Dynamic decision making for graphical models applied to oil exploration

Gabriele Martinelli, Jo Eidsvik and Ragnar Hauge

European Journal of Operational Research, 2013, vol. 230, issue 3, 688-702

Abstract: We present a framework for sequential decision making in problems described by graphical models. The setting is given by dependent discrete random variables with associated costs or revenues. In our examples, the dependent variables are the potential outcomes (oil, gas or dry) when drilling a petroleum well. The goal is to develop an optimal selection strategy of wells that incorporates a chosen utility function within an approximated dynamic programming scheme. We propose and compare different approximations, from naive and myopic heuristics to more complex look-ahead schemes, and we discuss their computational properties. We apply these strategies to oil exploration over multiple prospects modeled by a directed acyclic graph, and to a reservoir drilling decision problem modeled by a Markov random field. The results show that the suggested strategies clearly improve the naive or myopic constructions used in petroleum industry today. This is useful for decision makers planning petroleum exploration policies.

Keywords: Bayesian Networks; Dynamic programming; Graphical model; Heuristics; Petroleum exploration (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:230:y:2013:i:3:p:688-702

DOI: 10.1016/j.ejor.2013.04.057

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