Financial decision making about found oil and gas in Ghana : real options vs. traditional methods

This research is a study of the use of capital budgeting methods for investment decisions. It uses both the traditional methods and the newly introduced approach called the real options analysis to make a decision. The research elucidates how capital budgeting can be done when analysts encounter projects with high uncertainty and are capital intensive, for example oil and gas production. It then uses the oil and gas find in Ghana as a case study to support its argument. For a clear understanding a thorough literature review was done, which highlights the advantages and disadvantages of both methods. The revenue that the project will generate and the costs of production were obtained from the predictions by analysts from GNPC and compared to others experts’ opinion. It then applied both the traditional and real option valuation on the oil and gas find in Ghana to determine the project’s feasibility. Although, there are some short falls in real option analysis that are presented in this research, it is still helpful in valuing projects that are capital intensive with high volatility due to the strategic flexibility management possess in their decision making. It also suggests that traditional methods of evaluation should still be maintained and be used to value projects that have no options or those with options yet the options do not have significant impact on the project. The research points out the economic ripples the production of oil and gas will have on Ghana’s economy should the project be undertaken. These ripples include economic growth, massive job creation and reduction of the balance of trade deficit for the country. The long run effect is an eventually improvement of life of the citizens. It is also belief that the production of gas specifically can be used to generate electricity in Ghana which would enable the country to have a more stable and reliable power source necessary to attract more foreign direct investment.

Determining the role of environmental factors and disturbance in the distribution of reed canary grass within wetlands

Reed canary grass (Phalaris arundinacea L.) is an invasive species originally from Europe that has now expanded to a large range within the United States. Reed canary grass possesses a number of traits that allow it to thrive in a wide range of environmental factors, including high rates of sedimentation, bouts of flooding, and high levels of nutrient inputs. Therefore, the goals of our study were to determine if 1) certain types of wetland were more susceptible to Reed canary grass invasion, and 2) disturbances facilitated Reed canary grass invasion. This study was conducted within the Keweenaw Bay Indian Community reservation in the Upper Peninsula of Michigan, in Baraga County. We selected 28 wetlands for analysis. At each wetland, we identified and sampled distinct vegetative communities and their corresponding environmental attributes, which included water table depth, pH, conductivity, calcium and magnesium concentrations, and percent organic matter. Disturbances at each site were catalogued and their severity estimated with the aid of aerial photos. A GIS dataset containing information about the location of Reed canary grass within the study wetlands, the surrounding roads and the level of roadside Reed canary grass invasion was also developed. In all, 287 plant species were identified and classified into 16 communities, which were then further grouped into three broad groupings of wetlands: nonforested graminoid, Sphagnum peatlands, and forested wetlands. The two most common disturbances identified were roads and off-road recreation trails, both occurring at 23 of the 28 sites. Logging activity surrounding the wetlands was the next most common disturbance and was found at 18 of the sites. Occurrence of Reed canary grass was most common in the non-forested graminoid communities. Reed canary grass was very infrequent in forested wetlands, and almost never occurred in the Sphagnum peatlands. Disturbance intensity was the most significant environmental factor in explaining Reed canary grass occurrence within wetlands. Statistically significant relationships were identified at distances of 1000 m, 500 m, and 250 m from studied wetlands, between the level of road development and the severity of Reed canary grass invasion along roadsides. Further analysis revealed a significant relationship between roadside Reed canary grass populations and the level of road development (e.g. paved, graded, and ungraded).