Changes

# The well was completed for "business reasons," that is, to hold a lease position or to satisfy a contractual or regulatory obligation.

# The well was completed for "business reasons," that is, to hold a lease position or to satisfy a contractual or regulatory obligation.

Contemporaneous drilling statistics serve to put all this into proper perspective, as shown in Table 2, which reports 1988 results by different classes of wells.

Contemporaneous drilling statistics serve to put all this into proper perspective, as shown in [[:Image:Charles-l-vavra-john-g-kaldi-robert-m-sneider_capillary-pressure_5.jpg|Table 2]], which reports 1988 results by different classes of wells.

==Probability of commercial success==

==Probability of commercial success==

Moreover, since development wells should generate sufficient production revenues to pay out in less than about 3 years, most operators will not purposefully continue to drill development wells that are only incrementally commercial. Even so, it is still true that many development wells are completed each year that return only enough to pay for completion and operating costs, not the cost to drill them. Nevertheless, the probability of success as applied to development projects should ''always'' be the probability of ''commercial success,'' which for most development wells should generally be 60-80%.

Moreover, since development wells should generate sufficient production revenues to pay out in less than about 3 years, most operators will not purposefully continue to drill development wells that are only incrementally commercial. Even so, it is still true that many development wells are completed each year that return only enough to pay for completion and operating costs, not the cost to drill them. Nevertheless, the probability of success as applied to development projects should ''always'' be the probability of ''commercial success,'' which for most development wells should generally be 60-80%.

For [[enhanced oil recovery]] projects, the geologist or engineer is well advised to anticipate ranges in final project or process efficiency when constructing future scenarios. In addition, project commerciality may be severely impacted by future negative (or positive) trends in nongeological factors, such as costs, wellhead prices, transportation problems, and time delays. Thus, these contingencies should also be anticipated and expressed probabilistically. Therefore, the probability of commercial success for a development project should have three components: (1) geotechnical, (2) operational, and (3) economic. A key parameter here is the minimum acceptable economic threshold for project performance.

For [[enhanced oil recovery]] projects, the geologist or engineer is well advised to anticipate ranges in final project or process efficiency when constructing future scenarios. In addition, project commerciality may be severely impacted by future negative (or positive) trends in nongeological factors, such as costs, wellhead prices, transportation problems, and time delays. Thus, these contingencies should also be anticipated and expressed probabilistically. Therefore, the probability of commercial success for a development project should have three components: (1) geotechnical, (2) operational, and (3) economic. A key parameter here is the minimum acceptable economic threshold for project performance.

Accordingly, the ''chance of project success'' becomes the probability of achieving the minimum acceptable return (or higher). This is related to the probability of finding at least some minimum reserves capable of producing at some minimum rate. At reserves greater than this minimum, the project will be commercial. Thus, the calculation of expected value for development projects is

Accordingly, the ''chance of project success'' becomes the probability of achieving the minimum acceptable return (or higher). This is related to the probability of finding at least some minimum reserves capable of producing at some minimum rate. At reserves greater than this minimum, the project will be commercial. Thus, the calculation of expected value for development projects is

:<math>\mathbf{Equation}</math>

:<math>\ \text{ENPV}_\text{commercial} = (\text{Probability of commercial success})~\times~(\text{Net present value of mean project outcomes above commercial minimum})~-~(\text{Probability of commercial failure})~\times~(\text{net present value of mean project outcomes below commercial minimum, including dry holes})</math>

where ENPV = expected net present value.

where ENPV = expected net present value.