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An Econometric Model of Oil and Gas Exploration Development and Production in the UK Continental Shelf: A Systems Approach

Alexander Kemp and Sola Kasim

Year: 2003
Volume: Volume24
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No2-5
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Abstract:
The petroleum supply process takes place in stages. Decisions at any stage are based on information obtained at the preceding stage. The present paper develops an econometric model incorporating the feedback structure of the process. The model framework consists of a system of simultaneous equations. Using UKCS data the model was estimated, tested for stability and predictive power, and used to conduct a structural analysis, investigating the effects of market conditions on activity levels in a mature hydrocarbon province. The results provide useful insights into the feedback nature of the petroleum supply process and the importance of market conditions to continued activity levels in a mature province.



Petroleum Taxation Contingent on Counter-Factual Investment Behaviour

Petter Osmundsen, Magne Emhjellen, Thore Johnsen, Alexander Kemp and Christian Riis

Year: 2015
Volume: Volume 36
Number: Adelman Special Issue
DOI: 10.5547/01956574.36.SI1.posm
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Abstract:
Petroleum administration can be regarded as a principal-agent problem. The government allocates exploration and production rights to petroleum companies on behalf of the population. The government is the principal and the companies are agents. With the aim of capturing revenue for the state, the government devises a petroleum tax system which takes account of the investment decisions made by the companies, while acknowledging for the fact that the companies may report strategically to the government. An important issue is how tax deductions are to be treated in investment analysis. A discrepancy arises here between assumptions made in some areas of tax theory and the actual investment analyses conducted by the companies. Tax theory has given rise to discussion and controversial tax proposals for the petroleum sector in Norway, Denmark and Australia. It led, for example, to reductions in tax-related depreciation for the Norwegian petroleum industry in May 2013. The article reviews this tax debate and analyses the implications of basing tax design on counter-factual investment behaviour.





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