A Dynamic Programming Decision-Making Model of Investment Policy for Unconventional Oil Exploitation
In this paper we focus on investment policy problems of unconventional oil exploitation and set up a dynamic programming model to help decision makers decide how to allocate the limited resources among a set of unconventional oil projects to maximize the total expected profits from investment horizon. Firstly, the urgency and feasibility of developing unconventional oil were introduced. Secondly, the properties of unconventional oil resources and the difficulty and complexity of exploiting them were analyzed. Thirdly, a multi-stage decision model was developed to help oil companies select an optimal investment policy given return on investment. Finally, a numerical example was provided by applying the model through backward recursion algorithm. The results demonstrate that the dynamic programming model provides an effective and efficient decision support tool for optimal investment policy of unconventional oil exploitation.
Keywordsdynamic programming model unconventional oil exploitation investment policy backward recursion algorithm
Unable to display preview. Download preview PDF.
- 2.Bakhtiari, A.M.S.: World oil production capacity model suggests output peak by 2006–2007. Oil and Gas Journal 102(16), 18–20 (2004)Google Scholar
- 6.Bellman, R.E.: Dynamic Programming-Republished 2003. Princeton University Press, Princeton (1957)Google Scholar
- 8.Chen, J., Li, C., Chen, X.: Oil Supplement and Substitution. Sinopec Press, Beijing (2009)Google Scholar
- 10.Dyni, J.R.: Geology and resources of some world oil-shale deposits. Oil Shale 20, 193–252 (2003)Google Scholar
- 12.Hubbert, M.K.: Nuclear energy and the fossil fuels. In: Drilling and Production Practice. American Petroleum Institute (1956)Google Scholar
- 13.Hu, X., Qian, G., Hu, Y.: A Research on the Knowledge Representation for Discrete Dynamic Programming Model and Its IBFS Algorithm. Journal of Harbin Institute of Technology 28(3), 119–126 (1996)Google Scholar
- 25.U.S. Department of the Interior, Bureau of Reclamation Upper Colorado Region. Quality of water Colorado River Basin Progress Report No.22. U.S. Department of the Interior website (2005), http://www.usbr.gov/uc/progact/salinity/pdfs/PR22.pdf (accessed June 8, 2008)
- 26.Yan, L., Chen, J., Zhou, F., et al.: Long term strategy of supplement and substitute for conventional oil in China. Advanced Technology of Electrical Engineering and Energy 25(4), 1–7 (2006)Google Scholar