Why are decisions for oil and gas projects not always made the way they ‘should’ be?
David Newman A B , Steve Begg A and Matthew Welsh AA Australian School of Petroleum, The University of Adelaide, SA 5005, Australia.
B Corresponding author. Email: newpoms@westnet.com.au
The APPEA Journal 58(1) 130-158 https://doi.org/10.1071/AJ17106
Submitted: 24 November 2017 Accepted: 18 January 2018 Published: 28 May 2018
Abstract
The outcomes of many business decisions do not live up to expectations or possibilities. A literature review of neuroscience and psychological factors that affect decision making has been undertaken, highlighting many reasons why it is hard for people to be good decision makers, particularly in complex and uncertain situations such as oil and gas projects.
One way to diminish the impact of these human factors is to use the structured methodology and tools of Decision Analysis, which have been developed and used over 50 years, for making good decisions. Interviews with senior personnel from oil and gas operating companies, followed up by a larger-scale survey, were conducted to determine whether or how Decision Analysis and Decision Quality are used and why they are used in particular ways.
The results showed that Decision Analysis and Decision Quality are not used as often as the participants think they should be; some 90% of respondents believed that they should be used for key project decisions, but only ~50% said that they are used.
Six propositions were tested for why Decision Analysis and Decision Quality are not used more, and the following three were deemed to be supported:
• Decision Analysis and Decision Quality are not well understood.
• There is reliance on experience and judgment for decision-making.
• Projects are schedule-driven.
Further research is proposed to determine the underlying causes, and tackle those, with the aim being to improve business outcomes by determining how to influence decision makers to use Decision Analysis and Decision Quality more effectively.
Keywords: biases, decision analysis, decision gate, decision-gated framework, decision making, decision quality, emotional tagging, experience, heuristics, interview, intuition, judgment, neuroscience, outcome, pattern recognition, prediction, premortem, psychology, rational, survey.
David Newman is presently undertaking a PhD from The University of Adelaide, researching decision making for oil and gas projects. He has a BSc in Aeronautical Engineering from Bristol University and an MSc for research on airships from Loughborough University. He has 35 years of experience in the oil and gas industry, working for Shell and Woodside in a variety of project, operations and business roles. This includes managing projects and running a decision-making framework for opportunities and projects. He is a Member of the Institution of Mechanical Engineers (UK), a Chartered Engineer, and a Member of the Society of Decision Professionals. |
Steve Begg is Professor and former Head of the Australian School of Petroleum at the University of Adelaide, where his focus is on decision-making under uncertainty, including psychological and judgmental factors, and asset and portfolio economic evaluation. Prior to joining the University in 2002, Steve spend 19 years in the oil and gas industry: Director of Decision Science and Strategic Planning for Landmark Corp; a variety of senior geo-science and engineering operational assignments for BP Exploration; and as a reservoir characterisation researcher and project manager with BP Research. He has twice been an SPE Distinguished Lecturer on decision-making and uncertainty assessment topics and was commissioned by the SPE to coauthor a book, Making Good Decisions. He was recently elected to the Board of the Society of Decision Professionals and in 2016 received the SPE’s International Award for the Management and Information discipline. He holds a PhD degree in Geophysics and a BSc degree in Geological Geophysics from Reading University. |
Matthew Welsh has a BA(Hons) in Philosophy, a Graduate Certificate in Education (Higher) and a BSc(Hons) and PhD in Psychology, from the University of Adelaide. He is employed as Senior Research Fellow in the Improved Business Performance Group at the Australian School of Petroleum, where he has worked for the past 14 years, conducting applied research focussing on the psychological aspects of decision making and the impact that these can have on the accuracy of forecasts and, thus, outcomes. This includes work on individual differences in decision-making ability and the design of elicitation support tools to aid estimation in the oil industry and defence. Matthew is a current member of Cognitive Science Society and Association for Psychological Science and has written more than 40 papers for psychology journals and industry outlets. He has been an invited Discussion Leader at an SPE Forum on Risk Mitigation and Uncertainty Management and presented work at psychology, engineering, geology and geophysics conferences worldwide. |
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