Analysis of Risk and Uncertainty in Oil Projects: The Case of Albpetrol
Analysis of Risk and Uncertainty in Oil Projects: The Case of Albpetrol

Author(s): Blerta Mjeda, Emi Hoxholli, Merita Toska
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Decision-making; Modeling; Petroleum projects; Optimization; Risk; Simulation; Uncertainty
Summary/Abstract: The oil industry is among the oldest sectors in Albania. Due to the limited research conducted in the country, this study aims to contribute to expanding the existing literature and empirical insights. The goal of this research is to provide opportunities for better-informed decision-making. While understanding the past is relatively straightforward, forecasting the future is more challenging. This inherent uncertainty creates numerous issues when developing a financial plan for a company. This paper analyzes modeling and simulation techniques used in decision-making for petroleum projects. To achieve our objectives, we first examine the challenges of risk and uncertainty, as both significantly influence the decision-making process at the beginning of investment projects. Accurately predicting risk and uncertainty is essential for any company. To define and explore the concepts of “risk” and “uncertainty,” we have applied qualitative and quantitative approaches, including Sensitivity Analysis and the Monte Carlo Method. Using these methods, we predict different scenarios for the Net Present Value and work towards optimizing the Net Present Value. As a result, we calculate the Net Present Value for petroleum production in each scenario.

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