In a waterflooded mature oil field, a large scale polymer-flooding project is evaluated with a small-scale...

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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. 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.

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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... View the full answer