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8 Jan 2013

By Phil Stockton

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Accord Energy Solutions 4

What do finding the Higgs Boson, Monte Carlo and a novel method to allocate North Sea oil and gas have in common?

All are informed by the mathematics of risk, probability and uncertainty.

With potential Nobel prizes in the offing, the detection of the Higgs particle in the Large Hadron Collider at CERN was only announced when it could be stated with a high level of certainty.

The Higgs particle cannot be observed directly but its presence can be inferred from other particles produced by its decay the specific combination of these decay particles is in effect the Higgs signature.

One of the methods used to calculate probabilities of the various particle decay products is a technique known as Monte Carlo simulation, which allows probabilities for much more comple . situations to be calculated such as those encountered ith the decay of the Higgs particle. The technique wa named after the Monte Carlo casino because it uses randomly generated numbers.

From Monte Carlo to the world of so-called casino banking; Fisher Black and Myron Scholes developed an equation in the 1970 s to allow options to be priced. This equation, based on the probabilities of pay-offs associated with the option, was seen as a breakthrough and resulting in the in two men being awarded a Nobel prize and its use has prc I iferated. The use, or rathur the abuse, of the Black Seholcs equation has been iiiiplicated as a contributing factor in the collapse of the financial markets in 2008.

The mathematics of uncertainty is employed widely in science, engineering and economics. At Accord Energy. we have utilised the mathematics of uncertainty to develop allocation methods for the North Sea s oil and gas industry. Allocation is required when oil and gas originating from different sources or fields is mixed together. The resultant mix cure has to be allocated back to the sources based on their measured production. These methods a] locate the mixed product oil to the sources in such a way that more accurate measurements receive quantities closer to their measured value. This type of approach has been used to allocate oil in the North Sea for over 10 years.

We are further developing the techniques to allocate oil and gas simultaneously and allow the incorporation ofTurther properties of the various fluids to be included. For example, the rate of flow from a particular field may be difficult to measure but because of the nature of the reservoir from which they are produced the relative proportions of oil and gas associated with a field may be known with a high degree of confidence. The new methods take advantage of this additional information in the allocation and hence improve its accuracy and equitability.

To improve the economics of marginal fields, tiebacks between ex production facilities and new discoveries are commonplace and rarely if ever is there one field with it's own production and transportation facilities. Because of this it is necessary to allocate produced hydrocarbons back to the contributing fields.

With the pressure to minimise costs for marginal projects the maxim of the use of the available resources can provide equitable solutions to common allocation issues. The innovative application of uncertainty in the oil and gas industry, is helping ensure that our clients allocation systems are robust, fi for purpose and fair. Phil Stockton is lirector and head consultant at Accord Energy, an iriependent, specialist hydrocarbon accounting cornpany for the international oil and gas

- industry Article Size (cm2 ) 37.58 Circulation: 61981 Source: ABC Jun 2011 Courier & Advertiser Section: Supplement Edition: Main 8 January 2013 Page: s9 This Cutting has been produced under licence by Press Data Ltd. It is protected by copyright. No further copies may be made except under licence Ref: DC20130108055