Allocation of capital investments of an oil company based on independent opportunity information

To address the problem of investment allocation while optimizing the total return on investment for projects under risk conditions associated with uncertainty of project income, a linear combination with non-negative coefficients of two loss-making models was employed: the standard minimax loss-making model and the minimax loss-making level model. The resulting probabilistic programming problem, under the assumption that the probabilistic variables characterizing project profitability are independent (unrelated), is reduced to a linear programming problem. Solving this problem using the simplex method yields a vector of the equity distribution of investments that determines the total return on investment according to the criterion of minimizing the loss function. Based on the proposed approach to the optimal solution of the investment allocation problem, an algorithm for project investment planning was developed using a database of invested and returned funds from previous planning periods, according to which distributions of possible investment returns are modeled. The forecast of total investments in the new planning period is presented as the sum of the basic (main) portion and the additional portion of the investment. The first portion is determined using the projected price of each project’s products in the new planning period and the planned (in case of over-fulfillment) or actual (in case of under-fulfillment) volume of products in the previous planning period. The second portion is determined using the equity investment vector obtained from the solution of the linear programming problem, applied to the total cost of project revenues in the previous planning period, evaluated at projected prices in the new planning period. For a project with no income, the cost of income is considered zero. The numerical implementation of the algorithm is illustrated using the example of investment planning in an oil company for oil and gas production projects.