• Environmental and Resource Economics Review
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• v.18 no.2
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• pp.217-239
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• 2009

As gas hydrate is recently emerging as a new energy source to solve environmental and exhaustion problems caused by fossil energy, Korea is working on a gas hydrate development project under a 10-year plan from 2005 to 2014. Gas hydrate is expected to have a big effect on the economy and society of Korea, which is largely depending on energy imports besides water energy and atomic energy. However, it is uncertain whether the project will produce successful results. Thus, it is very important to improve its validity and to propose effective execution strategies by evaluating the value of the project in advance. Thus, this study intended to include new information, which had not been evaluated in existing methods, and to reduce biases or errors in value evaluation results by applying a fuzzy risk analysis to the real option model in order to evaluate the value of a gas hydrate development project. It is advantageous that the real option model based on the fuzzy risk analysis modelizes the vagueness and inexactness of intangible element judgment into an appropriate language scale so as to evaluate these elements clearly and integrate them with estimated financial performance results. The application of the fuzzy risk analysis makes it possible to conduct an analysis by dissolving a decision-making issue with complicated and various attributes into several simplified problems. With the continuing high oil prices and today's demand of clean energy, the necessity of energy resources and technology development projects keeps growing. Amid this situation, it is expected that these study results will contribute to proposing a guideline not only for gas hydrate projects but also for policy decision-making related to future energy industries.