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Efforts and Efficiency in Oil Exploration: A Vector Error-Correction Approach

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  • Klaus Mohn

Abstract

High oil prices and gradual resource depletion have raised global concerns for security of energy supply. Successful exploration activity is a critical factor for future oil production. Based on standard neoclassical producer behavior and modern time series econometrics, this study reveals new insights into the process of oil and gas exploration. I find that reserve additions are enhanced by an increase in the oil price, due to responses both in effort and efficiency of exploration. Moreover, oil companies accept higher exploration risk in response to an oil price increase, implying lower success rates and higher expected discovery size.

Suggested Citation

  • Klaus Mohn, 2008. "Efforts and Efficiency in Oil Exploration: A Vector Error-Correction Approach," The Energy Journal, , vol. 29(4), pages 53-78, October.
    • Handle: RePEc:sae:enejou:v:29:y:2008:i:4:p:53-78
    DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-3
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