IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v16y2023i5p2342-d1083840.html
   My bibliography  Save this article

Conventional Natural Gas Project Investment and Decision Making under Multiple Uncertainties

Author

Listed:
  • Chi Yong

    (College of Logistics, Chengdu University of Information Technology, Chengdu 610225, China)

  • Mu Tong

    (School of Finance, Southwest University of Finance and Economics, Chengdu 611130, China)

  • Zhongyi Yang

    (School of Computing and Artificial Intelligence, Southwestern University of Finance and Economics, Chengdu 611130, China)

  • Jixian Zhou

    (School of Computing and Artificial Intelligence, Southwestern University of Finance and Economics, Chengdu 611130, China)

Abstract

Similar to many energy projects, the evaluation of investments in natural gas projects is influenced by technical and economic uncertainties. These uncertainties include natural resource characteristics, production, decline laws, prices, taxes, benchmark yield, and so on. In China, conventional natural gas is still the dominant energy source. The investors are mainly large state-owned energy companies. Therefore, it is necessary to include the technical and economic uncertainties, as well as the investment decision and optimization problems of the enterprises in a unified analytical framework. To this end, this paper innovatively constructs such a framework. Using numerical simulations of approaches, the process of investment decision optimization by companies based on technology assessment and price forecasting is visualized in detail. The results suggest that the investment decision of the enterprise needs to consider technical and economic uncertainties in an integrated manner. It also needs to combine the business strategy and social responsibility of the enterprise in order to construct the objective function. With the availability of data, the framework and its algorithms can be used for practical evaluation of investment plans and decision supports for conventional natural gas projects. The framework can also integrate the analytical perspective of the macroeconomic and political environment to bring in a more comprehensive range of uncertainties.

Suggested Citation

  • Chi Yong & Mu Tong & Zhongyi Yang & Jixian Zhou, 2023. "Conventional Natural Gas Project Investment and Decision Making under Multiple Uncertainties," Energies, MDPI, vol. 16(5), pages 1-30, February.
    • Handle: RePEc:gam:jeners:v:16:y:2023:i:5:p:2342-:d:1083840
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/16/5/2342/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/16/5/2342/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Méjean, Aurélie & Hope, Chris, 2008. "Modelling the costs of non-conventional oil: A case study of Canadian bitumen," Energy Policy, Elsevier, vol. 36(11), pages 4205-4216, November.
    2. Jianzhong Xiao & Jinhua Cheng & Jun Shen & Xiaolin Wang, 2017. "A System Dynamics Analysis of Investment, Technology and Policy that Affect Natural Gas Exploration and Exploitation in China," Energies, MDPI, vol. 10(2), pages 1-19, January.
    3. Méjean, Aurélie & Hope, Chris, 2013. "Supplying synthetic crude oil from Canadian oil sands: A comparative study of the costs and CO2 emissions of mining and in-situ recovery," Energy Policy, Elsevier, vol. 60(C), pages 27-40.
    4. Per Bjarte Solibakke, 2021. "Forecasting Stochastic Volatility Characteristics for the Financial Fossil Oil Market Densities," JRFM, MDPI, vol. 14(11), pages 1-17, October.
    5. McGlade, Christophe & Speirs, Jamie & Sorrell, Steve, 2013. "Methods of estimating shale gas resources – Comparison, evaluation and implications," Energy, Elsevier, vol. 59(C), pages 116-125.
    6. Xu, Guangyue & Dong, Haoyun & Xu, Zhenci & Bhattarai, Nishan, 2022. "China can reach carbon neutrality before 2050 by improving economic development quality," Energy, Elsevier, vol. 243(C).
    7. Julien Chaisse & Jamieson Kirkwood, 2020. "Chinese Puzzle: Anatomy Of The (Invisible) Belt And Road Investment Treaty1," Journal of International Economic Law, Oxford University Press, vol. 23(1), pages 245-269.
    8. Zhihua Chen & Hui Wang & Tongxia Li & Ieongcheng Si, 2021. "Demand for Storage and Import of Natural Gas in China until 2060: Simulation with a Dynamic Model," Sustainability, MDPI, vol. 13(15), pages 1-19, August.
    9. Welkenhuysen, Kris & Rupert, Jort & Compernolle, Tine & Ramirez, Andrea & Swennen, Rudy & Piessens, Kris, 2017. "Considering economic and geological uncertainty in the simulation of realistic investment decisions for CO2-EOR projects in the North Sea," Applied Energy, Elsevier, vol. 185(P1), pages 745-761.
    10. Maren Diane Schmeck & Stefan Schwerin, 2021. "The Effect of Mean-Reverting Processes in the Pricing of Options in the Energy Market: An Arithmetic Approach," Risks, MDPI, vol. 9(5), pages 1-19, May.
    11. Valery Salygin & Igbal Guliev & Natalia Chernysheva & Elizaveta Sokolova & Natalya Toropova & Larisa Egorova, 2019. "Global Shale Revolution: Successes, Challenges, and Prospects," Sustainability, MDPI, vol. 11(6), pages 1-18, March.
    12. Zhu, Lei & Zhang, ZhongXiang & Fan, Ying, 2015. "Overseas oil investment projects under uncertainty: How to make informed decisions?," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 742-762.
    13. Rui Guo & Dongkun Luo & Xu Zhao & Jianliang Wang, 2016. "Integrated Evaluation Method-Based Technical and Economic Factors for International Oil Exploration Projects," Sustainability, MDPI, vol. 8(2), pages 1-19, February.
    14. Weiwei Xiong & Liang Yan & Teng Wang & Yuguo Gao, 2020. "Substitution Effect of Natural Gas and the Energy Consumption Structure Transition in China," Sustainability, MDPI, vol. 12(19), pages 1-20, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rui, Zhenhua & Wang, Xiaoqing & Zhang, Zhien & Lu, Jun & Chen, Gang & Zhou, Xiyu & Patil, Shirish, 2018. "A realistic and integrated model for evaluating oil sands development with Steam Assisted Gravity Drainage technology in Canada," Applied Energy, Elsevier, vol. 213(C), pages 76-91.
    2. Aurélie Méjean & Chris Hope, 2010. "The Effect of CO2 Pricing on Conventional and Non-Conventional Oil Supply and Demand," Working Papers EPRG 1029, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. Hosseini, Seyed Hossein & Shakouri G., Hamed, 2016. "A study on the future of unconventional oil development under different oil price scenarios: A system dynamics approach," Energy Policy, Elsevier, vol. 91(C), pages 64-74.
    4. Hui Li & Renjin Sun & Wei-Jen Lee & Kangyin Dong & Rui Guo, 2016. "Assessing Risk in Chinese Shale Gas Investments Abroad: Modelling and Policy Recommendations," Sustainability, MDPI, vol. 8(8), pages 1-17, July.
    5. Shunbin Zhong & Huafu Shen & Ziheng Niu & Yang Yu & Lin Pan & Yaojun Fan & Atif Jahanger, 2022. "Moving towards Environmental Sustainability: Can Digital Economy Reduce Environmental Degradation in China?," IJERPH, MDPI, vol. 19(23), pages 1-23, November.
    6. Shuguang Liu & Jiayi Wang & Yin Long, 2023. "Research into the Spatiotemporal Characteristics and Influencing Factors of Technological Innovation in China’s Natural Gas Industry from the Perspective of Energy Transition," Sustainability, MDPI, vol. 15(9), pages 1-34, April.
    7. Chen, Junqing & Jiang, Fujie & Cong, Qi & Pang, Xiongqi & Ma, Kuiyou & Shi, Kanyuan & Pang, Bo & Chen, Dongxia & Pang, Hong & Yang, Xiaobin & Wang, Yuying & Li, Bingyao, 2023. "Adsorption characteristics of shale gas in organic–inorganic slit pores," Energy, Elsevier, vol. 278(C).
    8. Xian, Yujiao & Hu, Zhihui & Wang, Ke, 2023. "The least-cost abatement measure of carbon emissions for China's glass manufacturing industry based on the marginal abatement costs," Energy, Elsevier, vol. 284(C).
    9. Ryu, Jun & Bahadur, Jitendra & Hayase, Shuzi & Jeong, Sang Mun & Kang, Dong-Won, 2023. "Efficient and stable energy conversion using 2D/3D mixed Sn-perovskite photovoltaics with antisolvent engineering," Energy, Elsevier, vol. 278(PB).
    10. Xiaoxue Liu & Fuzhen Cao & Shuangshuang Fan, 2022. "Does Human Capital Matter for China’s Green Growth?—Examination Based on Econometric Model and Machine Learning Methods," IJERPH, MDPI, vol. 19(18), pages 1-27, September.
    11. Banda, Webby, 2023. "A system dynamics model for assessing the impact of fiscal regimes on mining projects," Resources Policy, Elsevier, vol. 81(C).
    12. Guangyue Xu & Peter Schwarz & Xiaojing Shi & Nathan Duma, 2023. "Scenario Paths of Developing Forest Carbon Sinks for China to Achieve Carbon Neutrality," Land, MDPI, vol. 12(7), pages 1-19, June.
    13. Adrian Neacsa & Cristian Nicolae Eparu & Doru Bogdan Stoica, 2022. "Hydrogen–Natural Gas Blending in Distribution Systems—An Energy, Economic, and Environmental Assessment," Energies, MDPI, vol. 15(17), pages 1-26, August.
    14. Tunstall, Thomas, 2015. "Iterative Bass Model forecasts for unconventional oil production in the Eagle Ford Shale," Energy, Elsevier, vol. 93(P1), pages 580-588.
    15. Montgomery, J.B. & O’Sullivan, F.M., 2017. "Spatial variability of tight oil well productivity and the impact of technology," Applied Energy, Elsevier, vol. 195(C), pages 344-355.
    16. Dai, Zhenxue & Zhang, Ye & Bielicki, Jeffrey & Amooie, Mohammad Amin & Zhang, Mingkan & Yang, Changbing & Zou, Youqin & Ampomah, William & Xiao, Ting & Jia, Wei & Middleton, Richard & Zhang, Wen & Sun, 2018. "Heterogeneity-assisted carbon dioxide storage in marine sediments," Applied Energy, Elsevier, vol. 225(C), pages 876-883.
    17. Yu, Ruyang & Zhang, Kai & Ramasubramanian, Brindha & Jiang, Shu & Ramakrishna, Seeram & Tang, Yuhang, 2024. "Ensemble learning for predicting average thermal extraction load of a hydrothermal geothermal field: A case study in Guanzhong Basin, China," Energy, Elsevier, vol. 296(C).
    18. Kuchler, Magdalena & Höök, Mikael, 2020. "Fractured visions: Anticipating (un)conventional natural gas in Poland," Resources Policy, Elsevier, vol. 68(C).
    19. Yijie Lin & Canyichen Cui & Xiaojun Liu & Gang Mao & Jianwu Xiong & Yin Zhang, 2023. "Green Renovation and Retrofitting of Old Buildings: A Case Study of a Concrete Brick Apartment in Chengdu," Sustainability, MDPI, vol. 15(16), pages 1-19, August.
    20. Méjean, Aurélie & Hope, Chris, 2013. "Supplying synthetic crude oil from Canadian oil sands: A comparative study of the costs and CO2 emissions of mining and in-situ recovery," Energy Policy, Elsevier, vol. 60(C), pages 27-40.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:16:y:2023:i:5:p:2342-:d:1083840. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.