Abstract
Upstream petroleum projects increasingly operate under simultaneous exposure to commodity price uncertainty, carbon cost internalisation, and evolving environmental regulation, requiring a quantitatively robust approach to economic optimisation. This study formulates a value-maximisation framework that integrates petroleum engineering design variables with stochastic energy-economic drivers and emissions constraints. Project revenues and costs are simulated under uncertain oil market conditions and policy-driven carbon pricing pathways, while greenhouse gas emissions are explicitly represented through asset-level emissions intensity coefficients. The optimisation problem is constructed to maximise certainty-equivalent net present value by jointly selecting development scale, production profiles, and investment timing, subject to technical, financial, and emissions-related constraints. Regulatory risk and managerial flexibility are captured using option-based valuation embedded within a Monte Carlo simulation environment. Numerical experiments across alternative carbon price trajectories demonstrate that ignoring emissions costs leads to systematically biased investment decisions and lower risk-adjusted returns. Results indicate that development strategies emphasising operational flexibility and reduced emissions intensity outperform conventional designs under stringent climate policy scenarios. The proposed methodology provides a rigorous quantitative bridge between petroleum engineering optimisation and energy economics, offering decision-relevant insights for capital allocation, regulatory resilience, and sustainable upstream development.
Keywords
Economic Aspect of Petroleum Industry, Optimization Technique, Marketing Decision and Planning in Petroleum Industry, NPV Maximization, IRR Improvement, Field Development Planning, Strategic Formulation in Petroleum Industry, Hedging Strategies for Economics in Petroleum Engineering Projects
Citations
IRE Journals:
Arindam Mukherjee, Shivam Mahto, Akshita Sahay, Doshantak Hingwe, Kingsley Ukuedojor "Economic Optimization of Petroleum Engineering Projects - A Review" Iconic Research And Engineering Journals Volume 9 Issue 7 2026 Page 153-173 https://doi.org/10.64388/IREV9I7-1713291
IEEE:
Arindam Mukherjee, Shivam Mahto, Akshita Sahay, Doshantak Hingwe, Kingsley Ukuedojor
"Economic Optimization of Petroleum Engineering Projects - A Review" Iconic Research And Engineering Journals, 9(7) https://doi.org/10.64388/IREV9I7-1713291
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