Borewell Dilemma.pdf

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Borewell Dilemma

Borewell

DilemmaTo Drill or Not to Drill

Swapan Preet Singh

WMG-242013

Term-2

Business Statistics

15 December 2015


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WMG-242013 Page 2

Contents

Abstract ........................................................................................................................................................................................................................ 3

Context ......................................................................................................................................................................................................................... 4

Actors ............................................................................................................................................................................................................................ 4

Dharwar Drilling Society (DDS) ...................................................................................................................................................................... 4

Mr. Nijalingappa .................................................................................................................................................................................................. 4

Karnataka Government...................................................................................................................................................................................... 4

Surface Geophysical Survey agency ............................................................................................................................................................. 4

Analysis ........................................................................................................................................................................................................................ 5

Condition 1 ............................................................................................................................................................................................................ 5

Condition2 .............................................................................................................................................................................................................. 6

Reimbursement: ................................................................................................................................................................................................... 6

Solution without consultancy: ............................................................................................................................................................................. 7

Solution with consultancy: .................................................................................................................................................................................... 8

Conclusion: ................................................................................................................................................................................................................. 9

Overall Condition ................................................................................................................................................................................................. 9

Impact on successful Drillings ........................................................................................................................................................................ 9

Reimbursement to failed Drillings ................................................................................................................................................................ 9


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WMG-242013 Page 3

AbstractRealizing the benefits of irrigation, an increasing number of farmers are applying for wells to be drilled in their lands.

The objective of this study is to describe various dynamics associated with the well boring in certain situations given

in the case. Analysis was done for Boring, Success rate and its profitability, with inferences drawn from the drilling

decision.

Results from the analysis suggest that drilling a well is profitable but risky activity. Though with some help of

external agencies this risk can be minimized but can’t be eliminated.


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WMG-242013 Page 4

ContextDharwar Drilling Society (DDS) is helping the small and marginal farmers to drill wells on their lands to improve the

productivity. DDS handed over an assignment to make a proposal to help small farmers for this project to Miss Malti

Prasad a student of W1MW1.

Malti needs to understand the roles of various players, risks and benefits associated with the drilling. How failure in

the drilling operation may hamper the small farmers. How the risks associated can be minimized or eliminated. Malti

also needs to understand that society itself cannot bear the whole cost of drilling but it can help farmers to some

extent only to keep the Society in good financial position.

Actors

Dharwar Drilling Society (DDS) DDS is helping the small and marginal farmers to drill wells on their lands to improve the productivity.

Mr. Nijalingappa

Managing director of DDS, who is trying to minimize the risk to framers for drilling a well.

Karnataka Government

Karnataka Government subsidizes failed well’s cost to the farmers to some extent with interest and some loan

amount.

Surface Geophysical Survey agency

This agency conducts an assessment of site to give recommendation of drilling or not.


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WMG-242013 Page 5

Analysis

Condition 1: When Farmer decides not to take the assessment for the drilling operation.

Success rate withAsssesment, 80%

Success rate withAsssesment, 81%

Success rate w/o

Asssesment, 60%

Success rate w/o

Asssesment, 62%

Failue with

assessment, 16% Failue with

assessment, 3%

Failue w/o

assessment, 32% Failue w/o

assessment, 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

200 Feet 250 Feet

Success and failure

Success @ 200 Total Cost Probability Result

10,000.00 ₹ 60% Success

0.6 10,000.00 ₹

Success @ 250

12,500.00 ₹ 2% Success

Yes 0.3 0.00 ₹

0.2 2,500.00 ₹

Failure @250

Failure @ 200 12,500.00 ₹ 6% Fail

0.7 0.00 ₹

0.4 10,000.00 ₹

No

10,000.00 ₹ 32% Fail

0.8 0.00 ₹

Conditions favorable?


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WMG-242013 Page 6

Condition2: When Farmer decides to take the assessment for the drilling operation

Reimbursement: Failure cases and reimbursement:

Success @ 200

Total Cost Probability Result Relative success

0.8 0.00 ₹ 10,490.00 ₹ 56% Success 80.0%

Yes Success @ 250

12,990.00 ₹ 1% Success 1.2%

0.7 10,000.00 ₹ Yes 0.3 0.00 ₹

0.2 2,500.00 ₹

Failure @ 250

Failure @ 200 12,990.00 ₹ 2% Fail 2.8%

Conditions Favourable? 0.7 0.00 ₹

Re comme nde d for dri ll ing? 0.2 0.00 ₹

490.00 ₹

No

10,490.00 ₹ 11% Fail 16.0%

0.8 0.00 ₹

No

490.00 ₹ 30% NIL NA0.3 0.00 ₹

Total Cost

Out of Pocket Probability

Reimb @ 20%

10,000.00 ₹ 14%

Cost 12990 0.9 -2,500.00 ₹

15% 12,500.00 ₹

Reimb @ 50%

6,250.00 ₹ 2%

Fail 0.1 -6,250.00 ₹

18.8%

Reimb @ 20%

8,000.00 ₹ 76%

Cost 10490 0.9 -2,000.00 ₹

85% 10,000.00 ₹

Reimb @ 50%

5,000.00 ₹ 8%

0.1 -5,000.00 ₹


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WMG-242013 Page 7

Solution without consultancy:Suppose we drill 1000 wells in a year.

With the help of Condition 2 and reimbursement tree above we have following conditions.

So we discount the costs as per the failure and success rates and we recover the failure costs from the successful

peers which comes out to be 24.94 rupees per foot in case of 200 foot bore and 8.99 rupees per foot in case of 250

foot bore.

Condition Well

Percenta

ge Total Cost Reimbursement Actual Cost

Recovery

Required per

failure

Total

Recovery

required

Additional

Burden

Burden

per well

Additional

burden per

foot

Success @

10000 600 60% ₹ 10,000 ₹ 0 ₹ 10,000 ₹ 0 ₹ 0 ₹ 2,992,545 ₹ 4,988 ₹ 24.9

Success @

12500 20 2.00% ₹ 12,500 ₹ 0 ₹ 12,500 ₹ 0 ₹ 0 ₹ 44,955 ₹ 2,248 ₹ 8.9

Failure@10000 52 5.20% ₹ 12,500 ₹ 2,500 ₹ 10,000 ₹ 10,000 ₹ 520,000

Failure

@6250 6 0.60% ₹ 12,500 ₹ 6,250 ₹ 6,250 ₹ 6,250 ₹ 37,500

Failure

@8000 290 29.00% ₹ 10,000 ₹ 2,000 ₹ 8,000 ₹ 8,000 ₹ 2,320,000

Failure

@5000 32 3.20% ₹ 10,000 ₹ 5,000 ₹ 5,000 ₹ 5,000 ₹ 160,000

Total 1000 ₹ 29,250 ₹ 3,037,500 ₹ 3,037,500

Success 620

Fail 380

Condition Foot Rate per foot Additional W/O Burden With Burden Difference Diff %age

Success @ 10000 200 50.00 ₹ 24.94 ₹ 14,987.58 ₹ 10,000 ₹ 4,987.58 50%

Success @ 12500 250 50.00 ₹ 8.99 ₹ 14,747.75 ₹ 12,500 ₹ 2,247.75 18%


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WMG-242013 Page 8

Solution with consultancy:Suppose we drill 1000 wells in a year.

With the help of Condition 2 and reimbursement tree above we have following conditions.

So we discount the costs as per the failure and success rates and we recover the failure costs from the successful

peers which comes out to be 9.2 rupees in case of 200 foot bore and 7.4 rupees in case of 250 foot bore.

Condition Well %age

Total

Cost/drilling Reimbursement

Actual

Cost/

drilling

Recovery

Required

per

failure

Total

Recovery

required

Additional

Burden

Burden per

well

Additional

burden per

foot

Success @

10000 800 80% ₹ 10,000 ₹ 0 ₹ 10,000 ₹ 0 ₹ 0 ₹ 1,476,814.80 ₹ 1,846.02 ₹ 9.23

Success @

12500 12 1.20% ₹ 12,500 ₹ 0 ₹ 12,500 ₹ 0 ₹ 0 ₹ 22,185.20 ₹ 1,848.77 ₹ 7.40

Failure

@10000 25 2.50% ₹ 12,500 ₹ 2,500 ₹ 10,000 ₹ 10,000 ₹ 250,000

Failure

@6250 4 0.40% ₹ 12,500 ₹ 6,250 ₹ 6,250 ₹ 6,250 ₹ 25,000 Failure

@8000 143

14.30

% ₹ 10,000 ₹ 2,000 ₹ 8,000 ₹ 8,000 ₹ 1,144,000

Failure

@5000 16 1.60% ₹ 10,000 ₹ 5,000 ₹ 5,000 ₹ 5,000 ₹ 80,000

Total 1000 ₹ 29,250 ₹ 1,499,000 ₹ 1,499,000

Success 812

Fail 188

Condition Foot

Rate per

foot Additional W/O Burden

With

Burden Difference Diff %ageSuccess @ 10000 200 50.00 ₹ 9.23 ₹ 11,846.00 ₹ 10,000 ₹ 1,846.00 18%

Success @ 12500 250 50.00 ₹ 7.40 ₹ 14,350.00 ₹ 12,500 ₹ 1,850.00 15%


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WMG-242013 Page 9

Conclusion:Risk is very high in drilling without site assessment so this shall not be included in the proposed solution.

Assuming that 490 rupees is to be borne by the farmer and only approved site will be drilled.

DDS shall make it mandatory to get the assessment done and can offer 90% reimbursement in case of failures and

10% can be kept as, margin of operating or contingency fund for abnormal conditions or for cases.

Overall Condition

Condition Well %age

Total

Cost/drilling Reimbursement

Actual

Cost/

drilling

Recovery

Required

per

failure

Total

Recovery

required

Additional

Burden

Burden per

well

Additional

burden per

foot

Success @

10000 800 80% ₹ 10,000 ₹ 0 ₹ 10,000 ₹ 0 ₹ 0 ₹ 1,476,814.80 ₹ 1,846.02 ₹ 9.23

Success @

12500 12 1.20% ₹ 12,500 ₹ 0 ₹ 12,500 ₹ 0 ₹ 0 ₹ 22,185.20 ₹ 1,848.77 ₹ 7.40

Failure@10000 25 2.50% ₹ 12,500 ₹ 2,500 ₹ 10,000 ₹ 10,000 ₹ 250,000

Failure

@6250 4 0.40% ₹ 12,500 ₹ 6,250 ₹ 6,250 ₹ 6,250 ₹ 25,000

Failure

@8000 143

14.30

% ₹ 10,000 ₹ 2,000 ₹ 8,000 ₹ 8,000 ₹ 1,144,000

Failure

@5000 16 1.60% ₹ 10,000 ₹ 5,000 ₹ 5,000 ₹ 5,000 ₹ 80,000

Total 1000 ₹ 29,250 ₹ 1,499,000 ₹ 1,499,000

Success 812

Fail 188

Impact on successful Drillings

Condition Foot

Rate per

foot Additional W/O Burden

With

Burden Difference Diff %age

Success @ 10000 200 50.00 ₹ 9.23 ₹ 11,846.00 ₹ 10,000 ₹ 1,846.00 18%

Success @ 12500 250 50.00 ₹ 7.40 ₹ 14,350.00 ₹ 12,500 ₹ 1,850.00 15%

Reimbursement to failed Drillings

Condition Total Cost Reimbursement Actual Cost Recovery Reimbursement2 Retain

Failure @10000 ₹ 12,500 ₹ 2,500 ₹ 10,000 ₹ 10,000 ₹ 9,000 ₹ 1,000.00

Failure @6250 ₹ 12,500 ₹ 6,250 ₹ 6,250 ₹ 6,250 ₹ 5,625 ₹ 625.00

Failure @8000 ₹ 10,000 ₹ 2,000 ₹ 8,000 ₹ 8,000 ₹ 7,200 ₹ 800.00

Failure @5000 ₹ 10,000 ₹ 5,000 ₹ 5,000 ₹ 5,000 ₹ 4,500 ₹ 500.00

Documents

Borewell Dilemma.pdf