Density Decisions and Risk Analysis

An important problem for exploration companies that want to make economic use of petroleum and natural gas to describe the problem is to determine the appropriate amount of horizontal wells to place in the strata to effectively drain existing hydrocarbons. The number of wells in each part or proportional unit is called the well density. In New Mexico, the standard allocation unit is 320 acres, or half of Congress. The number of wells allowed to drill the strata of New Mexico is determined by the New Mexico Oil Reserve (NMOCD).

This section introduces risk analysis and sensitivity analysis. Risk analysis can be used to provide the possibility of revenue related to decision making options. Therefore, risk analysis helps decision makers to identify the difference between the expected value of a decision option and the benefit that may actually occur. Sensitivity analysis also supports decision-makers by explaining changes in natural state probability and changes in income on the selection of recommended decisions.

Political risk analysis, risk management, political decision-making, events or circumstances have a significant impact on the probability theory of the profitability of the company or the expectations of specific business decisions. A wide range of political risks can affect the business and political risk analysts use qualitative and quantitative methods to analyze and evaluate such risks. Despite the long history of political risk analysis, the series of international crises of the 1970s encouraged it to develop into institutionalized business practices. These include the Oil Embargo of the Organization of Petroleum Exporting Countries (OPEC) in 1973, and the revolution of Nicaragua and Iran in 1978-79. Academic research on political risk analysis also appeared in the 1970s and 1980s

Includes risk analysis. Through risk analysis, decision makers are provided with probabilistic information on potential beneficial outcomes and adverse effects. We begin research on decision analysis by considering a relatively small number of decision options and issues related to relatively few possible future events. In order to provide the structure of the decision making problem and to explain the basic principles of decision analysis, we will introduce impact diagrams and payment tables. Next, we introduce a decision tree to show the order of decision problems. Decision trees are used to analyze more complex problems and to determine optimal decision sequences called optimal decision strategies. Sensitivity analysis shows how changes in various aspects of the problem affect the selection of recommended decisions.