Abandonment option of mature oil fields: A case applied to the Brazilian onshore oil and gas sector

Fernando Antonio Lucena Aiube, Edison Tito and Boris Asrilhant

Revista Brasileira de Economia - RBE, 2024, vol. 78, issue 3

Abstract: The recent changes in the concession rules for mature fields and exploratory blocks, implemented by the Brazilian Oil, Gas, and Biofuels Agency (ANP), along with Petrobras’ sales of onshore fields, have ushered in a new business environment for players in the Brazilian upstream sector. Within this context of increased liquidity and greater flexibility, the use of the Discounted Cash Flow methodology for investment decisions can potentially lead to erroneous managerial choices. This article examines the abandonment option for mature onshore oil fields using the Real Options methodology. It identifies the optimal time for abandonment and calculates the option’s value. Furthermore, the model takes into account the disconnection between the residual value and abandonment cost variables. The findings demonstrate that this consideration not only enhances the comprehension of managerial decisions but also enables more precise negotiation strategies.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://periodicos.fgv.br/rbe/article/view/90329 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:78:y:2024:i:3:a:90329

Access Statistics for this article

Revista Brasileira de Economia - RBE is currently edited by Ricardo Cavalcanti

More articles in Revista Brasileira de Economia - RBE from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil) Contact information at EDIRC.
Bibliographic data for series maintained by Núcleo de Computação da FGV EPGE ().