Abstract
As the shale gas revolution expands globally, the future potential and economic profits of overseas shale gas reserves have attracted the interest of Chinese investors. Overseas shale gas development is becoming an investment hotspot for Chinese oil companies. However, this multibillion-dollar venture is surrounded by a complex and uncertain environment. Therefore, this paper carries out an integrated and publicly available model for assessing risk in overseas shale gas investments. The purpose of this model is to address the index weight calculation and risk ranking and provide investor with risk information. In view of this, the comprehensive weights are obtained based on an analytic hierarchy process (AHP) and entropy weight methods; and the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method is performed to rank target countries. First, the paper identities five categories of risks with full consideration of the economic risk, political risk, geological risk, technological risk, and internal managements risk. Based on the risk identification, the assessment index system is established and valued. Secondly, China is taken as an example nation to use this model to prove the effectiveness of the proposed model and help the investor make wise decisions. According to the results, low-risk countries, such as Canada, Argentina, United States, and Algeria can be considered to be future key targets of shale gas investment abroad, while investors should be more cautious of high-risk countries such as South Africa and Brazil. Finally, policy recommendations are proposed to optimize the overseas shale gas investments from both the government and investor perspectives.
Highlights
Shale gas, a clean-burning and high-efficiency unconventional resource, is a rapidly expanding industry as a result of the shale gas revolution in the United States [1]
We provide risk ranking information for the Chinese Oil Company to make investment decisions and policy recommendations for overseas shale gas development
The innovations are as follows: (1) In terms of the index system, we identify five types of risks for overseas shale gas investments and choose ten representative indices to measure the foreign shale investments risk, which fully considers the potential risk abroad and reduces the repetition and tedium of excessive indices; (2) Considering the risk assessment method, we built an integrated model based on the analytic hierarchy process (AHP), Entropy weight and TOPSIS methods, which provide a feasible
Summary
A clean-burning and high-efficiency unconventional resource, is a rapidly expanding industry as a result of the shale gas revolution in the United States [1]. China’s National Oil Company has expanded its investment activities in global shale gas under the encouragement of the “going out” policy [6]. The overseas risks for shale gas investments should be identified and assessed to reduce potential economic loss, especially when oil prices are low. Numerous studies have documented the subjective limitation of the experts [30] The quantitative methods, such as Monte Carlo and Fuzzy Evaluation, are limited by the inconvenient implementation and the requirements of abundance data [31]. Due to the limited usefulness, few risk assessments apply a purely qualitative or quantitative method [32]. The comprehensive method effectively incorporates the benefits of qualitative and quantitative methods and is becoming an important risk assessment tool [33]
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