An Economic Analysis Using Multi-objective Genetic Algorithm And Stochastic Process With Real Option

Abstract

Both the risk of a project and the flexibility of decision making are extremely crucial in analyzing the economic efficiency of reservoir development. Existing models cannot include operational, geological and market risks due to deterministic assumptions of future cash flow. This study developed a model for analyzing economic efficiency stochastically using a multi-objective history matching process along with Real Option Valuation (ROV). The multi-objective genetic algorithm was introduced to generate history matching data in the reservoir. The well performance for a simulated reservoir was predicted by additional drilling sites at stages of development. ROV was employed to reflect the payback period and business risks simultaneously. The asset value of the operating field can be improved up to 6-12%. Compared to the conventional models for analysis of economic efficiency, the proposed method can flexibly determine the time for additional drilling to manage the uncertainty of the project.