Real Options in the Investment Projects of PJSC Bashneft

Flowing in an environment that can be characterized by high level of uncertainty, investment projects of vertically integrated oil and gas companies require the use of managerial flexibility to obtain an adequate evaluation of economic efficiency. On September 25 in 1998, giving a speech in Hamburg, economist Merton Miller identified the most attractive, from his side, field for the future research in one word: "options". Accordingly, the trajectory of this work is determined by two coordinates: on the one hand, the goal is to describe the feasibility of using the real option method as an alternative to the traditional one; on the other hand, the problem of applicability and low prevalence of this method in Russia give the reason to study that field. The object of study is the large joint stock Russian oil and gas company, the subjects is real options in the oil exploration project. Results received comprise financial model built by the author, as well as the developed methodology for implementing real options in the project, regarding to the conditions indicated. Four different methods of calculating the volatility of the oil and gas project, a key parameter of the Black-Scholes model, were also presented. The results of the work, shown in recommendations on the further application of the option analysis, consist of three different areas: risk-management, project portfolio management and decision-making process. The conclusion made by the author allows the party-executor of the project to concern uncertainty and to receive a numerical estimation of managerial flexibility value.