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Drilling speed—the relevance of experience

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Author Info

  • Osmundsen, Petter
  • Roll, Kristin Helen
  • Tveteras, Ragnar

Abstract

Drilling expenses have increased sharply in recent years. The productivity of drilling operations – in terms of meters drilled per day – significantly influences exploration costs. Hence it is important to understand the factors that determine drilling productivity. In this study we analyze the effect of different types of experience or learning on offshore drilling productivity. The econometric analysis employs a large data set on exploration wells from the Norwegian Continental Shelf, covering most of its 45year drilling history. Many other industries have a steep learning curve. A central question here is if learning effects also contribute to increased productivity in petroleum exploration drilling. Furthermore, to what extent do diseconomies associated with reservoir depletion effects and limited acreage counteract learning effects on productivity?

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 3 ()
Pages: 786-794

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Handle: RePEc:eee:eneeco:v:34:y:2012:i:3:p:786-794

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Learning effects; Drilling; Productivity;

References

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  1. Osmundsen, Petter & Sørenes, Terje & Toft, Anders, 2008. "Drilling contracts and incentives," Energy Policy, Elsevier, vol. 36(8), pages 3128-3134, August.
  2. Iledare, Omowumi O. & Pulsipher, Allan G., 2007. "Joint bidding restriction policy for selective E&P firms in the US Gulf of Mexico OCS: How persuasive is its effectiveness?," Energy Policy, Elsevier, vol. 35(6), pages 3126-3133, June.
  3. Asafu-Adjaye, J. & Mahadevan, R., 2003. "How cost efficient are Australia's mining industries?," Energy Economics, Elsevier, vol. 25(4), pages 315-329, July.
  4. Iledare, Omowumi O. & Pulsipher, Allan G., 1999. "Sources of change in petroleum drilling productivity in onshore Louisiana in the US, 1977-1994," Energy Economics, Elsevier, vol. 21(3), pages 261-271, June.
  5. Klaus Mohn, 2008. "Efforts and Efficiency in Oil Exploration: A Vector Error-Correction Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 53-78.
  6. Ryan Kellogg, 2009. "Learning by Drilling: Inter-Firm Learning and Relationship Persistence in the Texas Oilpatch," NBER Working Papers 15060, National Bureau of Economic Research, Inc.
  7. Stoker, Thomas M. & Berndt, Ernst R. & Denny Ellerman, A. & Schennach, Susanne M., 2005. "Panel data analysis of U.S. coal productivity," Journal of Econometrics, Elsevier, vol. 127(2), pages 131-164, August.
  8. Xunpeng Shi & R. Grafton, 2010. "Efficiency impacts of the Chinese industrial transition: a quantitative evaluation of reforms in the coal industry," Economic Change and Restructuring, Springer, vol. 43(1), pages 1-19, February.
  9. Osmundsen, Petter & Toft, Anders & Agnar Dragvik, Kjell, 2006. "Design of drilling contracts--Economic incentives and safety issues," Energy Policy, Elsevier, vol. 34(15), pages 2324-2329, October.
  10. Richard L. Farnsworth & Richard B. Norgaard, 1976. ""Technical Change and Petroleum Drilling Costs": Comment," Land Economics, University of Wisconsin Press, vol. 52(1), pages 103-108.
  11. Petter Osmundsen, 1998. "Dynamic Taxation of Non-renewable Natural Resources Under Asymmetric Information About Reserves," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 933-951, November.
  12. Managi, Shunsuke & Opaluch, James J. & Jin, Di & Grigalunas, Thomas A., 2006. "Stochastic frontier analysis of total factor productivity in the offshore oil and gas industry," Ecological Economics, Elsevier, vol. 60(1), pages 204-215, November.
  13. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
  14. Managi, Shunsuke & Opaluch, James J. & Jin, Di & Grigalunas, Thomas A., 2005. "Technological change and petroleum exploration in the Gulf of Mexico," Energy Policy, Elsevier, vol. 33(5), pages 619-632, March.
  15. Alexander Kemp & Sola Kasim, 2006. "A Regional Model Of Oil And Gas Exploration In The Ukcs," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 198-221, 05.
  16. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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Citations

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Cited by:
  1. Asche, Frank & Dahl, Roy Endre & Oglend, Atle, 2013. "Value-at-Risk: Risk assessment for the portfolio of oil and gas producers," UiS Working Papers in Economics and Finance 2013/3, University of Stavanger.
  2. Petter Osmundsen & Knut Einar Rosendahl & Terje Skjerpen, 2013. "Understanding Rig Rates," CESifo Working Paper Series 4532, CESifo Group Munich.
  3. Lars Lindholt, 2013. "The tug-of-war between resource depletion and technological change in the global oil industry 1981 - 2009," Discussion Papers 732, Research Department of Statistics Norway.
  4. Osmundsen, Petter & Roll, Kristin Helen, 2013. "Concave Drilling Curves," UiS Working Papers in Economics and Finance 2013/1, University of Stavanger.

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