Assessment of synergies for selecting a project portfolio in the petroleum industry based on a multi-attribute utility function

Abstract The oil and gas industry engages in risk activities: companies in this line of business are routinely faced with decision making situations under risk and uncertainty. This article focuses on evaluating Exploration and Production (E&P) projects which are in the development phase. Three key aspects that should be considered in selecting projects that aim to develop the production of oil and gas are as follows: the stochastic and multi-objective nature of this decision context, an assessment of a project׳s synergies, and the influence that these aspects have on the decision maker׳s preference structure. The contribution of this paper is to put forward a multi-attribute decision model to aid selecting oil and gas development projects in order to assign them to an appropriate portfolio. For this purpose, the proposed model takes into account the aspects described above. A multi-attribute decision model is proposed to aid selecting such projects and a numerical application is conducted. Questions related to assessing uncertainty and considering multiple objectives are tackled within the axiomatic structures of MAUT (Multi-attribute Utility Theory). Assessing synergies between projects is particularized in the context of selecting an E&P project portfolio and, in addition, the consequences of these synergistic considerations in value- or utility-based decision models are discussed. Finally, a numerical application is set out in order to visualize and discuss the steps of the model, as well as to demonstrate and discuss its usefulness and some practical issues that arise.

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