Project Management Research Proposal Example | Topics and Well Written Essays - 1250 words - 1

Project Management - Research Proposal Example Throughout literature, there seems to be a two-sided wave of discussion on the core forms of risk associated with the oil and gas industry. These are what may be referred to as historical risk factors and complex modern risk factors (Geman, 2005). Parigi and Guiso (1999) noted that the oil and gas industry has for long suffered from historical risk factors that have always seemed to be available, no matter the area of investment in the industry. Some of the specific historical risk factors are named to include commodity price volatility, geopolitics, cost risk, demand and supply risk, and political risk. In the estimation of Grenadier (2002) however, even though these historical risk factors cannot be pushed under the carpet, the industry continues to experience so much complexity that expands its risks beyond those mentioned earlier. In the light of this, the industry is said to be faced with complex modern risk factors which are directly focused on macroeconomic influences (Hansen, 1982). With this said, the industry can be said to be harboring a form of increasing proclivity of mega-projects at the national levels which account for a leveraged economies of scale, which have pushed for the existence of macroeconomic influences. There are a number investment appraisal and risk management techniques used in the oil and gas industry today. This section of the review gives an overview of these techniques, when they are considered right for application, and the limitation that comes with each. The first technique is the accounting rate of return (ARR). Williams (2002) noted that this technique is appropriate in determining the profit an investor requires from an investment as against the amount invested. Its limitation however is that it is not considered suitable when dealing with competing projects as competing projects may have same rate of return but different net present value (Parigi and Guiso, 1999). There is also the use of payback