Understanding Rig Rates
AbstractWe examine the largest cost component in offshore development projects, drilling rates, which have been high over the last years. To our knowledge, rig rates have not been analysed empirically before in the economic literature. By econometric analysis we examine the effects on Gulf of Mexico rig rates of gas and oil prices, rig capacity utilization, contract length and lead time, and rig specific characteristics. Having access to a unique data set containing contract information, we are able to estimate how contract parameters crucial to the relative bargaining power between rig owners and oil and gas companies affect rig rates. Our econometric framework is a single equation random effects model in which the systematic part of the equation is non-linear in the parameters. The non-linearity is due to representing the effects of gas and oil prices by a CES price aggregate. Such a model belongs to the class of non-linear mixed models which has been heavily utilized within the biological sciences.
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Bibliographic InfoPaper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2012/9.
Length: 34 pages
Date of creation: 08 May 2012
Date of revision:
Rig rates; Oil and gas drilling; Panel data;
Other versions of this item:
- Petter Osmundsen & Knut Einar Rosendahl & Terje Skjerpen, 2013. "Understanding Rig Rates," CESifo Working Paper Series 4532, CESifo Group Munich.
- Petter Osmundsen & Knut Einar Rosendahl & Terje Skjerpen, 2012. "Understanding rig rates," Discussion Papers 696, Research Department of Statistics Norway.
- C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-15 (All new papers)
- NEP-BEC-2012-05-15 (Business Economics)
- NEP-ENE-2012-05-15 (Energy Economics)
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.:
- Guro Børnes Ringlund & Knut Einar Rosendahl & Terje Skjerpen, 2004.
"Does oilrig activity react to oil price changes? An empirical investigation,"
372, Research Department of Statistics Norway.
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"Financial market pressures, tacit collusion and oil price formation,"
UiS Working Papers in Economics and Finance
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- Aune, Finn Roar & Mohn, Klaus & Osmundsen, Petter & Rosendahl, Knut Einar, 2010. "Financial market pressure, tacit collusion and oil price formation," Energy Economics, Elsevier, vol. 32(2), pages 389-398, March.
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