VALUE OF INFORMATION

Success Story

VALUE OF INFORMATION

A major Oil and Gas company had a highly prospective region near the shoreline of its offshore lease. It is notoriously difficult to acquire seismic data in such regions, since neither land crews nor marine crews can operate. A very expensive approach called an “ocean bottom cable survey” was the only viable option.

But $275 million is a lot to pay for something that does not directly generate any revenue.

When Decision Strategies was hired to serve as their business consulting firm, we were able to identify over $450 million in value created by this survey – more than enough to justify the cost.

What We Did

  • Enumerated a list of projects affected by the new data
  • Identified key uncertainties
  • Quantified the value of the new data

How We Did It

  • Framed the problem appropriately
  • Started simple and then increased complexity
  • Considered what could be, not just what was known

The Challenge

It is often difficult to imagine all the ways in which additional information might affect our future decision choices. However, it is critical to remain focused on these decisions, because information that does not have the potential to change any decisions adds no value to the business (regardless of how much more comfortable it makes us feel).

Summing Value Over Multiple Projects

It is also important to know when the value of information may be simply summed, as well as when it must be combined in a more sophisticated way using decision trees. Value from information that affects multiple projects or assets may be summed, while value from information that helps to resolve multiple uncertainties on a single asset must be assessed with a more complex decision tree.

The Solution

We worked closely with the team to identify all assets that might be improved by the new seismic survey, including potential assets that had not yet been defined. We discussed which of the key uncertainties on each asset might be resolved by the new data. This enabled us to design a decision tree tool to assess the value of the new information.

Find the Decision Tipping Points

Many inputs to the analysis were estimates from the team. We utilized these estimates but conducted sensitivity analyses to see how far off they could be before the results changed. This enabled a confident decision, even without absolute confidence in the inputs.

Roll the Value Up

On some assets, the new information added no value – i.e., the client was better off deciding what to do without acquiring the new data. But on most assets, the new data added significant value. And when the total value surpassed $450 million, the client felt confident that even if the assessments were somewhat off, the new survey would be worth the investment. They acquired the survey, and it more than paid for itself.

TESTIMONIAL

Decision Strategies helped us keep key major capital projects on schedule, and they provided important insights on the decision quality of major investments.

Decision Analysis Team Lead Oil and Gas Company