Publications

The oil industry still becomes an interesting sector to invest the money as the world’s current oil reserves and production still show an upward trend despite the fact that oil is unrenewable resource. There are methods to assess the value and the risk of investments in the upstream oil industry such as described in the SPE Paper from Widjadono (1993), Dharmadji (2002), Rajan (2008), and Craig (2004). However, these assessments are frequently done separately resulting in two different perspectives of a country, the value and risk. This paper aggregates the study of value and risk as a single result in order to assist oil companies analyzing and comparing the country attractiveness objectively. Two approaches with completely different inputs and methodology are used to assess the country risk. The first is the country risk score method which focuses on the country risk index observed by independent parties such as corruption, terrorism, ease of starting business, etc. The second method is the Damodaran method which relies on financial market data of the country such as equity market volatility and country credit default swap rate. As a result, this paper will compare the combined value and risk results and analyze if the result from the two methods are validating or conflicting each other.