Estimating Optimum Crude Oil Production and the Annual Needed Investment for Iran on the Horizon Of Twenty Years

Document Type : Original Article

Authors

1 Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University

2 M.A. in Economics

Abstract

In this study, optimal daily production of Iran's crude oil and its annual required investment is calculated. To this aims, according to Kan-Taker Theorem and by applying non-linear programming, the present value of future profits from oil exporting is maximized in a twenty-year cycle. To compute the profit, revenue and cost functions are presented and used. The cost function is non-linear and exponential subject to exploration rate and stock level remaining of the reserve. The function is increasing to the exploration rate and decreasing to the stock level. For the future revenue of oil prices, the researchers considered three different scenarios, and the model is appropriate for all the three. Final results show that the current production rate is below the optimal rate. The profit maximizing daily rate of production is a little above five million barrels for the current prices, and the investment needed to reach this level is thirty billion dollars a year during the primary years.

Keywords

References

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Journal of Economics and Modelling
Volume 2, 5-6
September 2011
Pages 1-37

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