| The purpose of this research was to develop an economic feasibility study of coalbed methane projects using Monte Carlo and Hypercube simulation. Traditionally, profitabilities in coalbed methane projects are computed with single values of multiple parameters. Sensitivity calculations may then be done by varying one of the parameters at a time. Because there are so many parameters that determine profitability, this technique is cumbersome and gives an incomplete assessment of risk. Monte Carlo and Hypercube simulation methods should be a more complete and accurate measure of profitability in coalbed methane work where so many uncertain parameters are involved.; Spreadsheets were set up in Excel, taking into account parameters like production rate, gas price, tangible cost, intangible cost, workovers, state tax, federal tax and federal tax credit to calculate the net cash flow and net present value (NPV) of coalbed methane projects as measures of profitability.; The parameters were varied one at a time and then all the parameters were varied simultaneously by sampling values from the probability distributions. Each time the net cash flow was calculated and compared to values from a conventional calculation. The outcome of the simulations were viewed graphically and the statistics were tabulated. A summary graph was generated for the final measures of profitability of net cash flow and NPV values.; The results are expressed in the form of probability distributions. Instead of a single point estimate of profitability from the traditional method, the full range of possible outcomes and their likelihood of occurrence is represented in this method. |
