Alternative methods for evaluating exploration projects

Oil production practically is the realisation of the (extra) profit captured through exploration. Geological exploration secures the higher than average profitability for the upstream oil companies. Geological exploration is a highrisk high-reward operation.

Exploration is a process with phases strictly built on one another starting from the block acquisition until production
start-up. The exploring company finds itself in a decision-making position prior to every step, and such step always
require further costs: it either allows all past costs to lose and abandon further exploration in the block, or, hoping for the final success, carries on with exploration assuming the subsequent costs. Decisions are supported with economic calculations.

Tamás Vincze, Dr.