Depletion of large gas fields with thin oil layers and uncertain stocks

Abstract

The optimal depletion policy for a combined oil and gas field is studied under the assumption that if oil is to be extractéd, it has to be depleted before production of gas can start. In particular, focus is put on how uncertainty affects the decision whether or not to extract the oil, and to study the effect of "learning by doing" on this decision. In opposition to conclusions in other literature it is shown that uncertainty alone may change the attitude to oil production. The effect of learning is a more attractive oil production if experience from oil production reduces the uncertainty about gas reserves.