case Petroil

Topics: Decision theory, Decision tree, Probability Pages: 4 (950 words) Published: August 20, 2014
Global Petroil is a transnational corporation with many years of experience in the energy sector of hydrocarbons in various countries. It is distinguished by three major business units: the company's exploration, refining and marketing. The business unit Exploration is considered as one of the pioneers and most important of the three, because it was achieved with the continuity and growth of the whole industry chain. One of the first projects

However, to achieve that growth, they had to make important management decisions from the start. In one of its first projects, the oil exploration company Petroil was considering two sites for two oil exploration wells. Only one may be punctured. The cost of drilling the Site Numero 1 was $ 100,000. Preliminary geological data indicated that the well could be dry, or be of low productivity or be highly productive. He had signed a contract with a development company to buy the site if a well by drilling success you had. The buyer would pay $ 250,000 for a well of low productivity and $ 600,000 for high productivity well. If the well was dry, Petroil lose $ 100,000 of the cost of drilling. By that time, the company geologist, Jane Goodwell, was unsure about the existence of a structural dome that site. A dome structure is a kind of anticlines (geological rock deformation formed as a curved folds as strata tectonic stress resulting from various types) raised to a certain depth by the accumulation of oil and the increase of the pressure produced by the natural gas . Structures are ideal for the accumulation of oil.  

She assigned a probability of 0.6 to the existence of a structural dome. Their assessments for dry, low, or high productivity wells were conditioned to geological structure. Table 1 shows the odds by estimated conditions. The geologist would rather give the information in this way though as she said, "we will never know for sure if there is a structural dome, up to drill." TABLE 1

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