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Predicting the Discoveries and Finding Costs of Natural Gas: the Example of the Scotian Shelf

M. Power and J. D. Fuller

Year: 1991
Volume: Volume 12
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No3-6
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Abstract:
Predicting the discovery rate and marginal finding costs of natural gas resources requires a well-documented and long statistical history. For partially explored basins, the statistical history is often inadequate. Attempts at avoiding the problem have been made using probabilistic modelling approaches. These are used to estimate the parent population of pools available for discovery and the probable discovery rate. The phenomenon of economic truncation, however, calls into question the precision and utility of such estimates. Furthermore, the exploration process is known to be biased toward larger pools, but no method of determining the extent of the bias has been discussed in the literature to date. To avoid these defciencies, this paper employs the pool size distribution estimates routinely produced by geologists to drive a probabilistic modelling framework taking explicit account of the physical laws of resource depletion. The methodology is discussed and applied to Canada's Scotian Shelf. In order to put the predicted costs for the Scotian Shelf in perspective, the results are then compared to forecasts for Alberta.



Resource Depletion and Technical Change: Effects on U.S. Crude Oil Finding Costs from 1977 to 1994

Marie N. Fagan

Year: 1997
Volume: Volume18
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No4-4
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Abstract:
A dramatic decline in U.S. crude oil finding costs has provoked intense interest in the extent to which technical progress has mitigated the effects of resource depletion. Analysis of depletion and technical change using data for 27 large U.S. oil producers from 1977-1994 is conducted using a translog cost function. The translog provides a flexible representation of the underlying production function, and controls for changing factor prices. The model also controls for the effect of prospect highgrading. Results show that an accelerating rate of technical change reduced average finding cost 15 percent (onshore) and 18 percent (offshore) per year by 1994. Resource depletion increased cost at an average annual rate of 7 percent onshore and 12 percent offshore. Technical change was relatively labor-using bothonshore and offshore.



Costs of Aggregate Hydrocarbon Reserve Additions

M.A. Adelman and G. Campbell Watkins

Year: 2004
Volume: Volume 25
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No3-3
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Abstract:
`Oil Equivalence' is widely used to measure total hydrocarbon activity. Natural gas is converted to oil using a fixed factor, usually based on thermal measurement. In turn, expenditures on oil and gas are divided by such `oil equivalence' volumes to define unit costs, especially of reserve additions. This approach lacks economic content. We show its implicit assumptions and constraints, and develop an alternative aggregation method using index numbers, with an example.





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