Oil leasing policies for the Outer Continental Shelf: some exploration and production implications

Thesis/Dissertation · Sun Jan 01 04:00:00 EST 1984

OSTI ID:5448928

Klan, M S

The US Department of the Interior manages the leasing of offshore tracts in the OCS for oil and gas exploration and production. Tracts are leased by conducting a sealed-bid auction. Most previous economic analysis focused on the relation between auction structure and the initial cash bonus paid for each tract. This study examines the impact of auction structure on ultimate exploration and production of oil, where oil is explicitly treated as an exhaustible nonrenewable resource. Two specific policy issues are analyzed. The first is the impact of a profit-tax and royalty on optimal extraction. A fully dynamic theoretical model is developed to capture some of the special features of oil extraction from the firm's viewpoint. The model is solved using techniques taken from calculus of variations and differential equations. A tax on pure economic profit is verified to have no effect on production. A royalty, however, does alter the optimal production path, generally reducing output at any given time. The second policy topic investigated is the effect of joint bidding on offshore exploration. Early analysis of the effect of joint bidding on direct auction revenues led the Government to adopt a joint bidding ban among the eight major oil companies. Joint bidding in general, and the bidding ban in particular, are shown in this study to have an effect on exploration, and thus on production.

• Research Organization: Texas Univ., Austin (USA)
• OSTI ID: 5448928
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700 -- Petroleum-- Economics
Industrial
& Business Aspects
03 NATURAL GAS
030600 -- Natural Gas-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002* -- Energy Planning & Policy-- Petroleum
294003 -- Energy Planning & Policy-- Natural Gas
BIDS
CONTINENTAL MARGIN
CONTINENTAL SHELF
EXPLORATION
FINANCIAL INCENTIVES
GEOLOGIC DEPOSITS
LEASING
MINERAL RESOURCES
NATURAL GAS DEPOSITS
OFFSHORE SITES
PETROLEUM DEPOSITS
PRODUCTION
RESOURCE DEVELOPMENT
RESOURCES