An application of AHP and fuzzy entropy-TOPSIS methods to optimize upstream petroleum investment in representative African basins

This study produces an evaluation system based on an Interpretive Structural Model to form the CIPP to assess comprehensive petroleum investment potential. This workflow integrates factors from petroleum geology as well as political, economic and cultural dimensions, adapting complex models commonly used in other fields for this assessment. In doing so, it fills a research gap in the field of transnational petroleum investment at basin level, elevating the focus beyond the primarily economic aspects that have dominated past research in this area (e.g.,^11,12,15,30).

The study primarily innovates by quantitatively assessing 17 representative African oil basins through an integrated evaluation model, aiming to identify and compare the differences among these basins in terms of oil resource exploration, development potential, and their investment attractiveness. By applying the Analytic Hierarchy Process (AHP), Entropy Weight Method, and Fuzzy TOPSIS technique, the research constructs a comprehensive evaluation system to quantitatively analyze each CIPP of each basin in the three aspects of Exploration Status, Development and Production and Local Environment.

The results suggest that the Illizi Basin and Offshore Côte d’Ivoire Basin are highly favorable for investment and development in petroleum resource exploration, particularly for various enterprises including those from China. This attractiveness is not solely based on abundant petroleum resources and favorable infrastructure, but also takes into account political and economic stability. However, basins such as the Offshore Tanzania Basin, Ruvuma Basin and Southwest African Basin are assessed as options that require very cautious consideration for investment. They rank low on a comprehensive level, and their limitations are not confined to just one aspect. This approach can assist Chinese or other oil and gas companies in gaining a clearer understanding at the basin level when investing in upstream oil and gas in Africa.

The optimal outcome of this ranking aligns closely with our professional opinion, which is derived from extensive experience and based on thorough investigation and analysis of a significant amount of expert outcomes. We believe that the Illizi Basin and Offshore Côte d’Ivoire Basin are the most favorable regions at the basin level for investment and development by Chinese oil and gas enterprises, based on our comprehensive assessment. These basins have been in a state of global oil and gas investment for some time, and they have relatively well-developed infrastructure and regulatory frameworks. With effort, we can successfully secure a share of the benefits. However, regarding the Tanzania Basin, Ruvuma Basin, and Southwest African Basin, although they may have considerable oil and gas reserves, the local development environment is relatively harsh, and the political risks and investment climate are also a matter for concern. Therefore, the model analysis fits our manual interpretation with a highly cautious approach to these regions.

This study categorizes 17 African oil basins into four levels based on Exploration Status, Development and Production, and Local Environment, using the standard deviation method. This classification aids investors and decision-makers in pinpointing specific investment opportunities and assessing potential risks. Basins are ranked from those excelling in all three indicators (Type II), indicating highest investment value, to those needing improvement (Type III), and those performing poorly (Type IV), reflecting varying investment appeal and development potential. Moreover, Spearman rank correlation analysis shows a moderate positive correlation between Exploration Status and Development and Production, with a weaker correlation to Local Environment. This highlights the importance of exploration status as a predictive indicator for a basin development potential but also underscores the necessity of considering a wide range of factors for comprehensive investment decisions. This approach assists in more precise resource allocation and risk management for oil and gas investments in Africa.

This study enhances the ranking of oil and gas exploration potential across various African basins and includes detailed dimensional rankings as well as comparisons between dimensions of the same level. This aspect, even for global petroleum investment field, was absent in previous studies^8,9,10, which were primarily limited to the financial investment dimension¹⁶, lacking consideration of the oil and gas geological aspects of basins and downstream infrastructure levels. Furthermore, complex decision-making models have rarely been applied to such oil and gas investments before^23,24 . Our research, while differing slightly in analysis details and incorporating a greater number of parameters for evaluation and classification compared to similar algorithms in other domains, effectively aids in prioritizing decision analysis objectives related to complexity^27,28. The application of this model provides a very good example of integration with actual investment behaviors, serving as a reference for similar decision-making fields or inspiring research on similar model applications.

This approach enhances decision accuracy, addresses uncertainty and yields clear, interpretable results, ultimately facilitating more effective decision-making. This advanced approach contributes to the algorithm advancement by handling complexity, enhances its transferability to various contexts, as well as improves its applicability in decision-making across industries and regions. More importantly, we can evaluate the ranking of each basin in-depth based on different sub-indicators and then determine the priority situation.

This modeling methodology focuses on assessing the petroleum investment potential of oil and gas basins, leveraging the practical experience of Chinese enterprises in overseas investments, specifically tailored for Africa due to its unique complexity in the mentioned aspects. Cross-regional comparisons, such as with basins in the Middle East and South America, are not considered within the framework of this model. For evaluations of specific basin groups, indicators with high commonality could be excluded in favor of new indicators with greater heterogeneity, integrating human interpretation with actual data to recalibrate weights. This model emphasizes the amalgamation of subjective and objective assessments in indicator ranking, innovatively influencing weight calculations to effectively integrate both evaluations comprehensively, departing from traditional segregations of subjective and objective metrics.

This evaluation system provides a practical application for a novel combined method for assessing petroleum basins in Africa. By classifying and quantitatively scoring these basins, petroleum investment companies can not only gain a more accurate understanding of the specific strengths and weaknesses of each basin but also systematically evaluate their potential risks and returns. The workflow is based on complex evaluation model methods that have already seen deep application in other fields^23,24,25,26. This adaptation can be considered a significant contribution to the upstream petroleum resource investment.

Additionally, the classification and correlation work enrich the content of this comprehensive evaluation system. The results of the correlation study indicate that the three classification indicators, namely “Exploration Status,” “Local Environment,” and “Development and Production,” exhibit certain interdependencies. Specifically, the first two show a moderate positive correlation, while the latter two are also related. This suggests that in petroleum basins with weak petroleum reserves but high exploration potential, there is already significant involvement from international petroleum companies, or the local government is likely to give it adequate attention.

While this study effectively evaluates petroleum basin investment potential, it also highlights limitations for future research to address. First, the current evaluation metrics need refinement to better capture the complexities of investment decisions, especially when considering multiple factors like economics and environment. Additional data, such as geological findings and market demand, should be included. Second, our model for assessing CIPP has limitations, notably in interpreting indicators such as exploration well density and success rate for example. High values do not always mean high potential, primarily due to deviations at extremely high or low data levels from the expectations of this study. Within a reasonable range (all indicators apply herein), these values demonstrate a proportional relationship, and we assume that no indicator experiences excessive conditions. Third, advanced data analytics like big data and AI should be used to improve the accuracy of investment and risk forecasts.

Lastly, robust model validation is essential to minimize biases and provide a stable basis for decision-making. Given the subjective elements involved in the evaluation process, there is a potential for bias in the presented results. However, it is important to note that our qualitative ranking of subjective interpretations relies on a thorough understanding of local contexts, strong domain expertise, and extensive discussions followed by multiple rounds of sorting and comparison to mitigate errors. To further mitigate bias, we propose several measures for future work. These include incorporating independent data sources for cross-validation, implementing expert blind review or expert validation panels, utilizing Monte Carlo simulation to address uncertainty, conducting sensitivity analyses, and validating results through comparative case studies, among other methods. These steps will enhance the reliability of investment strategies in the field of petroleum exploration and development.

This research aids China and other countries in deepening the analysis and planning of social policies related to African oil and gas investment decisions. Rationalizing Africa’s oil and gas investments is crucial for enhancing energy security, advancing the Belt and Road Initiative, and strengthening Sino-African economic and political ties. Such investments not only boost China’s diplomatic influence in Africa through deepened energy cooperation and solidifying friendly relations with African nations but also support China’s global diplomatic policies. For African countries, rational oil and gas investments significantly spur local economic development and job creation, especially in oil and gas development and infrastructure. Moreover, improving infrastructure not only fosters African economic growth and enhances the living standards of the local population but also contributes to sustainable development goals. In the long term, Sino-African energy cooperation is expected to create a mutually beneficial situation, strengthening economic collaboration between both sides and promoting global energy market stability and development.