IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v40y2012i1p189-195.html
   My bibliography  Save this article

Modeling the operating costs for petroleum exploration and development projects

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544212001004
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2012.02.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Méjean, Aurélie & Hope, Chris, 2008. "Modelling the costs of non-conventional oil: A case study of Canadian bitumen," Energy Policy, Elsevier, vol. 36(11), pages 4205-4216, November.
    2. Krautkraemer, Jeffrey A. & Toman, Michael, 2003. "Fundamental Economics of Depletable Energy Supply," Discussion Papers 10842, Resources for the Future.
    3. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
    4. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    5. Kaiser, Mark J., 2009. "Hydrocarbon production forecast for committed assets in the shallow water Outer Continental Shelf of the Gulf of Mexico," Energy, Elsevier, vol. 34(11), pages 1813-1825.
    6. Kaiser, Mark J., 2006. "Hydrocarbon production cost functions in the Gulf of Mexico," Energy, Elsevier, vol. 31(12), pages 1726-1747.
    7. Cutler J. Cleveland & Robert K. Kaufmann, 1991. "Forecasting Ultimate Oil Recovery and Its Rate of Production: Incorporating Economic Forces into the Models of M. King Hubbert," The Energy Journal, , vol. 12(2), pages 17-46, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nemet, Andreja & Klemeš, Jiří Jaromír & Kravanja, Zdravko, 2013. "Optimising entire lifetime economy of heat exchanger networks," Energy, Elsevier, vol. 57(C), pages 222-235.
    2. Jia-Yue Huang & Yun-Fei Cao & Hui-Ling Zhou & Hong Cao & Bao-Jun Tang & Nan Wang, 2018. "Optimal Investment Timing and Scale Choice of Overseas Oil Projects: A Real Option Approach," Energies, MDPI, vol. 11(11), pages 1-22, October.
    3. Silva, L.M.R. & Guedes Soares, C., 2023. "Robust optimization model of an offshore oil production system for cost and pipeline risk of failure," Reliability Engineering and System Safety, Elsevier, vol. 232(C).
    4. Wang, Wenyang & Pang, Xiongqi & Chen, Zhangxin & Chen, Dongxia & Ma, Xinhua & Zhu, Weiping & Zheng, Tianyu & Wu, Keliu & Zhang, Kun & Ma, Kuiyou, 2020. "Improved methods for determining effective sandstone reservoirs and evaluating hydrocarbon enrichment in petroliferous basins," Applied Energy, Elsevier, vol. 261(C).
    5. Cabrales, Sergio & Bautista, Rafael & Benavides, Juan, 2017. "A model to assess the impact of employment policy and subsidized domestic fuel prices on national oil companies," Energy Economics, Elsevier, vol. 68(C), pages 566-578.
    6. Wang, Wenyang & Pang, Xiongqi & Chen, Zhangxin & Chen, Dongxia & Zheng, Tianyu & Luo, Bing & Li, Jing & Yu, Rui, 2019. "Quantitative prediction of oil and gas prospects of the Sinian-Lower Paleozoic in the Sichuan Basin in central China," Energy, Elsevier, vol. 174(C), pages 861-872.
    7. Zhao, Xu & Luo, Dongkun & Xia, Liangyu, 2012. "Modelling optimal production rate with contract effects for international oil development projects," Energy, Elsevier, vol. 45(1), pages 662-668.
    8. Bo Xu & Lianyong Feng & William X. Wei & Yan Hu & Jianliang Wang, 2014. "A Preliminary Forecast of the Production Status of China’s Daqing Oil field from the Perspective of EROI," Sustainability, MDPI, vol. 6(11), pages 1-21, November.
    9. Wang, Wenyang & Pang, Xiongqi & Chen, Zhangxin & Chen, Dongxia & Wang, Yaping & Yang, Xuan & Luo, Bing & Zhang, Wang & Zhang, Xinwen & Li, Changrong & Wang, Qifeng & Li, Caijun, 2021. "Quantitative evaluation of transport efficiency of fault-reservoir composite migration pathway systems in carbonate petroliferous basins," Energy, Elsevier, vol. 222(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guido Fioretti, 2007. "A connectionist model of the organizational learning curve," Computational and Mathematical Organization Theory, Springer, vol. 13(1), pages 1-16, March.
    2. Tat Y. Chan & Jia Li & Lamar Pierce, 2014. "Learning from Peers: Knowledge Transfer and Sales Force Productivity Growth," Marketing Science, INFORMS, vol. 33(4), pages 463-484, July.
    3. Maharjan, Prapti & Hauck, Mara & Kirkels, Arjan & Buettner, Benjamin & de Coninck, Heleen, 2024. "Deriving experience curves: A structured and critical approach applied to PV sector," Technological Forecasting and Social Change, Elsevier, vol. 209(C).
    4. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2009. ""Twin Peaks" in Energy Prices: A Hotelling Model with Pollution Learning," Working Papers 2009-10, University of Alberta, Department of Economics.
    5. Strupeit, Lars & Neij, Lena, 2017. "Cost dynamics in the deployment of photovoltaics: Insights from the German market for building-sited systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 948-960.
    6. Lee, Shun-Chung & Shih, Li-Hsing, 2010. "Renewable energy policy evaluation using real option model -- The case of Taiwan," Energy Economics, Elsevier, vol. 32(Supplemen), pages 67-78, September.
    7. Jim Bessen, 1997. "Productivity Adjustments and Learning-by-Doing as Human Capital," Working Papers 97-17, Center for Economic Studies, U.S. Census Bureau.
    8. Gregory F. Nemet, 2006. "How well does Learning-by-doing Explain Cost Reductions in a Carbon-free Energy Technology?," Working Papers 2006.143, Fondazione Eni Enrico Mattei.
    9. Bramoulle, Yann & Olson, Lars J., 2005. "Allocation of pollution abatement under learning by doing," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1935-1960, September.
    10. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 377-409, December.
    11. Fioretti, Guido, 2007. "The organizational learning curve," European Journal of Operational Research, Elsevier, vol. 177(3), pages 1375-1384, March.
    12. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
    13. Koji Kotani & Makoto Kakinaka, 2017. "Some implications of environmental regulation on social welfare under learning-by-doing of eco-products," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(1), pages 121-149, January.
    14. Juan M. Contreras & Beomsoo Kim & Ignez M. Tristao, 2009. "Does Experience Make Better Doctors?," Discussion Paper Series 0902, Institute of Economic Research, Korea University.
    15. Yeh, Sonia & Rubin, Edward S., 2012. "A review of uncertainties in technology experience curves," Energy Economics, Elsevier, vol. 34(3), pages 762-771.
    16. Lohwasser, Richard & Madlener, Reinhard, 2013. "Relating R&D and investment policies to CCS market diffusion through two-factor learning," Energy Policy, Elsevier, vol. 52(C), pages 439-452.
    17. Nandakumar, Karthik & Funk, Jeffrey L., 2015. "Understanding the timing of economic feasibility: The case of input interfaces for human-computer interaction," Technology in Society, Elsevier, vol. 43(C), pages 33-49.
    18. Ziesemer, Thomas & Michaelis, Peter, 2011. "Strategic environmental policy and the accumulation of knowledge," Structural Change and Economic Dynamics, Elsevier, vol. 22(2), pages 180-191, June.
    19. Méjean, Aurélie & Hope, Chris, 2013. "Supplying synthetic crude oil from Canadian oil sands: A comparative study of the costs and CO2 emissions of mining and in-situ recovery," Energy Policy, Elsevier, vol. 60(C), pages 27-40.
    20. Funk, Jeffrey L. & Magee, Christopher L., 2015. "Rapid improvements with no commercial production: How do the improvements occur?," Research Policy, Elsevier, vol. 44(3), pages 777-788.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:40:y:2012:i:1:p:189-195. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.