Analysis of the profit share as a bid-variable bidding system

Technical Report · Fri Jan 01 04:00:00 EST 1982

OSTI ID:5568630

Burris, A E; Robson, W M

Use of alternative bidding systems for lease sales in the Outer Continental Shelf is mandated by recent changes to the Outer Continental Lands Act. To use these bidding systems it is necessary to assess their impacts on the development and production of hydrocarbons. This report provides the results of a study conducted by the Los Alamos National Laboratory for the US Department of Energy on the profit share as a bid-variable bidding system. This system was compared to the currently used cash bonus/one-sixth-royalty bidding system by using GEN2, a general resource leasing model. The two leasing systems were compared in a variety of situations that include high and low prices as well as different water depths, costs of production, and reservoir sizes. The profit-share bid ranged from 10 to 65 percent and the capital recovery factor ranged from 30 to 90 percent. The evaluation criteria were: social value, expected production, government revenue, percentage development, and lease life. The major conclusions was that the profit share as a bid-variable bidding system is inferior to the cash bonus/one-sixth-royalty system now in use.

• Research Organization: Los Alamos National Lab., NM (USA)
• DOE Contract Number: W-7405-ENG-36
• OSTI ID: 5568630
• Report Number(s): LA-9185-MS; ON: DE82010850
• Country of Publication: United States
• Language: English

Related Subjects

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BIDS
COMPARATIVE EVALUATIONS
CONTINENTAL MARGIN
CONTINENTAL SHELF
ECONOMIC ANALYSIS
ECONOMICS
GEOLOGIC DEPOSITS
LEASING
MINERAL RESOURCES
NATURAL GAS DEPOSITS
PETROLEUM DEPOSITS
RESOURCES