Review of the Applications of Decision Tree Analysis in Petroleum Engineering with a Rigorous Analysis

Abstract

Abstract As oil prices are fluctuating, decision makers are challenged to make the "best" decisions for field's developments. Decision Tree Analysis (DTA) can help decision makers to make the "best" decisions. DTA focuses on managerial decisions, such as whether to do workover or not, whether the additional information will be valuable or not. The aim of this work is to review the applications of DTA in petroleum engineering and provide a clear methodology on how to apply DTA for any petroleum engineering application. The combination of Expected Monetary Value (EMV) and DTA is one of the most common methods used in the decision-making process. If EMV is positive, the decision is considered to be feasible. However, that doesn't mean the decision will be successful at all times. It simply means that if a similar decision is made for a larger number of cases, the decision will be successful. DTA will account for the uncertainty in the probability. A good number of papers about the applications of DTA in petroleum engineering were read and summarized into three categories. Also, a clear methodology on how to apply the DTA for any petroleum engineering application was established. After reading and summarizing a good number of papers and case histories about the applications of DTA in petroleum engineering, it was concluded that the applications can be classified into three main categories; applications of DTA and EMV for the whole oil and gas prospect projects, applications of DTA and EMV for a specific operation or development, applications of DTA, EMV, Monte Carlo simulations, and other methods to assess the value of information. These applications were summarized into tables. In addition, a clear methodology accomplished by a flowchart that explains how to successfully apply the EMV and DTA for any petroleum engineering application was provided. The method consists of three main steps: 1) how many scenarios need to be considered and what are they 2) collection of the required data 3) use the visual tool (DTA) or programming to find EMV. Each of the previous steps has its own challenges, thus these challenges were addressed and the solutions to overcome the challenges were provided. Finally, practical guidelines have were developed that when used with the accompanying flow chart will serve as a quick reference to apply the DTA for any petroleum engineering application. As the petroleum engineering applications becoming more complicated nowadays, accomplished by the oil prices fluctuations, the decision-making processes becoming more difficult. The DTA is a very important tool for the decision makers to make the "best" decision. This paper provides a clear methodology on how to successfully apply the DTA which can serve as a reference for any future DTA applications in petroleum engineering.