Developing an Automated System for Assessing an Innovative Project's Economic Efficiency for an Oil and Gas Industry Case

摘要

A company's top managers decide to finance an innovative project base on a preliminary estimation of its economic efficiency. This paper will describe an automated tool which allows to estimate an innovative project's economic efficiency, taking into account uncertainties identified after studying statistics on successful projects. The automated calculation tool relies on a decision tree-based method which calculates an expected probabilistic cash flow for a project' alternative scenarios. Knowing the value of effect from technological innovations allows making an informed decision on financing the innovations based on success and failure rates for similar projects in the industry. The authors chose an oil and gas project, where systems engineering (SE) was supposed to be introduced, as a case to test the simulation. The simulation showed that the funds invested into the project's development paid back and applying the innovation was feasible. Thus, this tool for estimating economic efficiency of an innovative project allows both to predict its expected effect and to make a value-justified decision at the level of a company's top management.