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With Crystal Ball, Earth Science Associates
Predicts Success of Russian Oil Production
CUSTOMER OF THE MONTH (JUNE, 1999)
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John D. Grace, Ph.D., is a consultant to the petroleum industry
with Earth Science Associates in Long Beach, CA. He has used Crystal
Ball for the past seven years to build models to analyze risk in
petroleum exploration and to forecast oil production from basins
and countries. In 1992-1993, he coordinated a group of Russian and
US geologists and engineers who built a model forecasting oil production
from Russia and the former USSR through the year 2000 (detailed
in Oil and Gas Journal, November 8, 1993). The team turned
to Crystal Ball to handle modeling the uncertainty surrounding such
variables as field production, well performance, the rates at which
Russian wells would fail and be repaired.
Between 1993, the first year of the forecast and 1998, the mean
estimate of annual oil production from Russia has remained within
1% of actual oil output. Estimation accuracy of forecasts made for
the largest individual Russian fields and new-field projects varied.
Many of the large old fields outperformed the forecast, most of
the new-field projects fell short of expectations. These disaggregated
forecasts provided insights into the relative success of the new
Russian oil companies in managing their field assets.
In 1998, Dr. Grace and his associates developed a model to examine
the oil production and export potential of the Caspian Sea region,
which encompasses the former Soviet republics of Azerbaijan, Kazakhstan,
Turkmenistan and a small part of Russia. Unlike the earlier model,
which was based purely on engineering variables, this model captured
the relationship between regional investment in oil and gas exploration
and production and its impact on oil output. The forecast period
extends to 2015 and included analysis of the many pipeline routes
proposed for exporting the oil (see Oil and Gas Journal,
August 24, 1998).
Because of the success of the original 1992-1993 Russian oil model,
it was updated this year to extend the forecast period to 2010.
The new version also incorporated features of the Caspian model.
It allows users to change economic parameters to simulate the impact
of changes in price, costs, taxes, and transportation tariffs on
Russian oil production. Regional production from the country's two
leading basins is aggregated with specific foreign and domestic
investment in new field projects to derive a national production
total.
In both the Caspian and new Russian models, Crystal Ball is at
the heart of the Monte Carlo simulation in the model and in the
aggregation of sectors and geographic regions. In both cases, extensive
use was made of the Crystal Ball Developer Kit. The capability this
provided allowed customization of calculations (improving run-time
efficiency) and the user interface, which was imbedded within Excel
spreadsheets. "The ability to directly call Crystal Ball functions
from a Visual Basic program moved the product to an almost unlimited
range and complexity in the models we can develop," Dr. Grace said
in evaluating the role of the program in modeling work he and his
colleagues pursue for oil and gas clients.
Dr. Grace can be contacted at:
Earth Science Associates
401 East Ocean Blvd., Suite 430
Long Beach, CA 90802
Tel: 562.437.7373
Fax: 562.437.7722
E-mail: esa@earthsci.com
Web site: www.earthsci.com
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