On the Value of Information

Abstract Often it has to be decided if additional information should be collected or if further studies are necessary before a new field development or an incremental development project can be initiated. Ideally, additional information should be gathered only as long as it contributes to improving the total project net present value and reduces the company's Investment risk. However, it is usually very difficult to attach an economic value to a specific data gathering activity. Lohrenz (1) presented a method for evaluating the value of information. This approach has been utilized in connection with decision making on: 1) a long term test of a vertical well in a small North Sea oil field, 2) a North Sea polymer pilot project, 3) extended production testing of a horizontal well in a reservoir with a thin oil rim. The method, its application and results for the three cases are described in this paper, advantages and disadvantages of the method are also discussed.