Same song, new verse. Wise portfolio management will continue to yield exploration success.
As a part-time independent exploration consultant with almost 50 years experience, I read many articles about our industry and attend business meetings and social lunches. A common theme in discussions today is the "lack of good quality exploration prospects." Is this a reality or a mistaken perception?

A historical review is useful, with quotes that I remember:

• 1962 - "This is the last big lease sale in the Gulf of Mexico."
• Mid '60s - "There is no oil in the geopressured section; it's a gas play only."
• 1970 - "There are many reasons to have strong reflections on seismic, and thus we are very skeptical about 'bright spot' technology."
• Late '70s - "There is no source rock and sand in deep water."
• Mid '80s - "Deepwater discoveries will never be economic."
• Late '80s - "You can have any oil found in Equatorial Guinea."
• Early '90s - "Gulf of Mexico drilling is essentially a Dead Sea."
• Early '90s - "West Africa offshore exploration is stagnant."

Of course, all the above statements are wrong. Creative explorers, exploration technology application and, in some cases, innovative engineering and development systems changed these perceptions and dogma to successful economic ventures.

There is no doubt that untested conventional structural closures (four-way dip anticlines and fault closures) are becoming increasingly difficult to find. A good knowledge of the exploration context is mandatory as prospects, especially those predominantly based on seismic attributes, must "make geologic sense." Geoscientists must use all the appropriate technical tools ("one more tool" is my favorite term) to evaluate oil and gas plays and prospects; there is no "silver bullet."
Each oil company should build an exploration portfolio to meet its corporate goals and leverage the skills of its technical staff within the scope of its financial resources.

It's necessary to have a large number of exploration prospects with varying probabilities of commercial success, say 15% to 70%, and different reserve potential ranges. Some companies' managements set targets of at least 50% probability of success, and some executives state, "Don't drill any dry holes." Of course this is unrealistic and impractical; the goal of all geoscientists should be a diversified exploration portfolio (just like our stock and bond portfolios). Avoid the very high-risk prospects (less than 10% to 15% usually means 1% commercial success). In my view, an average probability of economic success of 30% to 40% is quite acceptable.

My experience indicates drilling results from a large diversified prospect portfolio will have a success rate near the average of all the prospects, but the discovered cumulative reserves can be half the sum of the chance-weighted pre-drill reserve estimates. The proper portfolio should include low-, medium- and high-risk opportunities that provide the chance that one or two prospects may find a reserve larger than the reasonable maximum and thus the total portfolio reserves are close to the predicted reserves. Some companies have failed because their portfolio consisted of all high-risk ventures - a Gambler's Ruin strategy.

Most of these comments are commonsense" and "back to the basics," but geoscientists and their managements sometimes fail to recognize the importance of creative explorers, application of new technology and portfolio management.

What are the exploration "Prospects of the Future?"

• Stratigraphic traps using geology studies in combination with 3-D seismic with attribute technology such as AVO (amplitude vs. offset) and frequency analysis in rich proven basins (in my view, on top of the list);
• Use of seismic AVO technology in medium- to low-porosity reservoirs - so-called AVO Class 2 and 1 Gas Sands;
• Detailed understanding of the effect of overpressures on seal and hydrocarbon migration to generate deep prospects in proven basins;
• "Bypassed pay" in old wells, which may be re-evaluated using modern logging and petrophysics technology so upside potential can be realized;
• Current uneconomic international "stranded" oil and gas discoveries, which may indicate a significant petroleum system is present and, in some cases, lead to new commercial oil and gas discoveries;
• More "basin center" gas plays; and
• Play and prospect ideas that technical staff has not thought of (very important).

Except for basin center gas plays, this list of play concepts has barely been scratched. Geoscientists need to think out of the box, and management must stimulate the development of new ideas. I believe the "lack of good prospects" is a mistaken perception.

Editor's note - Mike Forrest is a well-known independent exploration consultant. Rhonda Duey's regular column will run again in October.

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