Shellveryard projects > companies > shell
|In the past, Shell acquired a good reputation among management
wreiters for its innovative scenario-based approach to strategic planning
and the management of uncertainty.
But Shell has recently been forced to make several downward corrections to its estimated reserves. As one of his last acts before getting ejected, the boss of Shell apologised "unreservedly" to the shareholders. (Interesting choice of word.)
Petroleum - What can the Directors of Shell learn from Harry Potter?
Confidence and Contingency - How can we get better at estimating?
Shell's estimation capabilitiesveryard projects > companies > shell > estimation
In the 1970s, geologists at Shell were excessively confident when they
predicted the presence of oil or gas. They would for example estimate a
40% chance of finding oil, but when ten such wells were actually drilled,
only one or two would produce. This overconfidence cost Shell considerable
time and money. Shell embarked on a training programme, which supposedly
enabled the geologists to be more realistic about the accuracy of their
predictions. Following this programme, when Shell geologists predicted
a 40% chance of finding oil, four out of ten were successful.
|Project Estimation: Confidence and Contingency|
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