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A Methodology for Gauging the Sensitivity of Project Value During Concept Comparison and Selection
- Publisher: European Association of Geoscientists & Engineers
- Source: Conference Proceedings, IPTC 2008: International Petroleum Technology Conference, Dec 2008, cp-148-00002
Abstract
Project value is highly correlated with decisions made<br>during concept comparison and selection. Decisions as<br>such are made amid uncertainty, putting value at risk. This<br>study details a methodology for determining the loss in<br>project value when inaccurate estimates are used during<br>concept comparison and selection. The difference between<br>net present values (NPVs) based on inaccurate estimates<br>and those based on an alternate hypothesis that is assumed<br>to represent the truth determines the magnitude of loss.<br>The value of the information required to reduce<br>uncertainty can then be obtained.