Between Extinction By Instinct and Paralysis By Analysis- a Case Study on Indian Oil Industry

Whilst conducting the research underpinning this thesis, one of the most difficult tasks for the researcher was to recognise that every interesting issue uncovered could not be explored. As such, whilst contributing to the theoretical debate and providing useful advice to practitioners, the current study has also highlighted several areas for future research. These will be discussed in this section. Firstly, as highlighted in Chapter 5, there is a need for several studies to investigate the issues surrounding Monte Carlo analysis. One study needs to establish the shape of the input distributions that ought to be used to represent the reservoir parameters, in a field of specified lithology and depth, in a Monte Carlo simulation to generate an estimate of the recoverable reserves. A further study is required to explore the nature of the dependencies between these variables. The data necessary for such a study is due to be published next year by the Geological Society in a book titled Oil and Gas fields of the United Kingdom Continental Shelf edited by Jon Gluyas et al.. The need for these studies is particularly pertinent since most companies are using Monte Carlo analysis to generate estimates of recoverable reserves at the prospect level. Similar studies also need to be conducted to investigate these issues for economic variables. However, the economic data that are necessary for such research are regarded by most companies to be strictly confidential. Consequently, such research is unlikely to be undertaken in the near future. Further work is also needed to understand the complexities of option theory and its application to the upstream. The growing interest from the industry should ensure that this occurs. The researcher expects to see more companies using the technique on individual investment appraisal cases in the next couple of years. Software companies such as Merak are interested in integrating the technique into their existing packages and this should aid its introduction to the industry. One of the most interesting areas that the researcher had to acknowledge was beyond the scope of this thesis were issues of tacit knowledge and the extent to which organisations and decisions are dependent upon it, and decision-makers reliance on gut feelings and experience. Firstly, understanding such issues, and secondly,researching them, requires specialist skills in areas, forexample, such as organisational psychology. Followingsimilar observations, in March 1999 the Departments ofManagement Studies and Economics at the University ofAberdeen identified a researcher with the appropriatebackground to undertake such research. This Ph.D. is duefor completion in March 2002. Future research should concentrate on further examination ofthe link between use of decision analysis and organisationalperformance. The current study focussed on those oilcompanies active on the ONGC, a comparative study couldbe undertaken in companies active in other areas. Followingpresentation of a paper based on Chapter 7 of this thesis at arecent Society of Petroleum Engineers conference in Japan,JNOC (Japanese National Oil Company) are consideringconducting a similar study in Japan. The study could also bereplicated in other industries with a similar high risk/highreward environment, such as pharmaceuticals oraeronautics. CSIRO are currently considering funding suchresearch. These studies could perhaps adopt longitudinal researchdesigns. Previous research (for example, Papadakis andLioukas, 1996; Rajagopalan et al., 1993), suggests thatorganisational performance is a function of a diversecollection of factors. Cause-effect relationships are, at best,tenuous and a broader conceptualisation of effectivenessthat incorporates both process and performance measures,is now appropriate (Goll and Rasheed, 1997). Usinglongitudinal research designs, researchers would be able togain a greater understanding of the causal relationshipsbetween the decision process and organisationalperformance by studying how connections between context,process and outcome unfold over time (Papadakis, 1998).This would minimise the possibility of reverse causalityamong the main variables (Van de Ven, 1992; Leonard-Barton, 1990). Consequently, longitudinal research methodswould increase researchers‟ confidence in the causalinterpretation of the findings (Hart and Banbury, 1994;Chakravarthy and Doz, 1992).

This thesis has highlighted that decision analysis should notbe perceived to be providing a dictatorial straitjacket ofrationality (French, 1989). Rather it should be seen to be adelicate, interactive, exploratory tool which seeks tointroduce intuitive judgements and feelings directly into theformal analysis of a decision problem (Raiffa, 1968). Thedecision analysis approach is distinctive because for eachdecision, it requires inputs such as executive judgement,experience and attitudes, along with the “hard data”. It helps

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decision-makers to tread the fine line between ill-conceived and arbitrary investment decisions made without systematic study and reflection (“extinction by instinct”) and a retreat into abstraction and conservatism that relies obsessively on numbers (“paralysis by analysis”) (Langley, 1995). The thesis has demonstrated that such an approach contributes positively to organisational performance in the upstream oil and gas industry.

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