This preview shows page 1. Sign up to view the full content.
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...
View Full Document
- Summer '14
- The Land