The optimal model of oilfield development investment based on Data Envelopment Analysis

Abstract

The investment problem of oilfield development is to trade off the investment exploration investment and development investment. With low return on investment got by using the existing method to solve this problem, we construct an optimal model to improve it based on Data Envelopment Analysis (DEA) method and the relations about investment and proven reserves, investment and output as well as production cost. Data Envelopment Analysis (DEA) method is used to present a method to determine the optimal scale of productivity construction investment in unit production. The relation between total cumulated proven reserves and cumulative exploration investment is denoted as an exponential model. The relation among productions and remaining recoverable reserves as well as production cost may be described as an exponential operational cost function. Based on above two relation models and investment effectiveness coefficients of every block, we establish an optimal model whose objective function is net present value (NPV) profit maximum, whose constrain conditions include investment, reserve/production ratio, production and some equality constraints under the mode of sustainable development. It can be solved by genetic algorithms. The result of case study shows that this optimal investment of oilfield development has multi-stage investment structure under given conditions; the model can provide scientific basic theory for oil companies to make a long-term strategic program and investment plan in oil exploration and development, may decrease the subjective blindness in the investment and bring about a reasonable and orderly exploration and development of oil resources.

Keywords

Data envelopment analysis / Oilfield development / Investment optimization / Reserves and productions

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