Multiobjective real options design : an evaluation methodology for the Orinoco-Meta Corridor megaproject

Abstract

The evaluation of the Orinoco-Meta Corridor megaproject requires the use of a custom-made methodology that can take proper account of its complexity and particular characteristics. The methodology should contribute to increase the probability of achieving the objectives set by the multiple stakeholders. But the megaproject has been conceived, and will be carried into the evaluation and implementation stages, in a setting where there is lack of consensus on its design and objectives, non-alignment on the criteria for selection, and huge risks and uncertainties. Furthermore, the evaluation needs to deal with the long duration of each stage and the frequent unrelatedness of ex-ante evaluations with the implementation stages. The evaluation methodology for the megaproject in question should therefore tackle these concerns with the aid of Multiobjective Real Options Design. This requires a progressive evaluation that starts with the construction of a multi objective vector, which consists of a Cost-Benefit Analysis and the assessment of five non-monetary variables - Environmental Impacts, Population Distress, Effects on Employment, Distributional Effects, and Effects on Comparative Advantage. Next, the methodology needs to build-on with Risk Analysis and Decision Analysis to produce the design of real options for the megaproject. The proposed methodology also includes a framework for encapsulating the megaproject into a participatory process at both the evaluation and implementation stages. At the end it is recognized that even after fulfilling the requirements of the proposed evaluation methodology, some gaps will still need to be filled in the areas of organization, financing, international coordination, and local security to provide conditions conducive to the successful implementation of the megaproject.