The current study undertakes such research in the

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Unformatted text preview: dustry literatures to ascertain which decision analysis tools are the most appropriate for companies to use for investment decision-making. This involves firstly, identifying the whole range of techniques that are available and, secondly deciding which of these tools are the most appropriate for upstream investment decision-making. This demands careful consideration of factors such as the business environment of the upstream industry and the level and type of information used for investment decision-making in the industry. Through this process, the research identifies the decision analysis techniques that are particularly useful for upstream investment decision-making. This constitutes current capability. Then, drawing again on the investment appraisal and industry literatures, and also on insights gained at conferences and seminars, an approach to investment decision-making in the oil industry is presented that utilises the full spectrum of tools identified. Some decision analysts advocate using one decision analysis technique for investment appraisal (for example, Hammond, 1967). However, in reality, each tool has limitations (Lefley and Morgan, 1999) some that are inherent, others which are caused by a lack of information or specification in the literature. As such, the knowledge that the decision-maker can gain from the output of one tool is limited (Newendorp, 1996). Therefore, a combination of decision analysis techniques and concepts should be used to allow the decision-maker to gain maximum insight which, in turn, encourages more informed investment decisionmaking. Some oil industry analysts have recognised this and presented the collection of decision analysis tools that they believe constitute those that decision-makers ought to use for investment decision-making in the oil and gas industry (for example, Newendorp, 1996). However new techniques have only recently been applied to the industry (for example, Galli et al., 1999; Dixit and Pindyck, 1998 and 1994; Ross, 1997; Smith and McCardle, 1997) and as such, these previously presented approaches now require modification. 2. Which techniques do companies use to make investment decisions and how are they used in the investment decision-making process? 5 This question is prompted by the observation highlighted in section 1.2 that very few previous studies into decision-making have investigated the use of decision analysis in investment appraisal decision-making by organisations. The current study examines the use of decision analysis in investment appraisal decision-making within the operating companies in the U.K. upstream oil and gas industry. Data are collected by conducting semi-structured interviews in twenty-seven of the thirty-one companies who were operators in the U.K.’s upstream oil and gas industry in March 1998. The data is analysed in two stages; first against the core themes contained in the interview schedule (Appendix 1), which are informed by the literature analysed in Chapters 2 and 3, and the emergent themes identified in contemporaneous notes taken during the research process. Second, after this initial coding, the data is coded again. In this second level coding, the core themes are more highly developed and closely s...
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