Ejaz Gul

Research Fellow

Economics, Nature and Leadership Analytics, Pakistan

ejazenla@gmail.com

Abstract

The most difficult challenge for an economist is analysis of exploration project due to intrinsic risk involved in the process. Compound risk of uncertainty and high possibility of failure makes the venture complicated. This case study elucidates the process of economic analysis of exploration project in Pakistan. The expected monetary value (EMV) analysis was conducted carefully based on probability of success (POS) which was determined as 20%. As per the technical details provided by the oil company, the resources were expected to be 100 million barrels. From the interpretation of technical data acquired, it was concluded that cost of the exploration was 20 million US$. Based on the net present value (NPV), the break even probability of success (BPOS) was determined. The critical decision was whether to recommend this project or not? To confirm the structure, geotechnical expert carried out geologic investigations. Structure was confirmed by three dimensional geologic model and assessed even bigger than before with estimated POS of 50%. Again the economic analysis was revised for this new assessment after geologic survey. The new calculations showed improved BEPOS for the project. Paper presents excellent study on how geotechnical investigations improve the economic worth of exploration projects. 

Keywords

Exploration, Project, Economic, Analysis, Breakeven, Probability, Success.