Dynamic modeling of uncertainty in the planned values of investments in petrochemical and refining projects

- We measure statistically the real value of an investment project.
- We present the reasons for the mismatch between planned and executed investments.
- We obtain a stochastic process to generate scenarios for oil industry investments.
- Results are valid for projects in the petrochemical and refining sector, downstream.
- The methodology can be applied to the upstream or even other branches of industry.

There is a large gap between the planned value of investment in a project and its financial implementation. This fact creates a mismatch between the planned and effectively achieved net present value (NPV) of the project. Considering the project portfolio of a company, this could even threaten your solvency in the future.Therefore, a quantitative-risk analysis that takes into account different possible scenarios for these values of investment is extremely important to measure statistically the real value of a project.The aim of this paper is to present the reasons for this mismatch between planned and executed investments and, from this study, obtain a suitable stochastic process to generate different scenarios for these investments in the oil industry.Although the results are valid for projects in the petrochemical and refining sector, also called in the oil industry as downstream, the methodology can be applied to the upstream or even other branches of industry.