Selection of Alternatives under Uncertainty
{"Image DocumentName": "Selection of Alternatives under Uncertainty", "Image ImageDescription": "In the equation for the developed reserve value V = q P B, the economic quality of reserve (q) gives also an idea of how fast the reserve volume will produce. For a given reserve, if we drill more wells the reserve will be depleted faster, increasing the present value of revenues. Higher number of wells \uf0de higher q \uf0de higher V. However, higher number of wells \uf0de higher development cost D. For the equation NPV = q P B - D, there is a trade off between q and D, when selecting the system capacity (number of wells, the platform process capacity, pipeline diameter, etc.) For the alternative j with n wells, we get NPVj = qj P B - Dj. Hence, an important investment decision is: How select the best one from a set of mutually exclusive alternatives? Or, What is the best intensity of investment for a specific oilfield? I follow the paper of Dixit (1993), but considering finite-lived options.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}