Economic Optimization of Petroleum Engineering Projects - A Review

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.