Answered step by step
Verified Expert Solution
Question
1 Approved Answer
In a waterflooded mature oil field, a large scale polymer-flooding project is evaluated with a small-scale pilot-test being considered to make a decision. Without
In a waterflooded mature oil field, a large scale polymer-flooding project is evaluated with a small-scale pilot-test being considered to make a decision. Without the pilot test, the existing waterflooding will continue with an estimated NPV of $36 MM USD. Historically, polymer-flooding pilot tests resulted with promising results in 65% of the cases, and results are representative for large-scale flooding in 70% of the cases (can be considered as right data are collected). In the case of a promising pilot-test, large scale project will have an NPV of $80 MM, but if the pilot test is not representative (is wrong), this will result in a loss of $40 MM USD. In the case of a not-promising pilot-test, existing waterflood will continue as it is, with an NPV of $36 MM USD. Calculate the value-of-information of the pilot test, by considering Lohrenz's Method.
Step by Step Solution
★★★★★
3.32 Rating (158 Votes )
There are 3 Steps involved in it
Step: 1
ValueofInformation VoI of the pilot test can be calculated using Lohrenzs Method This method is based on the concept of expected value of perfect info...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started