Title | A bivariate real options model to evaluate the effects of oil and natural gas price uncertainties on the oil sands projects |
Publication Type | Conference Paper |
Year of Publication | 2014 |
Authors | Kobari, L., & Lawryshyn Y. |
Pagination | 10 pages |
Date Published | 01/2014 |
Publisher | Industrial and Systems Engineering Research Conference |
Place Published | Montreal Canada. |
Publication Language | eng |
Keywords | bivariate trinomial tree, economics, model, modeling, oil sands, project valuation |
Abstract | This paper presents a practical, yet financially sound, real options framework to evaluate Canadian oil sands projects. The framework considers oil and natural gas price uncertainties, as well as managerial flexibilities in their decision making process. The Canadian oil sands hold the world's third largest oil deposit. To process oil sands into a usable source of energy, an extensive amount of natural gas, which has a highly volatile price, is required. We show that the importance of natural gas price and its volatility on the optimal investment policies is fading, as the price has decreased significantly in recent years. |
URL | http://www.xcdsystem.com/iie2014/abstract/finalpapers/I169.pdf |
Locational Keywords | Canadian oil sands |
Group | OSEMB |
Citation Key | 51209 |