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On the Cost of Lost Production from Russian Oil Fields

Abstract:
Russia is now paying heavily for past mismanagement of its major oh, fields. Unconventional attempts to maximize short-run extraction, neglect of routine maintenance, and shortages of critical equipment have combined to cause a steep decline in production. This study examines the scope and size of resulting economic losses using an extension of the traditional exponential decline model. Estimates derived from the model indicate that as much as 40% of the potential value of Russian oil reserves has been lost through poor management.

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Energy Specializations: Petroleum – Exploration and Production; Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation

JEL Codes:
D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Lost oil production, Russia, mismanagement, exponential decline model, oil field rehabilitation

DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No2-2


Published in Volume16, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.