4.6692016090 – the Most Important Number in Upstream E&P??
Instead of numbers like 1200 BOPD or 6500# ftp or 15,000’ MD? Or even 200,000 gross acres under lease?
Probably a small percentage of those of you reading this know this number as Feigenbaum’s constant – a very important number in chaos theory.
Important because it implies that within what appears to be chaotic information there is a universal constant. And with a universal constant, there’s some hope of being able to find order, and maybe even predictability, within the non-linear enterprise that we know as upstream oil and gas exploration and development.
In doing some very light research I’ve found that chaos theory has been applied to understanding business organization, HR programs, stock price behaviors, and ecosystems. I’ll be willing to bet that some of the strongest players in E&P have applied it to reservoir behavior and exploration strategies, and maybe even development models.
And given that we’re living in an unconventional reservoir world maybe we should be thinking about the entire enterprise in an unconventional way.
Initial Conditions Matter
One of the great stories in the development of chaos theories concerns Edward Lorenz (Dartmouth College class of 1938). He was at MIT and had done some very early programing in 1961 to attempt to predict weather outcomes. One day he started a new model and decided he wanted to look at a segment of the output in detail. So he re-ran the model using the numbers that his model had generated from the last calculation. Picking up where he left off, as it were. What he found shocked him.
Within a finite number of iterations the same model, the same inputs began to give him wildly varying results (assume the red is the initial run)!
Image Source: James Gleick (Chaos-Making a New Science, p17, Penguin Books)
How does this happen? The function didn’t change. But inputs were not exactly the same!
Lorenz had rounded his second iteration inputs from six significant digits to three. As a result, his model absolutely blew up.
This was termed the Butterfly Effect, and was popularized by the image of a butterfly suddenly flapping its wings in the Amazon, ultimately perturbing the atmosphere by just enough to create large changes in weather in North America. Message: small changes in initial conditions can have profound effects.
Would this matter to E&P?
Well, think of modelling future corporate cash flow based on last month’s production numbers – and then finding that in the most current month those production numbers were corrected.
Or your petrophysics work relies on LAS curves that have porosity values that are one digit too low or too high.
Or your decline curve analysis is sampling at too gross a rate.
You would be forgiven for thinking that ALMOST right is equivalent to CERTAINLY wrong.
Lorenz Attractors in E&P?
As Lorenz and other workers worked through their non-linear models they began to find that there would come a point where data periodicities would become chaotic, leading to a not-so-comforting conclusion that non-linear systems could never be understood.
But they persevered, and one of the things Lorenz found was this—the Lorenz Attractor
It tells us that in a chaotic time series system no three variables will ever generate the same point, but they will deliver values that are constrained and which approach predictability.
So how amenable is E&P to chaos theory analysis?
Can it be analyzed and thought of in out-of-the box kinds of ways that will be illuminating?
Does it behave like an ecosystem with predator/prey relationships? If so, what constitutes food?
Do acreage acquisition strategies have “initiators” that can be abstracted into simple repeating models of behavior that can predict acreage buy areas or characterize the lessee universe?
How fractal is the distribution of fractures?
Can a simple fractal model of this:
We’re curious about this so we’re going to initiate a series of unconventional looks at unconventional reservoirs. Simple out-of-the box arm waving that may yield some very useful insight.
So stay tuned! And chaotic….
What do you think? Leave a comment below.
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