the model are number of pre -drill wells , initial facility capacity and number of well slots . Comparison is made between project value derived under erroneous estimates for reserve size and under an alternate hypothesis . The results suggest loss in project value of up to 40 % when reservoir estimates are erroneous . Moreover , both optimistic and pessimistic reserve estimates results in a loss in project value . However , loss in project value is bigger when reserve size is underestimated than when it is overestimated . |