Decision Analysis Applied In The Investment Appraisal And Decision-making In Chinese Upstream Oil And Gas Industry

The paper focuses on how Chinese oil companies to evaluate the petroleum investments, capture value in the risky and complex world oil industry, achieve hence advantage of decision-making in the international competitive market. First, it summarizes the main decision theories and methods applied to the worldwide oil and gas industry. Then it tries to evaluate the current capability of decision analysis in the Chinese upstream investment appraisal and decision-making. Finally, it demonstrates the application of decision analysis in Chinese oil Companies for project investment evaluation with three case studies.Decision Analysis is a structured solution to rational and best decision for the practical and complex problems in the world by a group of people or a project team involving decision maker, through a systematic process combining various decision theories and methodologies of systematic analyses and operational research. It is now a common language of international business. The application of decision analysis in the oil and gas industry has created profound impacts on the future tendency of this industry. Several oil companies have already recognized its value and are upgrading their capabilities of decision analysis as one of their competitive advantages.To Chinese oil companies who try to implement their strategic worldwide expansion plan under the current situation of the complex competitive market, they need to work very hard and develop solutions to explore value and competitive edge from risks. As a whole, the current process of Chinese oil companies in the upstream investment appraisal and decision-making is an effective solution to viable decision, but not to the best decision. It is hard to add value on the new issues resulting from the expansion strategies of Chinese oil companies. A systematic process of decision analysis is an option for Chinese oil companies to face the challenges of expansion strategies and investment decision-making.The paper is unique in the following aspects:1. It illustrates that the main drawback to implement a systematic decision analysis is not in the lack of theories and methodologies, but in the lack of decision awareness and culture of implementation.2. The practice shows decision analysis can be applied to the appraisal and decision-making of each phase of a Chinese upstream oil and gas project, and will add significant project value for investors.