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Producers’ dilemma?

Managing oil sands development in a world of scarcity


The accelerated pace of oil sands development has brought with it a host of difficulties and challenges, including environmental concerns over the volumes of water and energy needed for production, and ongoing labour and supply concerns that force producers to question exactly how they’re going to keep the momentum going. Though it took nearly 40 years (from 1967 to 2006) for oil sands production to top one million barrels per day, the Canadian Association of Petroleum Producers (CAPP) predicts that number will rise to 3.5 million by 2020 – little more than a comparatively mere decade away.

With Producers' dilemma I, Deloitte set out to shed some focused light on the situation, using the mathematics of game theory to model development scenarios. These scenarios aim to answer a fundamental question: How can industry and government affect the pace of oil sands development in the near future?

With Producers’ dilemma II: Managing development in a world of scarcity , the game theory model expanded to include the direct participation of both industry and government. This builds on the first phase’s role-play exercise in which a group of Deloitte Energy & Resources professionals and associates simulated the strategic options and preferences of major oil sands companies and the Alberta government — in game theory terms, the “players.” Game theory represents the needs, challenges and opportunities of the players — especially where each player’s behaviour influences the others — and allows for the exploration of the widest possible range of future scenarios.

The first phase revealed two optimal outcomes: “maintain pace” and “maintain peace,” where the evident need to choose between the two was the literal dilemma itself. Strikingly, the second phase reveals that producers can resolve the dilemma if they focus on unifying these seemingly divergent paths. In other words, the players can maintain the pace of development if they also maintain peace.

The Producers' dilemma process and resulting insights together support Deloitte’s assertion that traditional ways of project planning can be enhanced. Such analysis is already enabling industry players to improve their strategic decision-making abilities — and ensuring the industry continues to engage in dialogue to anticipate future outcomes and implement enhanced business planning.

Read  Producers' dilemma II: Managing development in a world of scarcity

Related links:
Producers' dilemma: The role of game theory in anticipating industry outcomes
Game theory helps forecasters think ahead
(Calgary Herald, Nov. 10, 2007, posted with permission)
Producers' dilemma wins Energy-TV Award
Attracting investment to Canada's energy sector



Producers’ dilemma II


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