Abstract
In this paper, the exploitation of petroleum resources in India is analyzed by developing a dynamic optimization modeling framework—PETEX. This model combines the practical aspects in determining optimal rates of extraction of oil and gas from a reservoir with a hybrid approach to estimating the discovery rate of petroleum resources in the future, additionally incorporating a stochastic specification to capture the uncertainty associated with discovery. The model acts as an aid to joint production–investment decision making for the entire supply process from drilling through production and in determining the import requirement to meet the country’s oil demand. The model results and sensitivity analysis suggest an acute requirement of sustained infusion of investment into the various upstream activities at a rate much higher than the current levels in order to bridge the demand—supply gap for crude oil. With the opening up of the Indian economy, it is hoped that the participation of the private sector in upstream activities would increase thereby increasing the investments available for upstream activity.
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