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Journal of Australian Energy Producers
RESEARCH ARTICLE

Real-world decision making in the upstream oil and gas industry—prescriptions for improvement

Steve I Mackie A , Steve H Begg B C , Chris Smith C D and Matthew Welsh B C
+ Author Affiliations
- Author Affiliations

A Magellan Petroleum Australia Ltd

B Australian School of Petroleum

C The University of Adelaide

D Graduate School of Business

The APPEA Journal 48(1) 329-344 https://doi.org/10.1071/AJ07022
Published: 2008

Abstract

Business under-performance in the upstream oil and gas industry, and the failure of many decisions to return anticipated results, has led to a growing interest in the past few years in understanding the impacts of decision-making processes and their relationship with decision outcomes. Improving oil and gas decision making is, thus, increasingly seen as reliant on an understanding of the processes of decision making in the real world.

There has been significant work carried out within the discipline of cognitive psychology, observing how people actually make decisions; however, little is known as to whether these general observations apply to decision making in the upstream oil and gas industry.

This paper is a step towards filling this gap by developing the theme of decision-making process. It documents a theoretical decision-making model and a real-world decision-making model that has been distilled from interviews with many Australian upstream oil and gas professionals. The context of discussion is to review the theoretical model (how people should make decisions) and the real-world model (how people do make decisions). By comparing and contrasting the two models we develop a prescriptive list of how to improve the quality of decisions in practice, specifically as it applies in the upstream oil and gas industry.

Steve Mackie is the exploration and business development manager at Magellan Petroleum Australia Ltd. He has a PhD from The University of Adelaide, researching decision making in the oil and gas industry. He also has a MBA from the University of South Australia and a BSc from Macquarie University. He has more than 30 years experience in the upstream petroleum industry in both region- and field-specific geoscience. As well as running his own successful consultancy, he has worked for multi-nationals and local explorers. He has been forming, managing and developing asset teams associated with exploration and development geoscience and has set up and successfully managed virtual teams. Member: PESA, AAPG, SPE and EAGE.

smackie@magpet.com.au

Steve Begg has a BSc and PhD in Geophysics from the University of Reading, England. He is a professor of petroleum engineering and management at the The University of Adelaide, Australia, focussing on decision making under uncertainty, asset and portfolio economic evaluations, and psychological factors that impact these. Formerly, he was the director of strategic planning and decision science with Landmark Graphics. Prior to that he held a variety of senior operational engineering and geoscience roles for BP Exploration, and was a reservoir characterisation researcher and manager for BP Research. Steve has been a SPE Distinguished Lecturer and has chaired several SPE forums and Advanced Technology Workshops related to his areas of expertise. Member: SPE and AAPG.

steve.begg@adelaide.edu.au

Chris Smith has a PhD in Strategic Management from Warwick Business School and a MClinPsych from the University of Surrey. He is a senior lecturer in strategy at the Graduate School of Business, The University of Adelaide, where he focusses on the meanings and manifestations of strategy at various levels of organisations. Prior to this, he was on the faculty at Warwick Business School, which he had joined after holding various general manager/managing director positions in international manufacturing companies across a range of industries. Member: Australian and British Psychological societies, Strategic Management Society and Strategic Planning Society.

dr.chris.smith@adelaide.edu.au

Matthew Welsh has a BA (Hons) in Philosophy and a BSc (Hons) and PhD in Psychology from The University of Adelaide. He is employed in the Australian School of Petroleum at the University of Adelaide researching psychological factors influencing judgement and decision making in the petroleum industry. Specifically, he examines heuristic decision processes, their accompanying biasses and methods of remediation. Member: SPE.

matthew.welsh@adelaide.edu.au