Real Options Application in Valuing " South Pars Gas Field" Development Project

In this paper we provide an introduction to real options in valuing investment projects. Since one of the real options applications is valuing oil and gas development projects with high uncertainty and considerable investment costs, in this research we have performed valuation of selected phases of “South Pars” gas field development project. “South Pars” gas field as the greatest independent gas field in the world is shared between Iran and Qatar and contains approximately half of the gas reserves of Iran. Based on the results of the model, using real options approach to valuing this project as compared to traditional valuation methods such as discounted cash flow, increases the project value meanwhile there is the possibility to identify optimal time of development.