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ABSTRACT
The research presented in this project is firmly grounded in the existing realms of decision theory and the literature pertaining to the oil industry. During this endeavor, the study discerns the decision analysis methods that hold particular relevance in the context of making investment decisions in the upstream sector. Enhancing the efficacy of risk management practices within Exploration and Production (E&P) necessitates the seamless incorporation of these analytical approaches to fully harness their potential. Portfolio analysis, for instance, offers E&P decision-makers a suite of portfolios optimized for minimizing risk while achieving a specific level of return. However, in the absence of guidance regarding the appropriate risk tolerance for the E&P firm, the portfolio analysis alone fails to furnish managerial insights into which of these efficient portfolios best aligns with the firm's goals. Nonetheless, there exist vital facets within the decision analysis framework that directly relate to the choices made by the firm concerning modern portfolio analysis. Preference analysis, a pivotal component of a comprehensive decision analysis framework, furnishes us with a means of quantifying and implementing a corporate risk-taking policy. These connections between decision analysis and portfolio management have the potential to enhance the overall decision-making process and, ultimately, enhance firm performance.
