Diversification of Portfolio of International Oil and Gas Assets using Cluster Analysis

Document Type : Original Article

Authors

1 Educational Research Center for Digital Technologies, Saint-Petersburg Mining University, Saint-Petersburg, Russia

2 Investment Efficiency Department, Gazpromneft STC, Saint-Petersburg, Russia

3 Department of Economics, Organization and Management, Saint-Petersburg Mining University, Saint-Petersburg, Russia

Abstract

Improving the tools and mathematical methods to diversify the portfolio of oil and gas assets in the face of limited investment, high market volatility, increasing risks and uncertainties at the current level of technology development is a very urgent task. In order to form an effective investment portfolio, the authors proposed asset diversification using cluster analysis, which implies grouping sample objects according to a set of specific features. The method under consideration involves five stages of asset valuation in order to consider those assets in a three-dimensional space, taking into account the specifics of the oil and gas business, including determination of individual asset trajectory, performing spatial approximation, calculating the clustering coefficient, ranking the resulting pairs, and directly solving the portfolio formation optimization problem. This paper provides a reasonable set of metrics for diversification of the investment portfolio based on cluster analysis: main criterion - ∆PV, additional criteria - ∆Production, ∆OPEX/toe, ∆CAPEX/toe, characterized geological, environmental, social and economic aspects. Thus, the proposed methodology provides an opportunity to identify the most attractive investment projects, thereby allowing large oil and gas companies to diversify their business with minimal risk and maximum return on invested capital.

Keywords

Main Subjects

References

  1. Brinson, G.P., Hood, L.R. and Beebower, G.L., "Determinants of portfolio performance", Financial Analysts Journal, Vol. 42, No. 4, (1986), 39-44.
  2. Tsay, R.S., "Analysis of financial time series, John wiley & sons, (2005).
  3. Vasilchenko, A., "Analysis of the project selection technique in the process of a portfolio building for oil and gas company (on the example of gpn-development llc)", Topical Issues of Rational Use of Natural Resources, Volume 2, (2019), 668.
  4. Burca, V., "Portfolio optimization using an alternative approach. Towards data mining techniques way", Economic Alternatives, Vol., No. 1, (2021), 113-133. doi: 10.37075/EA.2021.1.07.
  5. Antonakakis, N., Cunado, J., Filis, G., Gabauer, D. and De Gracia, F.P., "Oil volatility, oil and gas firms and portfolio diversification", Energy Economics, Vol. 70, No., (2018), 499-515. doi: 10.1016/j.eneco.2018.01.023.
  6. Mandacı, P.E. and Kırkpınar, A., "Oil assets and portfolio diversification: Firm-level analysis for borsa istanbul", Borsa Istanbul Review, Vol. 22, No. 3, (2022), 571-585. https://www.sciencedirect.com/science/article/pii/S2214845021000788
  7. Kameli, A., Javadian, N. and Daghbandan, A., "Multi-period and multi-objective stock selection optimization model based on fuzzy interval approach", International Journal of Engineering, Transactions C: Aspects, Vol. 32, No. 9, (2019), 1306-1311. doi: 10.5829/ije.2019.32.09c.11.
  8. Lenkova Olga, V., "The formation of portfolio development strategy in the petroleum refining segment of an oil and gas holding", Tomsk State University Journal, No. 169.
  9. Chalikova-Uhanova, M. and Samarukha, A., "Development of oil and gas projects based on the cluster approach on the example of the irkutsk oil company", Baikal Research Journal, Vol. 11, No. 2, (2020).
  10. Erich, A., Techniques of financial analysis with financial genome passcode card. 2002, McGraw-Hill/Irwin.
  11. Fein, M.L., "Robo-advisors: A closer look", Available at SSRN 2658701, (2015). https://ssrn.com/abstract=2658701
  12. Fabozzi, F.J., Markowitz, H.M. and Gupta, F., "Portfolio selection", Handbook of Finance, Vol. 2, (2008).
  13. Marvin, K., "Creating diversified portfolios using cluster analysis", Princeton University, (2015). https://www.cs.princeton.edu/sites/default/files/uploads/karina_marvin.pdf
  14. Matrokhina, K.V., Trofimets, V.Y., Mazakov, E.B., Makhovikov, A.B. and Khaykin, M.M., "Development of methodology for scenario analysis of investment projects of enterprises of the mineral resource complex", Записки Горного института, No. 259 (eng), (2023), 112-124.
  15. Iakovleva, E., Belova, M., Soares, A. and Rassõlkin, A., "On the issues of spatial modeling of non-standard profiles by the example of electromagnetic emission measurement data", Sustainability, Vol. 14, No. 1, (2022), 574. https://doi.org/10.3390/su14010574
  16. Mardashov, D.V., "Development of blocking compositions with a bridging agent for oil well killing in conditions of abnormally low formation pressure and carbonate reservoir rocks", Записки Горного института, Vol. 251, (2021), 667-677. https://doi.org/10.31897/PMI.2021.5.6
  17. Tufegdžić, M. and Pravdić, P., "Artificial intelligence techniques in business decision making".
  18. Tsiglianu, P., Romasheva, N. and Nenko, A., "Conceptual management framework for oil and gas engineering project implementation", Resources, Vol. 12, No. 6, (2023), 64.
  19. Shabalov, M.Y. and Dmitrieva, D., "Implementation of cluster scenario approach for economic development of the arctic zone of the russian federation", International Journal of Applied Business and Economic Research, Vol. 15, No. 4, (2017), 281-289.
  20. Pivovarova, I., "Cluster analysis for structuring spatial data", International Journal of Mechanical Engineering and Technology, Vol. 10, No. 2, (2019), 1085-1109.
  21. Bashiri, M. and Mohammadkhanloo, M., "A clustering based location-allocation problem considering transportation costs and statistical properties (research note)", International Journal of Engineering, Transactions C: Aspects, Vol. 26, No. 6, (2013), 597-604. doi: 10.5829/idosi.ije.2013.26.06c.05.
  22. Leković, M., "Investment diversification as a strategy for reducing investment risk", Ekonomski Horizonti, Vol. 20, No. 2, (2018), 173-187.
  23. Ren, Z., "Portfolio construction using clustering methods", Worcester Polytechnic Institute Worcester, (2005),
  24. Landau, S. and Ster, I.C., "Cluster analysis: Overview", Á Á, Vol. 11, No. x12, (2010), x1p. doi: 10.1016/B978-0-08-044894-7.01315-4.
  25. Haddad, M.F.C., "Sphere-sphere intersection for investment portfolio diversification—a new data-driven cluster analysis", MethodsX, Vol. 6, (2019), 1261-1278. doi: 10.1016/j.mex.2019.05.025.
  26. Yiping, W., Buqing, S., Jianjun, W., Qing, W., Haowu, L., Zhanxiang, L., Ningning, Z. and Qingchao, C., "An improved multi-view collaborative fuzzy c-means clustering algorithm and its application in overseas oil and gas exploration", Journal of Petroleum Science and Engineering, Vol. 197, (2021), 108093. doi: 10.1016/j.petrol.2020.108093.
  27. Molchanov, K. and Romasheva, N., "Conceptual approaches for building a balanced portfolio of projects in oil and gas companies in exploration and production sector", in E3S Web of Conferences, EDP Sciences. Vol. 140, (2019), 03004.
  28. Laopodis, N.T., "Understanding investments: Theories and strategies, Routledge, (2020).
  29. Luenberger, D.G., "Investment science", OUP Catalogue, (1997).
  30. Guerard Jr, J.B., Saxena, A. and Gültekin, M.N., Investing in assets: Theory of investment decision-making, in Quantitative corporate finance. 2022, Springer.239-290.
  31. Everitt, B.S., Landau, S., Leese, M. and Stahl, D., "Cluster analysis, John Wiley & Sons, (2011).
  32. Giri, S., Al‐Obaidi, M., Harmon, C., Clark, D., Ubersax, C., Dai, C., Young‐Smith, C., Outlaw, D., Gbolahan, O. and Khushman, M.d., "Patient‐reported geriatric assessment‐based frailty index among older adults with gastrointestinal malignancies", Journal of the American Geriatrics Society, Vol. 71, No. 1, (2023), 136-144. https://doi.org/10.1111/jgs.18054
  33. Mousavi, S., "A multi-criteria decision-making approach with interval numbers for evaluating project risk responses", International Journal of Engineering, Transactions B: Applications, Vol. 25, No. 2, (2012), 121-130. doi: 10.5829/idosi.ije.2012.25.02b.05.
  34. Ponomarenko, T., Marin, E. and Galevskiy, S., "Economic evaluation of oil and gas projects: Justification of engineering solutions in the implementation of field development projects", Energies, Vol. 15, No. 9, (2022), 3103. https://doi.org/10.3390/en15093103
International Journal of Engineering
Volume 36, Issue 10
TRANSACTIONS A: Basics
October 2023
Pages 1783-1792

Files

Cited by

Share

How to cite

Statistics