Risk Evaluation of Investment Decision During Low Oil Prices (Russian)

Kolbikov, Sergey; Kolbikova, Ekaterina; Sholudko, Alexander

doi:10.2118/171158-ru

Cited by 2 publications

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“…In addition to price uncertainty, oil investment carries its own risks, and in new or existing projects, attention needs to be paid to the different implementation scenarios that influence efficiency indicators. The profitability of projects decreases in periods of low prices, especially in the drilling of new wells, which is an intensive activity in terms of capital (Kolbikov, Kolbikova & Alexander, 2014). In the case of Pemex, the financial pressure from the taxes it pays and the debt has limited the creation and strengthening of an exclusive savings fund for productive purposes, since part of the resources are transferred directly to the national budget and hence, toward other public programs.…”

Section: Finance and Investmentmentioning

confidence: 99%

Pemex in the context of the global oil company: investment policy and lessons learned

SANTOS

2023

Brazil. J. Polit. Econ.

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The article analyzes Pemex’s investment policy for the period 1980-2019, based on the management of other oil companies. The central question is whether in the last four decades, it has been convenient for Pemex to be specialized in oil extraction, while other companies focused on the comprehensive development of the supply chain. The answer is negative. The sale of crude oil and the abandonment of refining made Mexico a net importer of fuels, a trend, which, today, is seeking to be reversed, in an environment of a high fiscal burden and high indebtedness of the company.

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Section: Finance and Investmentmentioning

confidence: 99%

Pemex in the context of the global oil company: investment policy and lessons learned

SANTOS

2023

Brazil. J. Polit. Econ.

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Including Oil Price Uncertainty in Development Option Selection Taking the Project Portfolio into Account

Steineder

Clemens

2019

SPE Europec Featured at 81st EAGE Conference and Exhibition

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Oil price forecasting has been shown to be challenging if not impossible for the long-term. However, the oil price has a major impact on Exploration and Production projects. Historical Project Realized Oil Price (PROP) can be calculated for example projects by summing up the total project revenue using the actual oil prices and dividing through the total amount of oil produced. For different starting dates of example projects, the PROP changes. Determining the PROP for different starting times, a Cumulative Distribution Function (CDF) can be derived. Adjusting this CDF for expected "half cycle breakeven costs" for the low limit and demand considerations for the high case leads to a PROP range that can be used for future project evaluation. Including PROP ranges into project evaluation allows for the selection of the most attractive development option, Value of Information analysis and project Probability of Economic Success (PES) calculation including oil price uncertainty. Furthermore, using PROP ranges rather than oil price scenarios enables a distinction between short-term budget planning and long-term project development. For budget planning, a scenario approach is suggested while for long-term planning PROP ranges should be used. Applying long-term planning on PROP ranges leads to less fluctuation in staff planning and small annual adjustments in PROP range forecasting. Also, using PROP ranges results in increasing PES project hurdles at low oil prices and lower PES hurdles at high oil prices. Hence, at low oil prices the risk averseness of the company is increased. Another effect of using PROP ranges is that at high oil prices robustness of projects to low oil prices is included in the assessment. To investigate the effect of PROP ranges on portfolio PES hurdles and project PES hurdles, a simplified linear-fit-model was developed. The results of the model showed that the project PES hurdles in a Value at Risk assessment can be determined applying the linear-fit-model to quantify the oil price dependency. The required individual project PES hurdles can be adjusted using the linear-fit-model to account for oil price uncertainty.

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Risk Evaluation of Investment Decision During Low Oil Prices (Russian)

Cited by 2 publications

References 0 publications

Pemex in the context of the global oil company: investment policy and lessons learned

Pemex in the context of the global oil company: investment policy and lessons learned

Including Oil Price Uncertainty in Development Option Selection Taking the Project Portfolio into Account

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