Research On Investment Decision Method In Oil Exploration Project Base On B-S Model

As a crucial kind of nonrenewable and strategic resource, petroleum is the foundation of society development. The more developed of our national economy, the more consuming of the energy, especially petroleum, which means more importing from other countries. However, the slow increasing of petroleum supply from domestic conflicts with the foresaid rapid consuming, the increasing high cost and difficulty and risk in the petroleum exploration is the key factor resulting to the discrepancy between supply and need. Therefore, study on investment decision method has important significance both theoretical and practical.Real Option Method is introduced into this research to illustrate the investment decision making of oil exploitation project, the Black-Scholes real option pricing model (herein after called B-S model) is also established to unveil the real value of investment on oil exploration project, which will bring more chances to the investment on oil exploration and make the decision making much more reasonable as well. Review on Real Option and its application field is discussed based on the corresponding studies home and abroad and then, the basic theories in regard to oil exploration project are summarized, including oil exploration project, investment decision-making on oil exploration project and commonly used method, together with comparison of each method's limitation. Subsequently, this paper makes an analysis on the real option characteristics and adaptability of the investment decision method on oil exploration. Finally, one B-S model, which is specific to investment of oil exploration project, is formed. It proves that the B-S model is more scientific and reasonable for the investment decision-making on oil exploration project than traditional ways by an empirical.