Options-based thinking in project management of an exploration and production company

The practice of evaluating economic efficiency of projects in exploration and production companies is often based on the traditional and rather conservative approaches, therefore, administrative decisions taken on the basis of the results of such evaluation are not always economically optimal and justified. The paper provides an overview of current approaches to the evaluation, taking into account the effect of active project management. The flexibility and adaptability of project management create an additional cost, which can be assessed using the methodology of real options. The process of improving a management mechanism in terms of organising efficient work with projects is closely connected with the methodological support for the process, so the paper discusses and proposes approaches to integrate options-based thinking into management mechanisms with reference to evaluation of individual investment projects of exploration and production companies. The proposed approaches, revealing the essence of the options-based approach to management, are considered through the example of a real business-case of acquisition of a new subsurface site with no strict geological information about. When solving theoretical and applied problems, general scientific research methods were used, including the methods of logical, comparative, systemic, statistical and financial analysis, and also methods of economic-mathematical modelling. The scientific novelty of the research consists in the development of practical application of modern methods of assessment of real options in conjunction with the specific operating conditions of oil and gas companies, as well as the specifics of development projects. Moreover, it is shown how revision and updating of the existing procedures and methods can become the key factor of a company''s strategic advantage.