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Petroleum Reservoir Exploitation: Switching from Primary to Secondary Recovery

Author

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  • Raphael Amit

    (Northwestern University, Evanston, Illinois)

Abstract

The petroleum recovery process has two potential phases: primary recovery, during which the natural drive forces the oil to the well bore, and secondary recovery, during which a producer uses artificial means to recover the resource. A producer may choose to switch from primary to secondary recovery if the desired ultimate output is more than can be obtained by exploiting the natural drive, or when the desired current extraction rate is larger than can be obtained by the natural drive. These decisions are affected by the interaction between geological, technical and market conditions. We formulate an investment and production model that incorporates the relationships between extraction rates, investment decisions and cumulative recovery, and investigate a two-phase dynamic optimization problem. We do so by defining and analyzing a more general optimization problem and applying the results to our model. The major findings relate to the timing and size of investment, the rate and duration of secondary recovery, and the optimal switching policies from primary to secondary recovery. We discuss each of these issues in detail, and outline and explain quantitative policy recommendations.

Suggested Citation

  • Raphael Amit, 1986. "Petroleum Reservoir Exploitation: Switching from Primary to Secondary Recovery," Operations Research, INFORMS, vol. 34(4), pages 534-549, August.
  • Handle: RePEc:inm:oropre:v:34:y:1986:i:4:p:534-549
    DOI: 10.1287/opre.34.4.534
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    File URL: http://dx.doi.org/10.1287/opre.34.4.534
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    Cited by:

    1. Giraud, Raphaël & Thomas, Lionel, 2017. "Ambiguity, optimism, and pessimism in adverse selection models," Journal of Economic Theory, Elsevier, vol. 171(C), pages 64-100.
    2. Boucekkine, Raouf & Piacquadio, Paolo G. & Prieur, Fabien, 2019. "A Lipsetian theory of voluntary power handover," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 269-291.
    3. Thorsten Upmann & Stefan Behringer, 2017. "Harvesting a Remote Renewable Resource," CESifo Working Paper Series 6724, CESifo.
    4. Thorsten Upmann & Stefan Behringer, 2017. "Harvesting a Remote Renewable Resource," CESifo Working Paper Series 6724, CESifo.
    5. Long, Ngo Van & Prieur, Fabien & Tidball, Mabel & Puzon, Klarizze, 2017. "Piecewise closed-loop equilibria in differential games with regime switching strategies," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 264-284.
    6. Raouf Boucekkine & Paolo Piacquadio & Fabien Prieur, 2015. "A Lipsetian theory of institutional change," Working Papers hal-02797064, HAL.
    7. Ngo Van Long, 2019. "Managing, Inducing, and Preventing Regime Shifts: A Review of the Literature," CESifo Working Paper Series 7749, CESifo.
    8. Caliendo, Frank N. & Gorry, Aspen & Slavov, Sita, 2019. "The cost of uncertainty about the timing of Social Security reform," European Economic Review, Elsevier, vol. 118(C), pages 101-125.
    9. Melstrom, Richard T. & Salau, Kehinde Rilwan & Shanafelt, David W., 2019. "The Optimal Timing of Reintroducing Captive Populations Into the Wild," Ecological Economics, Elsevier, vol. 156(C), pages 174-184.
    10. Jørgensen, Steffen & Zaccour, Georges, 2019. "Optimal pricing and advertising policies for a one-time entertainment event," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 395-416.

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