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Modeling the operating costs for petroleum exploration and development projects

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  • Luo, Dongkun
  • Zhao, Xu

Abstract

Since the operating cost is among the most sensitive factors to uncertainties in economic evaluation of petroleum exploration and development projects, scientific prediction of the operating cost plays an important role in accurately evaluating the viability of projects. This paper establishes the operating cost prediction model based on production decline law and learning curves through analyzing the impact of resource depletion and technological advances on unit operating cost. This analysis quantifies the effects of both learning and depletion on operating costs, and also introduces an assessment of the economic limit of stimulation treatments, which is set by comparing the unit operating cost before and after the treatments are taken. The results show the effect of resource depletion overwhelming that of technological advances for a single oilfield, and thus the operating cost is increasing over its life cycle. The influence of each parameter on the operating cost is examined, the unit operating cost in plateau phase having the largest influence. Over time, the effect of constant decline rate of the exponential decline is gradually overtaking that of unit operating cost. This model is applied in several oilfields in Tunisia, and all the exam results meet accuracy requirements.

Suggested Citation

  • Luo, Dongkun & Zhao, Xu, 2012. "Modeling the operating costs for petroleum exploration and development projects," Energy, Elsevier, vol. 40(1), pages 189-195.
    • Handle: RePEc:eee:energy:v:40:y:2012:i:1:p:189-195
    DOI: 10.1016/j.energy.2012.02.006
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