An offshore oil Company has discovered new oil reserves of 70 million barrels where the cost of developing these reserves is approximately $430 million. The company has the right to exploit these reserves for the next 20 years. The development lag is 3 years. The current price and production costs are $60/barrel and $30/barrel, respectively. The cost of delay is 4% p.a, the risk-free rate is 10% p.a; the variance in oil prices is 0.04. What is the option value of these undeveloped reserves? (Hint: use real option valuation method).

a. $1,866.9 million b. $780.67 million c. $2,400 million d. $4,800 million e. none of the above