Reserves, well drilling and production: Assessing the optimal trajectory of oil extraction for Brazil

Abstract

The global energy matrix is in transition, leading to expectations of a reduction in fossil sources in the coming years. Brazil has substantial oil reserves but has not yet considered optimization strategies for extracting these resources. The research proposed the calibration of a Hotelling model adapted for Brazil, with a focus on maximizing the economic return from extracting reserves. We employed optimization methods to calculate the ideal annual rates of oil drilling and production in Brazil. We also assess the sensitivity of these rates to changes in oil prices, well drilling costs, discount rates, and technical progress, according to the characteristics of the reserves. The results indicate that optimal onshore production would continue to decrease in the coming years, while offshore production may be nearing its peak. Assuming higher oil prices, offshore production is expected to increase over the next five years and decline thereafter.