An economic analysis of unitized and non-unitized production

D. Lueck, P. Schenewerk

Research output: Chapter in Book/Report/Conference proceedingConference contribution

5 Scopus citations

Abstract

Wasteful production of oil and gas can result when access to a reservoir is held by more than a single producer. Severe economic losses arise because of over-drilling, excessive storage, improper well-spacing, and intertemporal inefficiency as well as damage to the natural drive of the field which can reduce ultimate recovery from the reservoir. Reservoir-wide unitization has long been viewed as the ideal solution to this "common pool" problem. Unitization can be accomplished through private agreements, although in many cases these contracts are difficult to secure because of bargaining costs and hold-out problems. In many cases agreements can be reached only if unitization is compelled by law. We develop a dynamic economic model of reservoir production to analyze unitized and non-unitized reservoirs. The model uses optimal control theory to generate predictions about depletion rates and total recovery under these two regimes. Reservoir simulations are used to examine some predictions of the model and show that production from unitized reservoirs is biased toward the future compared to non-unitized reservoirs and that the initial overproduction under the rule of capture can be significant.

Original languageEnglish (US)
Title of host publicationSociety of Petroleum Engineers - SPE Annual Technical Conference and Exhibition
PublisherSociety of Petroleum Engineers
Pages67-76
Number of pages10
ISBN (Print)9781555634230
DOIs
StatePublished - 1996
Event1996 SPE Annual Technical Conference and Exhibition - Denver, United States
Duration: Oct 6 1996Oct 9 1996

Publication series

NameSociety of Petroleum Engineers - SPE Annual Technical Conference and Exhibition

Conference

Conference1996 SPE Annual Technical Conference and Exhibition
CountryUnited States
CityDenver
Period10/6/9610/9/96

ASJC Scopus subject areas

  • Geochemistry and Petrology
  • Geology
  • Geotechnical Engineering and Engineering Geology

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