Using BP Neural Networks to Prioritize Risk Management Approaches for China's Unconventional Shale Gas Industry
18 Pages Posted: 7 Jun 2017 Last revised: 19 Sep 2017
Date Written: June 7, 2017
This article is motivated by a conundrum: How can shale gas development be encouraged and managed without complete knowledge of the associated risks? To answer this question, we used back propagation (BP) neural networks and expert scoring to quantify the relative risks of shale gas development across 12 provinces in China. The results show that the model performs well with high predictive accuracy. Shale gas development risks in the provinces of Sichuan, Chongqing, Shaanxi, Hubei, and Jiangsu are relatively high (0.4~0.6), while risks in the provinces of Xinjiang, Guizhou, Yunnan, Anhui, Hunan, Inner Mongolia, and Shanxi are even higher (0.6~1). We make several recommendations based on our findings. First, the Chinese government should promote shale gas development in Sichuan, Chongqing, Shaanxi, Hubei, and Jiangsu Provinces, while considering environmental, health, and safety risks by using demonstration zones to test new technologies and tailor China’s regulatory structures to each province. Second, China’s extremely complex geological conditions and resource depths prevent direct application of North American technologies and techniques. We recommend using a risk analysis prioritization method, such as BP neural networks, so that policymakers can quantify the relative risks posed by shale gas development to optimize the allocation of resources, technology and infrastructure development to minimize resource, economic, technical, and environmental risks. Third, other shale gas industry developments emphasize the challenges of including the many parties with different, often conflicting expectations. Government and enterprises must collaboratively collect and share information, develop risk assessments, and consider risk management alternatives to support science-based decision-making with the diverse parties.
Keywords: shale gas, risk assessment, BP neutral networks, environmental impacts
JEL Classification: D81, Q4, N5, O13, M14, A14
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