Spatially and temporally dispersed marginal subsea field valuation. Part I: preliminaries

This is part one of a two-part paper on the economic valuation of spatially and temporally distributed marginal subsea fields. Risks in subsea marginal field development arise from many sources, including the state of technology, oil and gas price, site condition, fiscal policy and regulations. Economic evaluation provides a valuable insight in how to improve the viability of a marginal field. Part I discusses the traditional methods of valuation, and then describes how the real option (RO) valuation can be applied for the valuation of scattered subsea reservoirs. None of the fields are large enough to justify the capital investment for individual exploitation. In Part II, these methods are applied to a case study and the relative merits of methods are discussed. It is argued that RO valuation enables the determinants of successful development to be identified.