Optimal Dynamic Production Policy: The Case of a Large Oil Field in Saudi Arabia

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dc.contributor.authorGao, Weiyuen_US
dc.contributor.authorHartley, Peter R.en_US
dc.contributor.authorSickles, Robin C.en_US
dc.contributor.orgJames A. Baker III Institute for Public Policyen_US
dc.date.accessioned2016-10-12T19:47:14Zen_US
dc.date.available2016-10-12T19:47:14Zen_US
dc.date.issued2004en_US
dc.description.abstractWe model the optimal dynamic oil production decisions for a stylized oilfield resembling the largest developed light oil field in Saudi Arabia, Ghawar. We use data from a number of sources to estimate the cost and revenue functions used in the dynamic programming model. We also pay particular attention to the dynamic aspects of oil production. We use a nonparametric smoothing technique – tensor splines – to approximate the value function. The optimal solution depends on assumptions about various exogenous variables such as the discount rate and the timing of breakthroughs in the use of alternative energy, which we take to be solar energy. We account for uncertainty about the forecasts by examining the solutions under a number of scenarios. Our model is based on the hypothesis that oil production is chosen to maximize the discounted value of profits. Saudi oil policy reflects many political and strategic motives. Our analysis enables one to quantify the cost of pursuing these non-economic objectives.en_US
dc.identifier.citationGao, Weiyu, Hartley, Peter R. and Sickles, Robin C.. "Optimal Dynamic Production Policy: The Case of a Large Oil Field in Saudi Arabia." (2004) James A. Baker III Institute for Public Policy: <a href="http://www.bakerinstitute.org/research/optimal-dynamic-production-policy-the-case-of-a-large-oil-field-in-saudi-arabia/">http://www.bakerinstitute.org/research/optimal-dynamic-production-policy-the-case-of-a-large-oil-field-in-saudi-arabia/</a>.en_US
dc.identifier.urihttps://hdl.handle.net/1911/91874en_US
dc.publisherJames A. Baker III Institute for Public Policyen_US
dc.relation.urihttp://www.bakerinstitute.org/research/optimal-dynamic-production-policy-the-case-of-a-large-oil-field-in-saudi-arabia/en_US
dc.subjectoptimal oil productionen_US
dc.subjectdynamic programmingen_US
dc.subjectvalue function approximationen_US
dc.subjecttensor splinesen_US
dc.titleOptimal Dynamic Production Policy: The Case of a Large Oil Field in Saudi Arabiaen_US
dc.typeResearch paperen_US
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