decision nodes sensitivity analysis

[MathiasAlerini]

Decision analysis can be performed on decision nodes. Copilot suggests 3 approaches which could be considered.

• Option Removal Analysis
• Decision Leverage Analysis
• Decision Importance Ranking

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Most people do not perform this analysis enough.

Question:

"How valuable is each decision opportunity?"

Examples:

• Drill appraisal well?
• Delay decision?
• Expand facility?
• Farm down?
• Abandon?

Here we are no longer testing uncertainty.

We are testing the strategy space itself.

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Option Removal Analysis

Remove one decision alternative and recompute MEU.

Example:

1 Base MEU:
2 500 M$

Remove:

1 Delay option

New MEU:

1 450 M$

Value of flexibility:

1 50 M$

Message

1 The delay option contributes 50 M$
2 of strategic value.

This is very different from uncertainty sensitivity.

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Decision Leverage Analysis

Measure:

$$ MEU_{best}-MEU_{worst} $$

at a decision node.

Example:

1 D3: Facility concept
2 
3 Tieback 520
4 FPSO 500
5 Minimal 420

Decision leverage:

1 100 M$

Message

1 This decision is strategically important.

High leverage decisions deserve management attention.

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Decision Importance Ranking

For each decision node compute:

$$ EV(\text{optimal}) - EV(\text{suboptimal}) $$

Ranking example:

Decision	Impact
Development concept	120
Appraisal	70
Expansion	30
Monitoring	10

Message

1 Not all decisions matter equally.

This is often a very powerful executive insight.