Research On Investment Decision-making Of Shale Gas Development Based On Real Option

Shale gas exploration and development(E&D)is critic to relieve pressure of energy supply and demand in China under situation of increasing dependence degree on foreign oil.However,significant differences in resource characteristics,recovery method and gas production between shale gas and conventional gas make development of shale gas project high-risk and uncertain.It is extremely complex to select the perfect investment opportunity for companies facing investment decision-making problems owing to significant uncertainties pervading the overall life cycle of shale gas projects.To speed the commercialization of shale gas development,research on decision-making timing of investment on shale gas resources under conditions of uncertainty is indeed necessary.Firstly,basic theory of real option and its history of development are reviewed,and attribute and characteristics of shale gas resources is analyzed.Secondly,the real option of shale gas development investment is researched through complexities of shale gas development,value and features of option.The necessity to introduce real option theory into investment decision-making of shale gas is also interpreted.Thirdly,an investment decision model on basis of real option,then economic evaluation of investment projects of shale gas development,and use examples to illustrate the effectiveness of the model.Finally,an investment-timing model on basis of partial differential method is constructed,and a numerical example is presented to testify availability and efficiency of the model.Shale gas resources are considered highly important in energy field on the earth,and its development and utilization is regarded as one of the best investment opportunities for many countries and regions.This paper contributes to explore a novel approach to solve decision-making timing problems of investment on shale gas development,aiming to extend application of real options theory in investment decision-making of shale gas projects and making great significance to advance the commercialization of shale gas development in China.