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.

Planting and production of switchgrass (<i>Panicum virgatum</i> L.) as a bioenergy crop in Michigan's Upper Peninsula

Switchgrass (Panicum virgatum L.) is a perennial grass holding great promise as a biofuel resource. While Michigan’s Upper Peninsula has an appropriate land base and climatic conditions, there is little research exploring the possibilities of switchgrass production. The overall objectives of this research were to investigate switchgrass establishment in the northern edge of its distribution through: investigating the effects of competition on the germination and establishment of switchgrass through the developmental and competitive characteristics of Cave-in-Rock switchgrass and large crabgrass (Digitaria sanguinalis L.) in Michigan’s Upper Peninsula; and, determining the optimum planting depths and timing for switchgrass in Michigan’s Upper Peninsula. For the competition study, a randomized complete block design was installed June 2009 at two locations in Michigan’s Upper Peninsula. Four treatments (0, 1, 4, and 8 plants/m2) of crabgrass were planted with one switchgrass plant. There was a significant difference between switchgrass biomass produced in year one, as a function of crabgrass weed pressure. There was no significant difference between the switchgrass biomass produced in year two versus previous crabgrass weed pressure. There is a significant difference between switchgrass biomass produced in year one and two. For the depth and timing study, a completely randomized design was installed at two locations in Michigan’s Upper Peninsula on seven planting dates (three fall 2009, and four spring 2010); 25 seeds were planted 2 cm apart along 0.5 m rows at depths of: 0.6 cm, 1.3 cm, and 1.9 cm. Emergence and biomass yields were compared by planting date, and depths. A greenhouse seeding experiment was established using the same planting depths and parameters as the field study. The number of seedlings was tallied daily for 30 days. There was a significant difference in survivorship between the fall and spring planting dates, with the spring being more successful. Of the four spring planting dates, there was a significant difference between May and June in emergence and biomass yield. June planting dates had the most percent emergence and total survivorship. There is no significant difference between planting switchgrass at depths of 0.6 cm, 1.3 cm, and 1.9 cm. In conclusion, switchgrass showed no signs of a legacy effect of competition from year one, on biomass production. Overall, an antagonistic effect on switchgrass biomass yield during the establishment period has been observed as a result of increasing competing weed pressure. When planting switchgrass in Michigan’s Upper Peninsula, it should be done in the spring, within the first two weeks of June, at any depth ranging from 0.6 cm to 1.9 cm.