Oil production cost function and oil recovery implementation: Evidence from an Iranian oil field

Vahid Ghorbani Pashakolaie, Shahla Khaleghi, Teymor Mohammadi, Morteza Khorsandi

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In the process of natural depletion of an oil reservoir, the reservoir pressure
declines, as does the production rate. To prevent this decline, some oil recovery
methods have been proposed. These methods, despite having impacts on the
natural depletion production profile, have an impact on the cost function. In this
study, we investigated how the cost function (that represents the natural
depletion situation of an oil field lifecycle) changes with secondary oil recovery.
Gaining more knowledge on this issue is of great importance in future decision
making and capacity expansion in the oil industry. Empirical evidence is
presented from an oil field in south west of Iran where immiscible gas injection
has been applied. For this purpose we have estimated two production cost
functions; one corresponds to the current situation of the oil field (with
secondary oil recovery), and the other is a simulated situation that represents a
natural depletion of the oil field so far. The results showed that the oil
production cost function in a situation with secondary recovery has a lower
stock effect parameter than compared to that of the natural depletion situation.
This implies that the marginal production cost dependency on cumulative
production decreases after secondary recovery implementation.
Original languageEnglish
Pages (from-to)459–470
Number of pages12
JournalEnergy Exploration and Exploitation
Issue number4
Publication statusPublished - 1 Aug 2015
Externally publishedYes


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