IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v29y2008i4p53-78.html
   My bibliography  Save this article

Efforts and Efficiency in Oil Exploration: A Vector Error-Correction Approach

Author

Listed:
  • Klaus Mohn

Abstract

High oil prices and gradual resource depletion have raised global concerns for security of energy supply. Successful exploration activity is a critical factor for future oil production. Based on standard neoclassical producer behavior and modern time series econometrics, this study reveals new insights into the process of oil and gas exploration. I find that reserve additions are enhanced by an increase in the oil price, due to responses both in effort and efficiency of exploration. Moreover, oil companies accept higher exploration risk in response to an oil price increase, implying lower success rates and higher expected discovery size.

Suggested Citation

  • Klaus Mohn, 2008. "Efforts and Efficiency in Oil Exploration: A Vector Error-Correction Approach," The Energy Journal, , vol. 29(4), pages 53-78, October.
    • Handle: RePEc:sae:enejou:v:29:y:2008:i:4:p:53-78
    DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-3
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/ISSN0195-6574-EJ-Vol29-No4-3
    Download Restriction: no
    File URL: https://libkey.io/10.5547/ISSN0195-6574-EJ-Vol29-No4-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Iledare, Omowumi O., 1995. "Simulating the effect of economic and policy incentives on natural gas drilling and gross reserve additions," Resource and Energy Economics, Elsevier, vol. 17(3), pages 261-279, November.
    2. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    3. Alexander Kemp & Sola Kasim, 2003. "An Econometric Model of Oil and Gas Exploration Development and Production in the UK Continental Shelf: A Systems Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 113-141.
    4. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dahl, Roy Endre & Lorentzen, Sindre & Oglend, Atle & Osmundsen, Petter, 2016. "Pro-Cyclical Petroleum Investments and Cost Overruns in Norway by Roy Endré Dahl, Sindre Lorentzen, Atle Oglend, and Petter Osmundsen," UiS Working Papers in Economics and Finance 2016/7, University of Stavanger.
    2. Osmundsen, Petter & Rosendahl, Knut Einar & Skjerpen, Terje, 2012. "Understanding Rig Rates," UiS Working Papers in Economics and Finance 2012/9, University of Stavanger.
    3. Mohn, Klaus, 2016. "Resource revenue management and wealth neutrality in Norway," Energy Policy, Elsevier, vol. 96(C), pages 446-457.
    4. Osmundsen, Petter & Rosendahl, Knut Einar & Skjerpen, Terje, 2015. "Understanding rig rate formation in the Gulf of Mexico," Energy Economics, Elsevier, vol. 49(C), pages 430-439.
    5. Ron Bird & Matthew Grosse & Danny Yeung, 2013. "The market response to exploration, resource and reserve announcements by mining companies: Australian data," Australian Journal of Management, Australian School of Business, vol. 38(2), pages 311-331, August.
    6. Mohn, Klaus, 2009. "Elastic Oil. A primer on the economics of exploration and production," UiS Working Papers in Economics and Finance 2009/10, University of Stavanger.
    7. Osmundsen, Petter & Roll, Kristin Helen & Tveteras, Ragnar, 2012. "Drilling speed—the relevance of experience," Energy Economics, Elsevier, vol. 34(3), pages 786-794.
    8. Güntner, Jochen H.F., 2019. "How do oil producers respond to giant oil field discoveries?," Energy Economics, Elsevier, vol. 80(C), pages 59-74.
    9. Misund, Bard & Mohn, Klaus, 2014. "Exploration Risk in Oil & Gas Shareholder Returns," UiS Working Papers in Economics and Finance 2014/4, University of Stavanger.
    10. Johannes Mauritzen, 2017. "The Effect of Oil Prices on Field Production: Evidence from the Norwegian Continental Shelf," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(1), pages 124-144, February.
    11. Dahl, Roy A & Osmundsen, Petter, 2014. "Estimating fluctuations in oil and gas investment," UiS Working Papers in Economics and Finance 2014/19, University of Stavanger.
    12. Osmundsen, Petter & Roll, Kristin Helen & Tveterås, Ragnar, 2010. "Faster Drilling with Expercience?," UiS Working Papers in Economics and Finance 2010/7, University of Stavanger.
    13. Khalifa, Ahmed & Caporin, Massimiliano & Hammoudeh, Shawkat, 2017. "The relationship between oil prices and rig counts: The importance of lags," Energy Economics, Elsevier, vol. 63(C), pages 213-226.
    14. Pernille Parmer & Steinar Strøm & Helge Sandvig Thorsen & Inger Ubbe & Bjørnar Andreas Kvinge, 2018. "Investments on the Norwegian Continental Shelf - An Empirical Analysis," CESifo Working Paper Series 7370, CESifo.
    15. Skjerpen, Terje & Storrøsten, Halvor Briseid & Rosendahl, Knut Einar & Osmundsen, Petter, 2018. "Modelling and forecasting rig rates on the Norwegian Continental Shelf," Resource and Energy Economics, Elsevier, vol. 53(C), pages 220-239.
    16. Dahl, Roy Endré & Lorentzen, Sindre & Oglend, Atle & Osmundsen, Petter, 2017. "Pro-cyclical petroleum investments and cost overruns in Norway," Energy Policy, Elsevier, vol. 100(C), pages 68-78.
    17. Mohn, Klaus, 2015. "Resource revenue management and wealth neutrality," UiS Working Papers in Economics and Finance 2015/2, University of Stavanger.
    18. Anthony Vashevko, 2019. "Does the Middle Conform or Compete? Quality Thresholds Predict the Locus of Innovation," Organization Science, INFORMS, vol. 30(1), pages 88-108, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Reto Föllmi & Angela Fuest & Philipp an de Meulen & Martin Micheli & Torsten Schmidt & Lina Zwick, 2018. "Openness and productivity of the Swiss economy," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-21, December.
    2. David F. Hendry & Grayham E. Mizon, 2016. "Improving the teaching of econometrics," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1170096-117, December.
    3. Hannu KOSKINEN, 2010. "Modelling of Structural Changes in Demand for Money Cointegration Relations," EcoMod2004 330600082, EcoMod.
    4. André Kallåk Anundsen & Ragnar Nymoen, 2015. "Did US Consumers 'Save for a Rainy Day' Before the Great Recession?," CESifo Working Paper Series 5347, CESifo.
    5. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
    6. David F. Hendry & Katarina Juselius, 2001. "Explaining Cointegration Analysis: Part II," The Energy Journal, , vol. 22(1), pages 75-120, January.
    7. White, Halbert & Pettenuzzo, Davide, 2014. "Granger causality, exogeneity, cointegration, and economic policy analysis," Journal of Econometrics, Elsevier, vol. 178(P2), pages 316-330.
    8. Elmer Sterken, 2004. "Demand for money and shortages in Ethiopia," Applied Economics Letters, Taylor & Francis Journals, vol. 11(12), pages 759-769.
    9. Katarina Juselius, 2011. "On the Role of Theory and Evidence in Macroeconomics," Chapters, in: John B. Davis & D. Wade Hands (ed.), The Elgar Companion to Recent Economic Methodology, chapter 17, Edward Elgar Publishing.
    10. Gómez-Puig, Marta & Sosvilla-Rivero, Simón, 2013. "Granger-causality in peripheral EMU public debt markets: A dynamic approach," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4627-4649.
    11. Ringlund, Guro Bornes & Rosendahl, Knut Einar & Skjerpen, Terje, 2008. "Does oilrig activity react to oil price changes An empirical investigation," Energy Economics, Elsevier, vol. 30(2), pages 371-396, March.
    12. Yersh, Valeryia, 2020. "Current account sustainability and capital mobility in Latin American and Caribbean countries," MPRA Paper 105440, University Library of Munich, Germany.
    13. Tilak Abeysinghe & Gulasekaran Rajaguru, 2004. "Temporal aggregation, causality distortions and a sign rule," Econometric Society 2004 Australasian Meetings 73, Econometric Society.
    14. Jennifer Castle & David Hendry, 2007. "Forecasting UK Inflation: the Roles of Structural Breaks and Time Disaggregation," Economics Series Working Papers 309, University of Oxford, Department of Economics.
    15. Heather Anderson, 1999. "Explanations of an empirical puzzle: what can be learnt from a test of the rational expectations hypothesis?," Journal of Economic Methodology, Taylor & Francis Journals, vol. 6(1), pages 31-59.
    16. Chen, Fan & Linn, Scott C., 2017. "Investment and operating choice: Oil and natural gas futures prices and drilling activity," Energy Economics, Elsevier, vol. 66(C), pages 54-68.
    17. ten Cate, Arie & Mulder, Machiel, 2007. "Impact of the oil price and fiscal facilities on offshore mining at the Dutch Continental Shelf," Energy Policy, Elsevier, vol. 35(11), pages 5601-5613, November.
    18. Luis A. Rivas & José de Jesús Rojas, 2001. "Precios relativos, inflación subyacente y metas de inflación: un análisis para Nicaragua," Monetaria, CEMLA, vol. 0(3), pages 355-380, julio-sep.
    19. Marçal, Emerson Fernandes, 2013. "Exchange rate misalignments, interdependence, crises, and currency wars: an empirical assessment," Textos para discussão 348, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    20. Marta Gómez-Puig & Simón Sosvilla-Rivero, 2014. "EMU sovereign debt market crisis: Fundamentals-based or pure contagion?," Working Papers 14-08, Asociación Española de Economía y Finanzas Internacionales.

    More about this item

    Keywords

    Oil exploration; industrial economics; econometrics; oil companies;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:29:y:2008:i:4:p:53-78. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.