Stochastic analysis of a shale gas investment strategy for coping with production uncertainties

摘要: Abstract The soaring demand for natural gas and deteriorating environmental conditions in recent years have together created a significant incentive China to develop shale exploration. In this endeavor, production capacity is major uncertainty that substantially affects the net investment return. We propose Markov decision process model explore determine desirable strategy under such uncertainty. Our has advantage of being able handle dynamic stochastic market states, it considers not only value project itself (net cash flow) but also social welfare, cost, financial subsidy. objective maximize long run expected return investment. methodology was applied case study China. found feasible when larger than 8.55 billion cubic meters. Additional supply may generate higher sales revenue. However, benefits be neutralized by decrease price domestic inelastic price. subsidy an effective because significantly increases