Quantification and Risk Assessment of Hydrocarbon Resources Development Projects in the Arctic Region

Abstract

The article outlines the main scientific and methodological views and approaches to risk measurement of the projects related to extraction of hydrocarbon resources in the Arctic. Special attention is paid to the methods of quantification of risks of the Arctic projects, i. e. those risks which have no definite value or quantitative expression and must be estimated using verbal and mathematical transformations. Regarding quantification of risks of the Arctic projects related to the extraction of hydrocarbon resources, the article proposes a methodology based on integration of financial, econometric, and economic methods which allows to convert original information into a comparable magnitude. Testing methods using the example of two Arctic projects have shown that risks in these projects are above average. This, in turn, may affect the environment and economic efficiency of the hydrocarbon production in the Arctic. The methodical approach proposed by the authors gives an adaptive tool that can also be used in order to analyze and measure the risk of other capital investment projects in the energy sector. As a key conclusion, the authors specify that the quantification of the risks, as well as publication of the data on the level of risks of the Arctic projects, will undoubtedly contribute to improving transparency of the activities of international and Russian oil and gas corporations. In turn, this will ensure growth of social and environmental responsibility of corporate structures which suggests that exploration, as well as work related to the production of hydrocarbon resources in the Arctic, will meet modern scientific and management paradigm (socialization, greening activities providing sustainable development of corporate and business structures).