THE USE OF DECISION ANALYSIS IN PETROLEUM DRILLING

The use of decision analysis in the evaluation of petroleum drilling prospects was examined through case studies of thirty-nine firms and a national survey of five-hundred working-interest owners. Results of the research show that decision analysis enjoys widespread but erractic application among respondents. Fifty-five percent of the respondents report using some form of decision analysis in at least one aspect of their drilling prospect evaluation, but only seven percent use the methodology to support all elements of their decision. Few respondents use decision analysis for either geologic or expenditure risk assessment; most use the methodology for revenue or investment analysis. Computer simulation is used far more frequently by respondents to perform decision analysis than are decision trees.;Virtually all decision-makers who do not use decision analysis in their evaluation of drilling prospects employ traditional subjective techniques.;The implementation of decision analysis by drilling decision-makers is concluded to be disappointingly low given its strong support in the theoretical and professional literature and among industry consultants.;When the decision-maker performs the review of primary geologic and financial data, there is virtually no inclination to use decision analysis. In addition, a significant relationship was found to exist between the complexity of a firm's decision-making administration and its propensity to use decision analysis.