Risk assessment of transnational oil investment in Central Asia using a fuzzy comprehensive evaluation method

doi:10.1016/j.regsus.2020.06.002

Abstract

Abstract:

Central Asia (including five countries: Kazakhstan, Kyrgyzstan, Turkmenistan, Uzbekistan, and Tajikistan) is rich in oil reserves and has become one of the most important target regions for global oil investment. The construction of the Silk Road Economic Belt has prompted Central Asia to look outwards for more collaborations in the oil industry. China’s need for oil investment in Central Asia has also increased significantly. This research established a comprehensive index system for assessing the risks of transnational oil investment in Central Asia. The system incorporated political, regulatory, economic, social, and infrastructural indices. Based on the Delphi method and fuzzy comprehension evaluation method, we qualitatively and quantitatively assessed and analyzed the risks of transnational oil investment in Central Asia. The results indicate that the risk score for regulatory risk was highest with the value of 6.1670, indicating a high risk level in transnational oil investment, followed by economic, social, political, and infrastructural risk indices. Of the 18 secondary risk indices calculated, there were seven indices with the probability of high risk occurrence exceeded 30.0% and the descending order was as follows: establishment of mining rights; host country intervention in operations; taxing system; stability of regulations; war and turmoil; labor capital; and ethnic, cultural, and religious differences. These seven critical risks should be watched closely and avoided during transnational oil investment in Central Asia. This study provides a comprehensive understanding of the potential risks of investing oil in Central Asia. The findings demonstrate the causes of these risks and provide a scientific basis for reasonably avoiding oil investment risk and improving investment benefits for both host and investing countries.

Key words: Transnational oil investment, Political risk, Regulatory risk, Economic risk, Social risk, Infrastructural risk

Haitao Ma, Zhan Sun, Chuanglin Fang. Risk assessment of transnational oil investment in Central Asia using a fuzzy comprehensive evaluation method[J]. Regional Sustainability, 2020, 1(1): 11-19.

Figures/Tables 3

Table 1

Table 2

Risk assessment indices and risk types of transnational oil investment in Central Asia"

Primary index	Score and type of the primary index	Secondary index and risk type	Risk property of the secondary index
Political risk	4.5406 (general risk )	War and turmoil (high risk )	(0.175, 0.133, 0.225, 0.392, and 0.075) A 39.2% probability of a high risk
		Change of regime (low risk )	(0.117, 0.358, 0.208, 0.258, and 0.058) A 35.8% probability of a low risk
		Government management (general risk )	(0.075, 0.417, 0.425, 0.083, and 0.000) A 42.5% probability of a general risk
		International oil monopoly (low risk )	(0.075, 0.492, 0.300, 0.133, and 0.000) A 49.2% probability of a low risk
		Foreign policies of powerful nations (low risk )	(0.050, 0.492, 0.300, 0.158, and 0.000) A 49.2% probability of a low risk
Regulatory risk	6.1670 (high risk )	Establishment of mining rights (high risk )	(0.000, 0.083, 0.175, 0.683, and 0.058) A 68.3% probability of a high risk
		Host country intervention in operations (high risk )	(0.000, 0.192, 0.100, 0.650, and 0.058) A 65.0% probability of a high risk
		Taxing system (high risk )	(0.000, 0.142, 0.417, 0.442, and 0.000) A 44.2% probability of a high risk
		Stability of regulations (high risk )	(0.000, 0.292, 0.117, 0.400, and 0.192) A 40.0% probability of a high risk
		Environmental protection requirements (general risk )	(0.133, 0.183, 0.367, 0.258, and 0.058) A 36.7% probability of a general risk
Economic risk	5.4827 (general risk )	Economic growth (general risk )	(0.000, 0.283, 0.408, 0.308, and 0.000) A 40.8% probability of a general risk
		Foreign exchange rates (general risk )	(0.075, 0.050, 0.467, 0.333, and 0.075) A 46.7% probability of a general risk
		Inflation (general risk )	(0.075, 0.100, 0.408, 0.342, and 0.075) A 40.8% probability of a general risk
Social risk	4.8687 (general risk )	Ethnic, cultural, and religious differences (high risk )	(0.050, 0.108, 0.300, 0.300, and 0.242) A 30.0% probability of a high risk
		Terrorist activities (low risk )	(0.058, 0.525, 0.217, 0.083, and 0.117) A 52.5% probability of a low risk
		Labor capital (high risk )	(0.200, 0.242, 0.233, 0.325, and 0.000) A 32.5% probability of a high risk
Infrastructural risk	4.2186 (general risk )	Infrastructure, including transportation, water, and electricity (low risk )	(0.117, 0.408, 0.342, 0.133, and 0.000) A 40.8% probability of a low risk
Infrastructural risk	4.2186 (general risk )	Oil transit pipelines (low risk )	(0.150, 0.392, 0.133, 0.325, and 0.000) A 39.2% probability of a low risk

Table 2

Fig. 1.

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