Economics of Oil and Gas Production

Oil and gas resources have provided much of the world's energy in the twentieth century and are expected to be an important part of the energy mix well into the twenty-first century. Currently, oil and gas provide approximately 63 % of primary energy consumption in Europe. However, energy security in the region remains a concern. In the mid-nineteenth century, mineral oil entered the market as an energy source. Refined oil in the form of petroleum and kerosene, for instance, rapidly gained a foothold in the lighting industry. At the time, oil deposits were much fewer in number than coal mines and were generally located in remote areas, at least from a Central European perspective. As a result, oil shipments began to significantly increase the volume of international trade. In the late nineteenth century, Western Europe imported its fossil oil mainly from the United States, and smaller amounts from Poland and Russia. Almost simultaneously, as the consumption of coal and crude oil increased sharply, several European countries such as France, Austria- Hungary, the Netherlands, Italy and Spain experienced industrial breakthroughs.Development planning and production are usually based on the expected production profile which depends strongly on the mechanism providing the driving force in the reservoir. The production profile will determine the facilities required and the number and phasing of wells to be drilled. The production profile shown in the Figure is characterized by three phases: