This paper presents a model of new petroleum reserves in the Gulf of Mexico OCS region from 1977 to 1998<SUP>1</SUP>. The model has three distinct components: the effectiveness of drilling at finding reserves (drilling success rate), the effectiveness of successful drilling at adding new petroleum reserves (petroleum productivity rate), and the number of wells drilled to find new reserves (drilling rate). Each component is specified as a function of several competing factors to determine the extent to which each determinant affects reserve additions on the OCS. The model equations are estimated using OCS data on reserves and oil and gas wells drilled from 1977-1998. The empirical results indicate a statistically significant evidence of diminishing returns as drilling increases on the OCS. The estimated elasticities of oil and gas reserves additions with respect to resource depletion are both very elastic. However, the responsiveness of new oil and gas reserves to economic incentives is significantly inelastic for oil and gas reserves. The results show that the average impact of technical change, economic, resource depletion, and prospect highgrading on oil reserve additions is a net gain of about 9.2% per year between 1977 and 1998. However, the net annual average impact of these competing factors on new non-associated gas reserves is a decrease of 3.3 percent per year.

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