Evaluating Investment Risk In A Sino-Russian Coalbed Methane Development Project In The KZ Basin

The CBM project in the KZ basin is seeking international oil companies to exploit.China is one of the potential cooperators.Although China and Russia have long carried out cooperation in the field of oil and natural gas,they have not been involved in the field of coalbed methane,so the cooperation will face more uncertainty.In addition,compared with conventional oil and gas projects,the development of unconventional oil and gas such as coalbed methane faces higher investment risk.Therefore,it is necessary to stand in the Chinese position to carry out special research on the investment risk of Sino-Russia coalbed methane project.The paper first reviews the history of Sino-Russia energy cooperation,and clarifies optional contract mode and fiscal terms.Secondly,the geological,economic and political risk factors are identified respectively.For geological and economic factor,the transmission mechanism of "influencing factors-economic factors-financial indicators" is used to identify them with financial analysis method.The political risk is not easy to quantify,so it is identified by scenario analysis.Finally,in the mining tax contract mode and product-sharing contract mode,using the comprehensive evaluation method of various risk factors characterized by internal rate of return to evaluate the risk,and judge the relationship between contract mode and risk.The research shows that,compared with the mining tax system contract,in the product sharing contract,geological risk and economic risk have less impact on the whole project,and the risk is also smaller.Changes and discontinuity in Russian policy are major political risk.For example,the new policies and reforms of Russia’s coalbed methane industry will lead to lower returns and higher investment risk for China.Under the product sharing contract,the policy expectation of resource countries is more stable and the risk is smaller.Based on the above analysis,it is suggested that China should take the product sharing contract as the negotiation goal.In addition,in order to further reduce investment risk,China also negotiate the terms of the contract to obtain a favorable proportion of cost oil recovery and profit oil distribution.