Improving corporate investment decision through decision risk analysis and value of information method

• Main Author: Arfah, Andy
• Format: Conference or Workshop Item
• Language: English
• Published: 2014
• Subjects: HD28 Management. Industrial Management
• Online Access: http://repo.uum.edu.my/15951/1/P21.pdf; http://repo.uum.edu.my/15951/; http://stmlportal.net/ictom04/TOC.html
• Institution: Universiti Utara Malaysia

This paper focus on how Decision Risk Analysis and VOI have been used to improve corporate investment decision on oil field development at PT. X.Decision and risk analysis is an ideal tool for decision making in an environment of risk and uncertainty.The process enables a more holistic view to be made within the context of the overall objective to get clear understanding of the oilfield asset development.In the petroleum industry, the decision to develop new field must be made under conditions of uncertainty.The degree of uncertainty and the economic consequences that associated with such investment decisions can vary widely.Fail in performing good decision could lead to inefficient of a multi-billion dollar capital investment and will ultimately affect the financial performance of the firm. Although uncertainty can always be reduced by simply buying more information, there must be a point at which the cost of additional information exceeds its benefit.This paper examines the problem of determining the point at which the development decision should be made.A complex decision problem is composed into separate components, form of a decision tree, on which perceptions of options, uncertainties and values can be explicitly represented.The methodology is applied to a real green-field development in Riau-Sumatera.