Research On The Risk In Cross-national Investment Of Fossil Energy

Profit is one of the most important goals for energy companies while investmentrisk is the honest company of profit-making process. Risk management relative issuesplay an important role in the decision making processes of these enterprises in energyindustry because that there are a series of risk factors such as political risk, legal riskthat associates with fossil energy investment. Energy industry, such as oil and gasindustry, is often regarded as a strategic industry which is related to the nationalsecurity. Cross-national energy investment, especially investment in the upstreamresource extraction activities, gets relation to the issue of sovereignty over naturalresources. Cross-national investment in energy industry has its own riskcharacteristics because the resources invested differ from that in other types ofinternational investment activities.Cross-national investment activities and the characteristics of the issues aboutmanagement of investment risk of the international energy companies will be themain topics of this paper. The discussion focuses on main energy resources in globalprimary energy consumption i.e., oil, natural gas and coal. In addition, investmentactivities in new energy and renewable energy and some other relative areas will alsobeen taken into account. The integrated use of system science research methods andstatistical prediction theory will build the framework of theoretical analysis. And then,the problems about universality and particularity of cross-national energy investmentrisk will be investigated in a wide range. Combined with the theories of cross-nationaldirect investment and risk management, this paper builds a targeted risk measurementand control model for different types of investment, which is the"State-factor-weighted Analytic Hierarchy Process-Moving Average"(SAHP-MA)model.Within the framework of the analysis model, this article selects seven quarters ofthree countries, which are of Venezuela, Russia and Iran, from the third quarter of2010to the first quarter of2012, as the case study objects. The final case study resultsshow that, from the perspective of the multinational energy investment enterprises ofChina, the overall investment risk profile of Venezuela and Russia tended to improve,while Iran’s overall investment risk situation is still not clear, which means there arestill some uncertainties.Then, according to the characteristics of the investment risk factors in terms ofdata fluctuations, the risk factors of cross-national energy investment have beendivided into two categories for further discussion in this article. The first category isthe valuation data of investment risk that change frequently, which includes political risk, policy risk and economic risk. The other relatively stable type of risk, whichmeans the data about these risk factors are much more stable, including the bilateralrelationship risk, resources risk and cultural risk.Aiming to reflect the characteristics of the risk factors have been discovered inthe case studies, this paper presents several proposals. In the last part, this paperargues that in the actual evaluation model database, the data master can focus directlyon the first type of investment risk factors and it is needed to increase the intensityand frequency of updating the valuation data. For the second category risk factors aremore stable, as a result, a longer time interval to maintain and update the valuationdata will be also reasonable. This will help to achieve the effect of the measurement,which can also improve the efficiency of investment risk valuation and control.