MADRID—Is being bold the equivalent of taking risks? That was the conundrum posed to several senior explorationists at Wednesday’s executive session at EAGE 2015, “Boldness vs. Risk in Exploration.” Exploration managers from Eni, Tullow, Statoil and Total, along with an academic and a consultant, were on hand to debate the topic.

Mike Daly, a professor at Oxford University, began by defining the difference between boldness and risk. Boldness consists of emotion judgment and the promise of a “big story” and is judged by its outcome. Risk relies on numerical analysis, is theoretically repeatable and consists of a pre-event assessment and a post-event review.

A quite simple example was inspired by Jonathan Swift’s quote, “He was a bold man that first ate an oyster.” In addition to the rather unappealing appearance of the shellfish (Daly was kind enough to provide a huge picture), the first man (or woman) to eat one had a one in 1,000 chance of having a violent allergic reaction. These types of risks can be quantified.

He gave an example of a man named William Knox D’Arcy who obtained an enormous concession in Iran in 1901 based on its natural fires and oil seeps. D’Arcy hired George Reynolds to run his operations.

“It was frontier exploration,” Daly said. “Everything had to come from the U.K.”

The venture had a rocky start. The first well struck oil at 274 m (900 ft) and was declared a success but dried up after a few days. The second well also was dry.

D’Arcy and Reynolds moved the operation to the southeast, where two more dry holes occurred. Reynolds, acting on a hunch based on the theory of anticlinal drilling, began drilling a fifth well when he received a telegram from his boss saying the company had run out of money. Reynolds finished the well anyway and brought in a gusher. It was the first successful well in the Middle East and led eventually to the formation of BP.

This, Daly said, was the true definition of boldness—D’Arcy risked everything, persevered through repeated failures, changed the industry for good and left a lasting legacy. It could have gone very differently.

BP was not so lucky later on in life. While examining data in the Brooks Range in Alaska, it noted an interesting structure that became Prudhoe Bay, a 12 Bbbl field and the largest conventional oil field in North America. Examining other seismic data nearby, the company found an almost lookalike prospect, the Mukluk. However, the prospect was offshore, leaving the company facing the decision of building a manmade island, which would add considerably to the already expensive prospect of drilling the well.

BP faced several questions. Could the company handle the cost of failure? Would its reputation be damaged if another company later had success at Mukluk? It had no means to reduce its risk, so it faced the final question: to drill or not to drill?

It built the island. It drilled the well. The well was dry.

The technical reason was simple—a thief zone had moved the oil to the already discovered Kuparuk Field. Geologists could argue that “it failed for the right reasons,” Daly said. But it caused considerable embarrassment to BP’s reputation, and as recently as 2011 a headline read, “Good luck, bad luck or Mukluk?”

Daly said that while boldness in exploration is characterized by perseverance and is skewed to success while being rarely acknowledged in failure, risk in exploration is characterized by trade-offs—is it a one-off frontier prospect vs. part of the prospect portfolio? Is a company’s judgment of how much it can afford to lose offset by the potential to create value vs. destroying it? Overall, risk analysis requires discipline and repeatability.

But, Daly concluded, risk analysis doesn’t make decisions. People do.