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Reserves, well drilling and production: Assessing the optimal trajectory of oil extraction for Brazil

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  • Alves, Joana Duarte Ouro
  • Faria, Weslem Rodrigues

Abstract

The global energy matrix is in transition, leading to expectations of a reduction in fossil sources in the coming years. Brazil has substantial oil reserves but has not yet considered optimization strategies for extracting these resources. The research proposed the calibration of a Hotelling model adapted for Brazil, with a focus on maximizing the economic return from extracting reserves. We employed optimization methods to calculate the ideal annual rates of oil drilling and production in Brazil. We also assess the sensitivity of these rates to changes in oil prices, well drilling costs, discount rates, and technical progress, according to the characteristics of the reserves. The results indicate that optimal onshore production would continue to decrease in the coming years, while offshore production may be nearing its peak. Assuming higher oil prices, offshore production is expected to increase over the next five years and decline thereafter.

Suggested Citation

  • Alves, Joana Duarte Ouro & Faria, Weslem Rodrigues, 2024. "Reserves, well drilling and production: Assessing the optimal trajectory of oil extraction for Brazil," Resources Policy, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:jrpoli:v:88:y:2024:i:c:s0301420723010528
    DOI: 10.1016/j.resourpol.2023.104341
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    More about this item

    Keywords

    Brazilian oil reserves; Hotelling model; Optimal extraction paths; Dynamic optimization;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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