Identifying and Understanding Critical Risks
Many resources are spent on reducing risks, which in the end, may have little or no impact on the decisions that need to be made and/or on the value of the project. Not all risks are critical to the success of the project; some are minor.
Identifying the critical risks at an early stage of a project allows the decision maker to focus resources on minimizing the risks and uncertainties which have the most significant impact on the project outcome.
The PetroVR Solution
The PetroVR Tornado Diagram is a central element in the workflow recommended for project evaluations. It is a graphical representation of the range of outcomes that can be expected from each uncertainty. It ranks all uncertainties in terms of project impact and shows which ones to focus on reducing.
Early identification of critical risks allows the team to focus their work on activities that significantly impact the project, while shortening the evaluation period.
How it works
The example Tornado Diagram shown in Figure 1 below indicates that uncertainty on Net Pay and Reservoir Area will have the highest impact on results, closely followed by Well Drilling Time. The numbers in brackets refer to a more detailed description of the parameter available in a table.
To gain further understanding of the impact of the risk, an option using the Scenario Tool is available to automatically create scenarios for all the end-points of the diagram. With end-points available as scenarios, the user can study the exact effect of encountering an extreme value of the associated uncertainty.
Figure 1: Tornado Diagram Example
Active use of Tornado Diagrams throughout the project life cycle allows the team to identify and understand the uncertainty and risks that are most critical to the success of the project, and then make best use of available resources to accelerate the evaluation process.