Scandinavian Working Papers in Business Administration

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2016/3: Log-normal creaming and the likelihood of discovering additional giant petroleum fields

Jostein Lillestøl () and Richard Sinding-Larsen ()
Additional contact information
Jostein Lillestøl: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Richard Sinding-Larsen: Department of Geology and Mineral Resources Engineering, Postal: NTNU , Department of Geology and Mineral Resources Engineering, N-7491 Trondheim, Norway

Abstract: This paper considers sampling proportional to expected size from a partly unknown distribution. The applied context is the exploration for undiscovered resources, like oil accumulations in different deposits, where the most promising deposits are likely to be drilled first, based on some geologic size indicators (“creaming”). A Log-normal size distribution turns out to have nice analytical features in this context, and fits available data reasonably well. The theoretical and practical consequences for the accumulation of knowledge on the underlying distribution based on this scheme, named Log-normal creaming, are explored in some detail. The theory is applied on the prediction of remaining oil accumulations to be found on the Norwegian Continental Shelf.

Keywords: Log-normal distribution; sampling proportional to size; resource prediction

JEL-codes: C00; C10; C13

18 pages, January 27, 2016

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