Geointelligence Network

J-M Monget - MinesParisTech - CG, Sophia Antipolis - France

T. Rousselin - MinesParisTech - Géo212, Paris - France

This course covers "in fine" the problems related to capital investment decision making in the exploitation of natural resources.

The background hypotheses are that the resource has been selected, the reserves have been identified following a period of exploration and the extracting industrial project has been already dimensioned. Starting from this situation, the problem is to evaluate the economic feasibility of the latter.

The exploitation of natural resources is a capital intensive economic activity in which the returns on investment occur over a long period of time (typically 10 to 20 years). Consequently, initial investment risks are often shared among various partners. The go-ahead decision is based on the concept of the accumulated " net present value" (or NPV) of the cash-flow generated by the extracted product :

with : 'I' the year income, 'C' the year costs and 'r' the rate of return

While under way, this type of industrial activity will be faced with issues related to profitability, technical reliability, socioeconomic side effects and environmental impact problems.

The prior evaluation of the expected return on investment and associated risks do condition the final decision. The assessment of the degree of risks involved is influenced by the following factors :

• The inaccuracy in the knowledge of the parameters which are used in the estimation of the workable reserves as well as those related to the predictability of the evolution of the market prices over a long period of time.
• The unpredictable events which may disturb the production and consequently increase its costs : industrial accidents, unwanted catastrophic effects on the environment, sudden modifications in the sociopolitical context in hosting nations…
• The volatility in the evolution of interests and behaviors of the various initial investment bodies which may result in conflicting situations over time.

The power of open information available on the web helps to gather sufficient information on the basic reserve parameters and adequate reading of the possible risks which may impinge on the long term profitability of the extraction project. Various models (geographic, environmental, economic, decision-making …) might be used cooperatively in order to form the best estimation of the proven reserves, evaluate their economic value, estimate the possible risks and form an opinion on the likely decisions of the various initial investment actors.

Project participants (sponsors, lenders, contractors, clients, local citizens...) but also other parties involved either in the decision process or in its consequences (international institutions,environmental development groups, local or global NGOs, medias and public opinion...) have to gather enough information in order to understand the issues and ponder various options.

Of course, it is not a static system, so the analysis and decision cycle will have to be performed for each business opening :

• Availability of new techniques or new knowledges
• Resources stocks and industry ventures
• Political openings
• Contract announcements
• Industrial developments
• Money available for investment and project financing

The initial case history used in order to illustrate the course involves the development of oil fields in Central Africa. But the philosophy of "geointelligence" is much broader and should be applicable to investment decision making situations related to renewable or non renewable resources at any geographic or economic scales.

Geointelligence, a systems analysis approach

The outcome of geointelligence should be:

• A better evaluation of risks involved in large capital resource ventures
• A clear understanding on the conflicts of interest existing between the various actors (political, financial, environmental, societal...)
• A quantitative approach on the evaluation of expected returns.