Study On Economic Evaluation Of Unconventional Oil&Gas Resources Development Based On Real Options

In the structure of world energy, traditional energy has an important status. Meanwhilethe global energy resources are adjusting rapidly resulting from the scarcity and non-renewability of traditional energy in the next era, which will face a fierce energy crisis. It hasbecome inevitable strategic choice to explore and exploit untraditional oil&gas resources.The traditional methods of economic evaluation have been employed by most of domesticscholars in economic evaluation and decision analysis of oil&gas resource development inour country. However, due to the unique formation, enrichment, distribution rule, and thegeology, nature and technical economic conditions from conventional oil and gas resources,untraditional oil&gas resources have a distinctive economic value. If we couldn’t prefer oil&gas resource evaluation in the aspect of economic, it would bring difficulties for scientificgeological survey, plans of exploration and the feasibility study of oil and gas areadevelopment. Therefore, applying the traditional methods of economic evaluation in theprocess of unconventional oil&gas development project economic evaluation or feasibilityanalysis will lead to the fact that calculation results can’t reflect the real value of the project.To start with this paper gives an overview of unconventional oil&gas resources. Thispaper compares the traditional economic evaluation methods with real options method on thebasis of the characteristics of unconventional oil and gas resources, such as wide distribution,significant difficulty, high risks and uncertainties in China. After that this paper constructs theeconomic evaluation model of unconventional oil&gas resources development on the basisof real options. The characteristics of real options of unconventional oil and gas developmentare established, and the investment value of unconventional oil and gas are proposed as twoparts: firstly the intrinsic value of the investment projects can be obtained using the netpresent value method under the condition of not considering the presence of real options;Secondly, the option value is generated by the project option characteristics. At the same time,analyzes the option value for representative coal-bed methane development project ofunconventional oil&gas resources. At last, this paper verifies the applicability for economicevaluation of unconventional oil&gas resources on the basis of real options by analyzing acoal-bed methane development and utilization demonstration project in western mining area.