Lions and tigers and bears? Oh my! A new theory of exploration risk management seeks to get the oil business out of the ivory trade.
Analogies are great fun, aren't they? I recently was contacted by Dave Russum, who formed his own company, Geo-Help Inc., to assist oil companies with exploration planning, assessment and implementation. Seems he has been pondering the concept of "elephant hunting" and found it to be an unsavory analog to oil and gas exploration.
Russum's thoughts about elephant hunting are these: it's illegal, easy in that the elephant is shot from a distance with a high-powered rifle, and wasteful in that the ivory is plundered and the carcass left to the hyenas.
"And the young are orphaned," he wrote in a recent presentation for the Canadian Society of Petroleum Geologists titled, "Exploration Strategies in the 21st Century - The End of Elephant Hunting?" Overall, he concluded, this is "a terrible analogy for our industry."
Russum looked to the animal kingdom for better analogies and more skilled hunters than a poacher with a high-powered rifle. After all, that poacher is seeking to get rich off the ivory, not simply survive. While all oil companies hope for the company-making play, most are satisfied to find enough reserves to continue to operate at a profit and keep their shareholders happy.
And nature is full of these types of hunters, Russum said. Each animal has its own risk-reward profile (Figure 1), similar to oil companies with different exploration strategies. If a company can identify its niche within this matrix, that information can be used to give a broad indication of expectations without a detailed statistical analysis.
The animal kingdom
Tigers choose to chase high-risk, high-reward targets. Typically they hunt big game over large areas. They also generally hunt alone and take their time, stalking their prey and striking aggressively. They eat sporadically, gorging when successful and leaving only scraps for their competitors. But their failure to hunt successfully can easily lead to their demise.
Russum wrote that this description is analogous to exploration in new fields. "A new basin will be dominated by this strategy," he wrote. "The percentage of tiger activity will decline rapidly as a basin matures. It is a long-term strategy that requires diligence, patience and deep pockets."
While every bit as fearsome as tigers, grizzly bears have an entirely different approach to hunting. They have a variety of eating habits and the ability to eat whenever the opportunity arises.
"This type of strategy becomes more prominent as a basin matures," wrote Russum. "It is the common exploration strategy of most companies in their core areas of activity. Note that it is virtually impossible to hunt for big game while foraging, which is a reason why companies with multidisciplinary operational teams may need a separate exploration group."
Wolves hunt in packs, which improves their success rate. But while there is strength in numbers, they also must divide the spoils, and an overly weak or dominant pack member may cause problems for everyone.
"This is the typical joint venture used to reduce risk," Russum wrote. "Ideally companies could agree to explore in different areas or focus on specific plays, then jointly participate in the best opportunities to increase their actual success rate."
Hawks are always alert for signs of movement and can strike quickly when an opportunity is spotted. Perhaps most significantly, they survive well eating small prey.
Russum deemed the hawk strategy "excellent for smaller companies which can rapidly pursue new opportunities. However, there is a risk of becoming too diversified. Once a company identifies a successful niche, it should focus the strategy to take advantage of that expertise by moving toward a grizzly strategy."
A final analogy is not so much exploration as a "table scrap" philosophy. Vultures, rather than finding their own meals, feed on others' leftovers. This would be analogous to development or step-out activity in the oil industry.
Any company foolish enough to pursue a high-risk, low-reward strategy, of course, will find itself following in the footsteps of the animals that put some of those hydrocarbons there to begin with - the dinosaurs.
Alternatively, few animals are lucky enough to live the low-risk, high-reward lifestyle consistently, but in nature (and in oil prospecting) these opportunities exist. When a predator moves into a new area with abundant prey or develops a new hunting technique, pickings are good. Similarly, when an oil company moves into a new basin or develops a significant new exploration technique, opportunities abound.
"The caveat is that this type of strategy cannot be predicted in advance," Russum said. "The results will only remain low-risk, high-reward for a short period of time before competition (comes along) and the easy opportunities are taken."
Russum sees the benefit of this approach to be a simple way of assessing potential and impact, "which can be visualized by both the expert and the layman."
He added, "The approach can provide considerable insight into the requirements for pursuing a particular strategy and the results that might be anticipated when different strategies are pursued."
Happy hunting!
For more information, visit www.geo-help.ab.ca.

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