Publication

This paper applies real options theory to establish an overseas oil investment evaluation model based on Monte Carlo simulation and solved by the Least Squares Monte Carlo method. To better reflect the reality of overseas oil investment, the model has incorporated the uncertainties of exchange rates and investment environments. These unique features have enabled the model to be best equipped to evaluate the value of oil overseas investment projects of three oil field sizes and under different resource tax systems. In empirical setting, the authors have selected China as an investor country and Indonesia as an investee country as a case study. The results show that the investment risks and project values of small sized oil fields are more sensitive to changes in the uncertainty factors than the large and medium sized oil fields.