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    Oily Waters

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    RAGHU MALLEGOWDA
    The document outlines an oil exploration scenario, including the probabilities of discovering oil or gas and costs and revenues associated with exploration. It uses Bayesian probability to calculate the conditional probabilities of discovering oil or gas given certain outcomes and maps out the expected values of exploring for oil using a decision tree.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Oily Waters

    Uploaded by

    RAGHU MALLEGOWDA
    13 views8 pages
    The document outlines an oil exploration scenario, including the probabilities of discovering oil or gas and costs and revenues associated with exploration. It uses Bayesian probability to calculate the conditional probabilities of discovering oil or gas given certain outcomes and maps out the expected values of exploring for oil using a decision tree.

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    © © All Rights Reserved

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    The document outlines an oil exploration scenario, including the probabilities of discovering oil or gas and costs and revenues associated with exploration. It uses Bayesian probability to calculate the conditional probabilities of discovering oil or gas given certain outcomes and maps out the expected values of exploring for oil using a decision tree.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    13 views8 pages

    Oily Waters

    Uploaded by

    RAGHU MALLEGOWDA
    The document outlines an oil exploration scenario, including the probabilities of discovering oil or gas and costs and revenues associated with exploration. It uses Bayesian probability to calculate the conditional probabilities of discovering oil or gas given certain outcomes and maps out the expected values of exploring for oil using a decision tree.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Given

    ONGC Offer
    Initial Payment 60
    Post Oil Discovery 600

    Revenue and Cost


    Cost of Own Exploration 100
    Profit 2000
    Total Revenue 2100

    Cost of engaging Oil Finders 2

    P(Oil) 0.6
    P(No Oil) 0.4

    P(Gas/Oil) 0.7
    P(No gas/Oil) 0.3

    P(Gas/No Oil) 0.1


    P(No gas/No Oil) 0.9

    Bayes theorem
    P(Oil/Gas)= P(Gas/Oil)*P(Oil)/{P(Gas/Oil)*P(Oil)+P(Gas/No Oil)*P(No Oil)}
    0.91
    P(No Oil/Gas)= 0.09

    P(Oil/No Gas)= P(No Gas/Oil)*P(Oil)/{P(No Gas/Oil)*P(Oil)+P(No Gas/No Oil)*P(No Oil)}


    0.33
    P(No Oil/No Gas)= 0.67

    P(Gas)= P(Gas/Oil)*P(Oil)+P(Gas/Dry)*P(Dry)
    0.46 1160
    P(No Gas) 0.54
    0.91
    Oil Discovered

    Explore 2100

    -100 1809 0.09


    No Oil
    0.46
    Gas 0

    0 1809 0.91
    Oil Discovered

    Sell 600

    60 604 0.09
    No Oil
    Oil Finders
    0
    -2 1151.28
    0.33
    Oil Discovered

    Explore 2100

    -100 591 0.67


    0.54 No Oil
    No Gas
    0
    0 591

    Cannot sell

    0 -2

    0.6
    Oil Discovered

    Explore 2100 2000

    -100 1160 0.4


    No Oil

    No Oil Finders 0 -100


    0 1160 0.6
    Oil Discovered

    Sell 600 660

    60 420 0.4
    No Oil

    0 60
    Oil Discovered
    1998
    1998

    -102
    -102

    Oil Discovered
    658
    658

    58
    58

    Oil Discovered
    1998
    1998

    -102
    -102

    -2

    2000

    -100
    660

    60
    ID PARENT TYPE ROW COL LABEL VALUE
    1 3T 2 17 Oil Discove 2100
    2 3T 7 17 No Oil 0
    3 7E 4 13 Explore -100
    4 6T 12 17 Oil Discove 600
    5 6T 17 17 No Oil 0
    6 7E 14 13 Sell 60
    7 13 D 9 9 Gas 0
    8 10 T 22 17 Oil Discove 2100
    9 10 T 27 17 No Oil 0
    10 12 E 24 13 Explore -100
    11 12 T 32 13 Cannot sell 0
    12 13 D 28 9 No Gas 0
    13 21 E 18 5 Oil Finders -2
    14 16 T 37 13 Oil Discove 2100
    15 16 T 42 13 No Oil 0
    16 20 E 39 9 Explore -100
    17 19 T 47 13 Event 17 0
    18 19 T 52 13 Event 18 0
    19 20 E 49 9 Sell 60
    20 21 D 44 5 No Oil Find 0
    21 0D 31 1 Event 3 0
    PROP
    0.91
    0.09
    0.5
    0.91
    0.09
    0.5
    0.46
    0.33
    0.67
    0.5
    0.5
    0.54
    0.5
    0.6
    0.4
    0.5
    0.5
    0.5
    0.5
    0.5
    1

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