Study on the relationship between oil and gas producing scale and profits

In order to demonstrate the relationship between oil and gas production scale and the overall profit of oil companies, to identify producing limits under different oil price and to provide basis for production and operation decisions, this paper defines variable cost and fixed cost of oil and gas production, and puts forward the cost-profit curve and cumulative-average-cost curve of oil and gas production.Based on these two curves, five producing limits are defined, respectively breakeven production, minimum average cost production, maximum profit production, maximum production with positive profit, and maximum production.Empirical study based on simulation data of different oilfields shows that oilfields can be categorized into three groups according to the relationship between production and profit:profitable oilfields, non-profitable oilfields and low-profit oilfields.