Introduction
The inclusion of a challenging investigative theme provides a sound means of enhancing the effectiveness of field training, giving it drive and focus. When one of the prime aims is to demonstrate how accurate geological knowledge generates commercial added value and competitive advantage, then the exercise can become infectious and compulsive for all concerned. The Aberdeen University field based Oil Business Game was devised for senior Honours students who are in the last few months of their study in a department with a strong petroleum focus. It is a competitive team exercise, integrated with an optional residential field course covering the superb Upper Palaeozoic to Mesozoic geology of the SE Scottish/ NE English coast. The game takes a week to unfold.
The oil game anchors the field course in applied realism, but adds excitement and fun - something special and unusual for students on the final straight of a Scottish 4 year undergraduate course! It is not an exercise in sophisticated petroleum geology, but an exercise in the data acquisition, management and decision making aspects of the processes involved. Student response is very positive and some, looking back on it, see it as a valuable introduction to the world of work.
This article describes the game, not the underlying fieldwork that underpins it. Despite the oil focus, the general principles and methods of the game, including the associated computer software, are adaptable. Direct translation to other applied themes, such as aggregate extraction and water resources, would be straightforward, and the game can be simplified. A “Research Company” version is in sketch form, and doubtless other generic applications will occur to readers. All feedback is welcome. Why not join us on a course, and see if the package is transferable for your particular purposes?!
The exercise
The exercise simulates the activities of oil exploration and production companies in creating teams, assessing plays, seeking investment, evaluating oil prospects, conducting impact assessments, bidding for blocks, and producing oil or gas that requires to be transported from site. Integrated with the geology field course, it reinforces the geological objectives, underscores the value of accurate field observation, and illustrates the ways in which geological science can be used in support of industry. In particular, it brings home to students the extent to which diverse subdisciplines, such as palaeoecology, trace fossils, diagenesis, sedimentology and structural geology contribute to the holistic understanding necessary for accurate petroleum modelling.
Individuals play both in their own right and as members of a team (company). Personal “investment cash” is earned, players placing half in their own company and half in a “portfolio” of choice in other companies. Investment is controlled through a simulated stock market (a purpose designed interactive spreadsheet, see ) responsive to actual investor confidence and company performance. The initial share value of a company is set by the team at floatation but this soon changes in successive rounds of bidding as market forces operate. Once formed, each company team works as a group in data gathering and interpretation exercises, and their relative effectiveness can quickly become apparent. A final share trading round is delayed to show the effects of this, when values can further change as investors move into the better looking companies.
Investor capital is used by the companies to assess, bid for and develop hydrocarbon prospects. These are potential fields contained in “blocks” put up for auction by the “regulators”. Blocks are precisely defined, based on real geological maps, involving real localities, rocks and structural features that are visited and examined in detail at various stages in the field course. Students are asked to imagine that they are walking around inside potential reservoirs, emulating the virtual reality caves used by some major companies, but some blocks are never seen first hand. A certain amount of “tweaking” is obviously necessary in block specifications, to define burial depth and overburden, and some structural enhancement is sometimes necessary. A second spreadsheet is used by companies to simplify and speed up reserve calculations, recovery figures, development and production costs, environmental premiums, taxation and ultimate likely profit or loss. Specific input data are required that force competitors to consider real issues and make judgements on these, including human and environmental impacts.
The reservoirs, development costs and ultimate recovery figures are, of course, imaginary, but the outturns used by the regulators are based upon the same assumptions as used by the teams. Actual daily oil and gas prices are used in calculations. The winning team (company) and winning individual (shareholder) will be those who have made the most of their investments. The results are calculated through the spreadsheet and are made known on the last night of the field course.
The main stages of the exercise
The Business game operates during the evenings, whilst the field course occupies the days. What the game generates, though, is an absolute need to examine certain localities and acquire specific data. The game and the fieldwork mutually reinforce one another.
Day 1: Outline of Business Game
The exercise is outlined in its separate stages, and the work and materials required in support, are explained. Laptops with information and software are distributed.
Day 2: Skills statements; allocation of personal investment capital, team building
Individuals publish an A4 poster of relevant personal and scientific attributes, and a notional cash reward of £100m is given to each. Statements are reviewed by all; the fundamentals of team building are reviewed and a procedure to create company teams is agreed and implemented.
Figure 1 Example of part of the main Stockmarket Spreadsheet
This edited version of the Stockmarket Spreadsheet for Easter 2000 shows the investment details of just 2 of the 5 teams or companies (blocks of data under Company “2 — Total G” and Company “5 — Oilyend M”). Student names are on the left, grouped in teams of 4. Share purchases by individuals are listed across the page. R1 to R5 represent 5 successive bidding rounds, in which they placed half their investment in their own company and distributed half across the remainder. The row marked “starting share value” shows the evolution of share value during these successive bidding rounds. Of the 2 companies shown, one suffered a declining share value and one experienced an increase. The “Centre” invested £400m in each company in round 4. The “spend” and “value” columns show the total investment by each individual in each company and the final value of this investment at the close of the stockmarket. Similarly, columns 1 (total value of spend) and 2 (current value of investments) keep overall track of each individual share portfolio across all companies (3 companies are not shown here). Note that by this intermediate stage in the game, individual profits of up to 11% have already been made, and there are some proportional losses (column 3). Total company income, available for spending by them on blocks, appears in one of the bottom rows.
At the conclusion of the game, when profits and losses have been calculated, share values have moved ahead proportional to the profits made by the companies. This is calculated on separate company spreadsheets and not shown here. However, the final share values are entered in the row at the top (“CO1” to “CO5”), and the spreadsheet can then calculate the final value of individual share portfolios. Company 3 was the winner. Columns 4 and 5 are the end of game equivalents of columns 2 and 3 and show the final values of individual share portfolios, and the percentage profit or loss percentages, following the variable performance of the companies. Student J was the winning investor.
Day 3: Formation of companies; sale of shares. Allocation of plays to companies for prospect appraisal
Companies reveal their names and internal organisation. Share dealing, using the stockmarket spreadsheet, is explained. The nominal value of shares is £1m each, but each company can set its own share value at floatation. During successive rounds of share dealing, players must invest half their personal wealth in companies other than their own. Stockmarket calculations are run after each round, and share values are seen to fluctuate according to the relative appeal of companies. Most players get the hang of this quickly, and some bid strategically to manipulate share values. No overspend or borrowing is allowed.
At the close of the stock market companies have up to £500m each in share investment. This varies, however, and hot favourite companies are immediately apparent. To top this up the regulators allocate paid consultancy work to all the companies. This takes the form of a hydrocarbon play appraisal of rocks they actually encounter (simple definitions such as Carboniferous, Permian, Jurassic and Cretaceous work well), to be researched over the next 2 days.
Day 4: Preparation of play appraisals
Companies work on their allocated plays. They are asked for the likely hydrocarbon sources, migration fairways, seals and reservoir rocks within (and outside) their given plays, and for likely trap types, porosity and recovery values and an assessment of possible exploration and production problems. This involves literature search and the preparation of a Powerpoint and/or poster presentation.
Day 5: Team presentations on plays. Fees are allocated; Blocks are revealed
Companies give independent presentations on their allocated plays. The setting is a formal government enquiry where there are influential personnel who may ask tricky questions. Other companies also ask questions, and they are expected to make notes. A (pretty unrealistic) performance-related, fee of up to £400m is allocated to each company.
The license blocks are then announced. There are around 20 of these, comprising areally-defined production rights for which the companies must bid competitively. The blocks are 4km square (16km2) on 1:50,000 geological maps, relating directly to areas most of which are also seen in the field. Some gross simplifications are made to save time and materials. For example, teams are asked to regard present day outcrop as if it is a 3 dimensional slice through the subsurface, and the standard map cross section substitutes for seismic data. No distinction is made between the exploration and production phases. All blocks on offer contain at least one obvious possible oil trap and, for the purposes of the game, most contain at least one prospective reservoir. To be safe, however, students have to look for good reasons why a trap might not be effective, adjusting their bids according to perceived risk. Broadly speaking, the regulators are not out to mislead, which, again is unrealistic, since reality can be very fickle!
Day 6: Bid applications for blocks are prepared, and handed in as sealed bids
Using a second spreadsheet, companies must calculate a likely volume and value of recoverable hydrocarbon in place and assess the difficulties and costs of recovery, including human and environmental factors. They must also cope with a variable taxation regime, which encourages development of small fields. The spreadsheet requires input of data that force quantification of real issues. A minimum profit margin of 25% on outlay must be built into bids. A confidential file of these is submitted by each company to the regulators by a previously agreed deadline. Teams sometimes work on these into the small hours.
Day 7: Sealed bids are opened; blocks are allocated; final company values are calculated through the shares spreadsheet; winners and losers
The regulators now sort through the sealed bids, block by block, keeping track of company acquisitions and preventing overspend. The regulators’ own calculations (development costs and value of recoverable hydrocarbon) define the notional outturn for each block. A “star” system enables companies to prioritise “hot shot” blocks, which are dealt with first. The profit or loss that individual companies make on blocks is calculated through the Company’s own spreadsheet. This contains all the shareholder and share value data, and the resultant overall profit/loss on acquired blocks generates a proportional (and sometimes substantial) rise or fall in share value.
The winning company is the one with the highest final share value, but in order to calculate the individual winners the final share values of each company are entered back on the main stockmarket spreadsheet (see ). Driven by the new company share values, the overall value of the share portfolio held by each individual is displayed. Some players will have made losses (tears and recriminations) and some large gains (drinks all round). Two results define the overall individual winner(s); the highest proportional gain and the largest windfall income. These don’t necessarily coincide, and two winners may be generated.
The main learning outcomes are:
In- depth knowledge and understanding of the geology of a selected area.
Understanding of the direct application and value of field study.
Understanding of how information derived from unrelated subdisciplines feeds an integrated, holistic picture that can inform commercial judgements.
Development of intellectual, self-management, practical, communication, numerical, computing, interpersonal and teamworking skills.
Understanding of the means by which pooled skills, effective teamwork and focused activity aid decision making and can create added value.
Experience of the conflicting balances between fact finding, residual uncer tainty and real deadlines in a competitive environment.
Awareness of the roles of business organisations, stock markets and central and local government mediation in relation to resource exploitation.
Awareness of the effects of business decisions on people and the environment.
The ideal requirements of the exercise are:
Good centres with dedicated meeting rooms, where “stuff” can be left out during the day.
Around 20 students working in teams of 4.
Multiple copies of local geological maps.
One laptop computer for each team, with basic information and spreadsheet-based software, including: a company data spreadsheet for recording all income and financial transactions, a taxation calculator, a reserves and upstream/ downstream costs calculator.
A laptop and portable projector for staff with the stockmarket spreadsheet that gives a display, on demand, of team performance, stockmarket fluctuation and game results.
A small library of relevant reference books and papers
Lots of flip chart paper, and lots of beer and/or coffee!
Some features of the Game
The game has already been run for three successive years, and it has evolved, particularly through the development of the associated software, but the game can be run without this. Greater sophistication would be achieved by using the results of actual seismic and drilling investigations through the area, and reduced sophistication could involve dropping the stockmarket stage and concentrating on field and evening team exercises.
The rules are very flexible, and there have been some surprises. For example, in 2000, when Oil Company Mergers were much in the air, two of the strongest teams pooled resources and created a joint company. The reaction from the excluded teams was a defensive data trading and non competition deal. We awaited the result with trepidation. The merged team became overconfident, and nearly crashed. Weak, overconfident management led to insufficient delegation and information flow to generate enough realistic bids. They over priced these and got landed with several turkeys.
A black shale horizon shows where Coccolith production and bioturbation stopped completely during an anoxic event in the Chalk sea.
Reservoir seal or production barrier?
Mike Simmons leads a discussion. Cenomanian Chalk, South Ferriby.
On another occasion a student needed a day’s absence for a crucial interview. Rather than disadvantage either him or his team, we made him an independent consultant, charged with making as much out of paid consultancy work with companies as the others made through the normal rules. He was given the actual results, shown the workings, but forbidden to divulge detail. His services were in great demand in the early stages and he very nearly won the game!
Most students enter into the spirit of the exercise very rapidly, and some of the introductory parts are designed to encourage them to take ownership. The game seems to generate a real sense of fun, but also one of serious competition. There is a knife edge balance to be maintained between the two.
Follow-up and student reaction
On the last evening of the course we generally hold a follow-up session, in particular tracking the skills development that the course has mediated. This promotes much discussion, both of the extent to which the Business Game mirrors reality and of the broader educational outcomes. This retrospective analysis is vital, raising awareness of the issues involved and extending student self knowledge. There are more thorough ways in which this could be approached, for example using a formal written self appraisal of learning outcomes.
Course assessment is presently done on the basis of a formal submission that includes submitted field notes, copies of materials prepared in connection with the game, and an account of some detailed aspect of the course. The outcome of the game plays no part in the assessment. Most students put such intensive effort into the course that we are reluctant to allow this submission to be an extensive and time consuming part of the exercise. In 2000, we asked students for a detailed account of one aspect of the course they found most interesting, expecting a geological focus, but many chose to highlight the Business Game. Here are some of their reactions:
“The Business Game was a very enjoyable and worthwhile exercise. The game combined real geology with the business side, which previously I have had no experience of.”
“I worked with a team of people I would not normally have worked with, very much like real life.”
“The Business Game provided a good source of transferable skills throughout the field trip. Many useful points were illustrated, and some of the realities of running a business were realised.”
“I found it very useful - enhancing my knowledge about the petroleum system as a whole and re-tuning my geological map interpretations.”
“The information collected during the day was not simply forgotten in our notebooks.”
“The game also focuses on the social and political implications of business decisions where commercial development is likely to affect people and the environment.”
Oil exploration must take second place when a block bearing an Ichthyosaur skull needs to be lifted up the cliff!
Bituminous Shales, Port Mulgrave.
And negative comments? - well there was just one: The course leader has a known penchant for bakery shops, and introduces students to one of the best in Britain, at the centre of Beverley, near Hull. Following this enlightening experience, one student wrote: “I would just like to note that a negative aspect of the trip was that it brought home to me just how useless the ‘Auld Toon Café” (the Aberdeen campus baker’s shop) really is”!. It is nice to see that a good student clearly recognises the important things in life!
Conclusions
Field-based exercises such as this take (let’s face it) weeks to prepare and develop, let alone to run. We need to be certain that such time is well spent. There are several aspects to this. Foremost is the valuable “deep learning” experience for the students, in terms of durable main learning outcomes. Such exercises present a substantial challenge and can provide a good real life analogue. Added to these, though, is the reinforcement provided by the sheer fun of participation and the sense of adventure in discovering intricacies and encountering the unexpected. For those in charge, perhaps the best reward is experiencing and participating in the dynamics of a group of intelligent young adults. It provides a deeper level of engagement with these developing personalities than provided by mere social interaction, and reveals that our future is likely to be in good hands. Please contact me if you would further information.