Risk measurement of international oil and gas projects based on the Value at Risk method
Abstract International oil and gas projects feature high capital-intensity, high risks and contract diversity. Therefore, in order to help decision makers make more reasonable decisions under uncertainty, it is necessary to measure the risks of international oil and gas projects. For this purpose, t...
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KeAi Communications Co., Ltd.
2018
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oai:doaj.org-article:99fe0e359472429f96a3703332dddd2b2021-12-02T05:25:19ZRisk measurement of international oil and gas projects based on the Value at Risk method10.1007/s12182-018-0279-11672-51071995-8226https://doaj.org/article/99fe0e359472429f96a3703332dddd2b2018-11-01T00:00:00Zhttp://link.springer.com/article/10.1007/s12182-018-0279-1https://doaj.org/toc/1672-5107https://doaj.org/toc/1995-8226Abstract International oil and gas projects feature high capital-intensity, high risks and contract diversity. Therefore, in order to help decision makers make more reasonable decisions under uncertainty, it is necessary to measure the risks of international oil and gas projects. For this purpose, this paper constructs a probabilistic model that is based on the traditional economic evaluation model, and introduces value at risk (VaR) which is a valuable risk measure tool in finance, and applies VaR to measure the risks of royalty contracts, production share contracts and service contracts of an international oil and gas project. Besides, this paper compares the influences of different risk factors on the net present value ($$NPV$$ NPV ) of the project by using the simulation results. The results indicate: (1) risks have great impacts on the project’s $$NPV$$ NPV , therefore, if risks are overlooked, the decision may be wrong. (2) A simulation method is applied to simulate the stochastic distribution of risk factors in the probabilistic model. Therefore, the probability is related to the project’s $$NPV$$ NPV , overcoming the inherent limitation of the traditional economic evaluation method. (3) VaR is a straightforward risk measure tool, and can be applied to evaluate the risks of international oil and gas projects. It is helpful for decision making.Cheng ChengZhen WangMing-Ming LiuXiao-Hang RenKeAi Communications Co., Ltd.articleRisk measurementValue at riskInternational oil and gas projectsFiscal termsProbabilistic modelScienceQPetrologyQE420-499ENPetroleum Science, Vol 16, Iss 1, Pp 199-216 (2018) |
| institution |
DOAJ |
| collection |
DOAJ |
| language |
EN |
| topic |
Risk measurement Value at risk International oil and gas projects Fiscal terms Probabilistic model Science Q Petrology QE420-499 |
| spellingShingle |
Risk measurement Value at risk International oil and gas projects Fiscal terms Probabilistic model Science Q Petrology QE420-499 Cheng Cheng Zhen Wang Ming-Ming Liu Xiao-Hang Ren Risk measurement of international oil and gas projects based on the Value at Risk method |
| description |
Abstract International oil and gas projects feature high capital-intensity, high risks and contract diversity. Therefore, in order to help decision makers make more reasonable decisions under uncertainty, it is necessary to measure the risks of international oil and gas projects. For this purpose, this paper constructs a probabilistic model that is based on the traditional economic evaluation model, and introduces value at risk (VaR) which is a valuable risk measure tool in finance, and applies VaR to measure the risks of royalty contracts, production share contracts and service contracts of an international oil and gas project. Besides, this paper compares the influences of different risk factors on the net present value ($$NPV$$ NPV ) of the project by using the simulation results. The results indicate: (1) risks have great impacts on the project’s $$NPV$$ NPV , therefore, if risks are overlooked, the decision may be wrong. (2) A simulation method is applied to simulate the stochastic distribution of risk factors in the probabilistic model. Therefore, the probability is related to the project’s $$NPV$$ NPV , overcoming the inherent limitation of the traditional economic evaluation method. (3) VaR is a straightforward risk measure tool, and can be applied to evaluate the risks of international oil and gas projects. It is helpful for decision making. |
| format |
article |
| author |
Cheng Cheng Zhen Wang Ming-Ming Liu Xiao-Hang Ren |
| author_facet |
Cheng Cheng Zhen Wang Ming-Ming Liu Xiao-Hang Ren |
| author_sort |
Cheng Cheng |
| title |
Risk measurement of international oil and gas projects based on the Value at Risk method |
| title_short |
Risk measurement of international oil and gas projects based on the Value at Risk method |
| title_full |
Risk measurement of international oil and gas projects based on the Value at Risk method |
| title_fullStr |
Risk measurement of international oil and gas projects based on the Value at Risk method |
| title_full_unstemmed |
Risk measurement of international oil and gas projects based on the Value at Risk method |
| title_sort |
risk measurement of international oil and gas projects based on the value at risk method |
| publisher |
KeAi Communications Co., Ltd. |
| publishDate |
2018 |
| url |
https://doaj.org/article/99fe0e359472429f96a3703332dddd2b |
| work_keys_str_mv |
AT chengcheng riskmeasurementofinternationaloilandgasprojectsbasedonthevalueatriskmethod AT zhenwang riskmeasurementofinternationaloilandgasprojectsbasedonthevalueatriskmethod AT mingmingliu riskmeasurementofinternationaloilandgasprojectsbasedonthevalueatriskmethod AT xiaohangren riskmeasurementofinternationaloilandgasprojectsbasedonthevalueatriskmethod |
| _version_ |
1718400430875082752 |