Gas exploration and production at the Dutch continental shelf: an assessment of the 'Depreciation at Will'
AbstractThis report analyses the effects of Depreciation at Will (DAW) on offshore gas production, government budget and employment in the gas industry. The DAW enables firms to accelerate deprecation of investments in platforms and other offshore equipment. The interest advantage due to the postponed payments of taxes raises the profitability of investment projects and, hence, could raise the level of investments. The key question in the debate on the DAW is whether the higher tax base compensates for the interest losses due to postponed tax receipts. The econometric analysis has shown that the DAW increased only the number of development drillings during the period this measure was implemented (1996-2002). A moving long-run average of the oil price has appeared to be a significantly explaining variable behind the level of exploration drillings as well as development drillings. Using the current value of that oil price, 25 dollar per barrel, we find a large number of profitable exploration projects. In the current circumstances, introduction of the DAW will not raise the level of investments in the near future, as several non-financial factors appear to be bottlenecks, such as the duration of licensing procedures. The econometric analysis is also published in A. ten Cate en M. Mulder, 2007, "Impact of the oil price and fiscal facilities on offshore mining at the Dutch Continental Shelf", Energy Policy , vol 35, pp 5601-5613.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Document with number 66.
Date of creation: Oct 2004
Date of revision:
Find related papers by JEL classification:
- Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-11-07 (Accounting & Auditing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Devereux, Michael P. & Pearson, Mark, 1995. "European tax harmonisation and production efficiency," European Economic Review, Elsevier, vol. 39(9), pages 1657-1681, December.
- Joeri Gorter & Ruud de Mooij, 2001. "Capital income taxation in Europe; trends and trade-offs," CPB Special Publication 30, CPB Netherlands Bureau for Economic Policy Analysis.
- Favero, Carlo A & Pesaran, M Hashem & Sharma, Sunil, 1994. "A Duration Model of Irreversible Oil Investment: Theory and Empirical Evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(S), pages S95-112, Suppl. De.
- Baldwin, Richard E. & Krugman, Paul, 2004.
"Agglomeration, integration and tax harmonisation,"
European Economic Review,
Elsevier, vol. 48(1), pages 1-23, February.
- Richard E. Baldwin & Paul Krugman, 2002. "Agglomeration, Integration and Tax Harmonization," NBER Working Papers 9290, National Bureau of Economic Research, Inc.
- Baldwin, Richard & Krugman, Paul, 2000. "Agglomeration, Integration and Tax Harmonization," CEPR Discussion Papers 2630, C.E.P.R. Discussion Papers.
- Richard Baldwin; Paul Krugman, 2001. "Agglomeration, Integration and Tax Harmonization," IHEID Working Papers 01-2001, Economics Section, The Graduate Institute of International Studies.
- Kind, H.J. & Knarvik, K.H.M. & Schjelderup, G., 1999.
"Competing for Capital in a "Lumpy" World,"
7/99, Norwegian School of Economics and Business Administration-.
- Hans Jarle Kind & Helene Midelfart & Guttorm Schjelderup, 2000. "Competing for Capital in a "Lumpy" World," CESifo Working Paper Series 252, CESifo Group Munich.
- Kind, Hans Jarle & Schjelderup, Guttorm & Ulltveit-Moe, Karen-Helene, 1999. "Competing for Capital in a 'Lumpy' World," CEPR Discussion Papers 2188, C.E.P.R. Discussion Papers.
- Favero, Carlo A, 1992. "Taxation and the Optimization of Oil Exploration and Production: The UK Continental Shelf," Oxford Economic Papers, Oxford University Press, vol. 44(2), pages 187-208, April.
- M. Hashem Pesaran, 1988.
"An Econometric Analysis of Exploration and Extraction of Oil in the U.K. Continental Shelf,"
UCLA Economics Working Papers
471, UCLA Department of Economics.
- Pesaran, M Hashem, 1990. "An Econometric Analysis of Exploration and Extraction of Oil in the U.K. Continental Shelf," Economic Journal, Royal Economic Society, vol. 100(401), pages 367-90, June.
- Edward W. Erickson & Robert M. Spann, 1971. "Supply Response in a Regulated Industry: The Case of Natural Gas," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 94-121, Spring.
- John A. Neri, 1977. "An Evaluation of Two Alternative Supply Models of Natural Gas," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 289-302, Spring.
- Favero, C.A. & Pesaran, M.H., 1992.
"Oil Investment in the North Sea,"
Cambridge Working Papers in Economics
9204, Faculty of Economics, University of Cambridge.
- J. Daniel Khazzoom, 1971. "The FPC Staff's Econometric Model of Natural Gas Supply in the United States," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 51-93, Spring.
- Ruud de Mooij & S. Ederveen, 2001.
"Taxation and foreign direct investment; a synthesis of empirical research,"
CPB Discussion Paper
3, CPB Netherlands Bureau for Economic Policy Analysis.
- de Mooij, Ruud A & Ederveen, Sjef, 2003. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," International Tax and Public Finance, Springer, vol. 10(6), pages 673-93, November.
- Ruud A. de Mooij & Sjef Ederveen, 2001. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," CESifo Working Paper Series 588, CESifo Group Munich.
- Sinn, Hans-Werner, 1991. "Share repurchases, the 'new' view, and the cost of capital," Economics Letters, Elsevier, vol. 36(2), pages 187-190, June.
- Paul W. MacAvoy & Robert S. Pindyck, 1973.
"Alternative Regulatory Policies for Dealing with the Natural Gas Shortage,"
Bell Journal of Economics,
The RAND Corporation, vol. 4(2), pages 454-498, Autumn.
- MacAvoy, Paul W. & Pindyck, Robert S., 1973. "Alternative regulatory policies for dealing with the natural gas shortage," Working papers 659-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Robert S. Pindyck, 1974. "The Regulatory Implications of Three Alternative Econometric Supply Models of Natural Gas," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 633-645, Autumn.
- Kemp, A. G. & Kasim, A. S., 2003. "Forecasting activity levels in the UK continental shelf: the role of perceptions," Energy Economics, Elsevier, vol. 25(6), pages 713-739, November.
- Alan J. Auerbach, 1980.
"Wealth Maximization and the Cost of Capital,"
NBER Working Papers
0254, National Bureau of Economic Research, Inc.
- Walls, Margaret A., 1992. "Modeling and forecasting the supply of oil and gas : A survey of existing approaches," Resources and Energy, Elsevier, vol. 14(3), pages 287-309, September.
- 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.
- Griffith, R & Chennells, C, 1997. "Taxing Profits in a Changing World," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Cox, James C & Wright, Arthur W, 1976. "The Determinants of Investment in Petroleum Reserves and Their Implications for Public Policy," American Economic Review, American Economic Association, vol. 66(1), pages 153-67, March.
- Lars Lindholt, 2008. "Maximizing the discounted tax revenue in a mature oil province," Discussion Papers 544, Research Department of Statistics Norway.
- Machiel Mulder & Gijsbert Zwart, 2006. "Government involvement in liberalised gas markets; a welfare-economic analysis of Dutch gas-depletion policy," CPB Document 110, CPB Netherlands Bureau for Economic Policy Analysis.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.