Oil & Gas (O&G) projects are inherently risky. Increasing economic volatility has compounded the complexity of decisions that O&G companies must make in selecting and investing in projects. Consequently, managerial toolkits to support decisions on economic viability of investments under uncertainty have proliferated, from established traditional models such as Discounted Cashflow Analysis (DCA), to more contemporary ones such as Real Options Valuation (ROV).
A comprehensive literature review of the Decision Analysis tools used in upstream asset valuations was performed, and identified tools were mapped to a conceptual decision analysis framework. Perceived value and popularity of these tools were established by conducting a broad survey which attracted 308 respondents over a two-month period.
The survey results indicate that the tools can be grouped into three broad categories: tools with universal acceptance; tools that are not embraced by the O&G industry; and tools with partial acceptance. The survey also included several demographics dimensions. Several tools exhibited an increasing trend in utilization with increasing company size, while others indicated a functional silo effect where tools’ acceptance levels varied considerably across job functions. Geographical impacts were not analyzed in detail as the sample space was skewed towards Europe and North America.
Utilization and satisfaction levels are generally well correlated; however, a cross-analysis of these two dimensions indicates that discrepancies do exist. Hydrocarbon price forecasting and cost estimation tools provide a lower satisfaction relative to their utilization frequency, while some of the well-established tools appear to be struggling to gain acceptance despite being valued by their practitioners.