Comparative Study of Discounted Cash Flow and Energy Return on Investment: Review of Oil and Gas Resource Economic Evaluation
https://doi.org/10.26794/2587-5671-2020-24-2-50-59
Abstract
The aim of the paper is to develop a methodology for evaluating oil and gas fields return on investments based on not only finance, but also environmental and social interrelations. The subject of the study is a comparison of methods for calculating return on investments on the example of China, Canada and Russia’s oil and gas companies. The authors used a comparative method of calculations, as well as a case study — a comparison of return on investments methods on the example of oil and gas enterprises. In the paper, the authors analyze the next traditional methods of economic assessment: net present value, differential rent, reserve and multiple costs. The authors suggest using a new assessment method that determines the energy return on investment (EROI). This method does not rely on traditional analysis of net present value (NPV), internal rate of return (IRR), and financial sensitivity. It comprehensively takes into account the costs of energy production, environmental protection and energy efficiency. Based on the results of the study, the authors conclude that the advantages of various methods of economic assessment should be integrated in order to avoid disadvantages and create a new dynamic integrated system of economic assessment. Oil and gas companies may use the results of the study to implement the energy return on investment methodology concerning oil and gas fields’ evaluation. A promising direction for further research may be to compare the energy return on investment at oil and gas enterprises in different countries as well as developing corporate reporting concerning energy return on investment improving efficiency.
Supporting agencies: This research was funded by the National Natural Science Foundation of China (grant No. 71874202/71874201), China Unviersity of Petroleum (Beijing), Beijing, China.
About the Authors
J. Yan
China University of Petroleum (Beijing)
China
China
Yan Jun — PhD student, Institute of Economics and Management
Beijing
L. Feng
China University of Petroleum (Beijing)
China
China
Lianyong Feng — PhD, Prof., Institute of Economics and Management
Beijing
A. N. Steblyanskaya
Harbin Engineering University
China
China
Alina N. Steblyanskaya — PhD, Assoc. Prof., Institute of Economics and Management
Harbin
S. Fu
Harbin Engineering University
China
China
Shanna Fu — PhD, Lecturer, Institute of Economics and Management
Harbin
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Review
For citations:
Yan J., Feng L., Steblyanskaya A.N., Fu S. Comparative Study of Discounted Cash Flow and Energy Return on Investment: Review of Oil and Gas Resource Economic Evaluation. Finance: Theory and Practice. 2020;24(2):50-59. https://doi.org/10.26794/2587-5671-2020-24-2-50-59
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