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Investment in the petroleum industry is heavily exposed to various risks due to their capital-intensive nature, high initial investment, and long-lived and highly specific asset. Risk assessment methods should consider the analysis and effect of key risks on profitability indicators of such investments. This study aims to develop a method for assessing and quantifying the impact of market risks on the feasibility of petroleum refinery investments by combining simulation and econometric methods. This method utilizes historical data of risk parameters and Latin Hypercube simulation to measure the probability distribution of profitability indicators. Then, using the data obtained from the simulation and employing the stepwise regression technique, calculate the impact of each of these risk factors on profitability indicators. The study applies the proposed method to a petroleum refining investment in Iran. The initial results showed that, at a 5% α level, NPVaR is in the negative probability distribution area and the project would not be attractive to investors. According to the calculations, diesel and gasoline crack spread fluctuations have a 90% and 8% share, respectively, in the variance of the NPV of the project. The calculations show that by eliminating or reducing the risk associated with diesel and gasoline crack spread changes, the project's standard deviation decreases from 9. 5 billion to 1. 6 billion, and the NPV of the project will enter the positive probability distribution area, making the project justifiable to shareholders.
Shokouhi et al. (Fri,) studied this question.
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