Abstract
In this study, a mathematical model is formulated to select the optimal product mix of wells in terms of numbers and types of wells that helps to maximize profit. The optimization model comprises two main components, the first component is revenue which includes forecasting of production and oil price, and the second component is cost which includes capital and operating costs. In addition, the model considers all related constraints such as budget, production targets, surface facility limitations, drilling rigs availability and others. Time has influence on the model, since its output is not limited only to the types and numbers of wells to be drilled during the planned period, but also when each well to be drilled for the same plan. Actual planning data for three consecutive years is used for model testing. The results show that 42% to 47% cost saving can be achieved by using the model. The analysis shows that with every 10% increase in oil price, the profit increases by about 6%. Also, it shows that the number of rigs and the rig daily cost affect the profit tremendously, where by reducing these two parameters by 50% an increase of 66% in oil profit can be achieved. The study confirms that oil field operating companies can stand a better chance of maximizing their profit by using product mix optimization model to define the optimum schedule for the number of wells, type of wells and time of drilling.
Highlights
Oil field operating companies are apparently producing one single product which is oil but in reality there are many different types and categories of oil which involve different cost to produce and subsequently different price at market
There is a potential for product mix optimization by drilling the optimum number of wells for each reference where each well is associated with oil production rates and costs
This study presents a model that maximizes the profit of an oil field operating company through product mix optimization
Summary
Oil field operating companies are apparently producing one single product which is oil but in reality there are many different types and categories of oil which involve different cost to produce and subsequently different price at market. A maximized profit cannot be achieved or guaranteed for the shareholders by using such approach These difficulties can be eliminated by using an appropriate automated optimization model that is formulated based on the fact that maximizing the profit is guaranteed by optimizing the production through product mix optimization. Such model handles all constraints, and defines the optimum number of wells of specific reference and when each will be drilled during the planning period. The results obtained by applying the model to actual planning data show considerable cost savings
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