Investment behaviour in the international oil and gas industry : essays in empirical petroleum

economics

Original version

Investment behaviour in the international oil and gas industry : essays in empirical petroleum
economics by Klaus Mohn, Stavanger : University of Stavanger, 2008 (PhD thesis UiS, no. 51)

Abstract

High growth and welfare aspirations will require massive energy investment

in the years ahead of us, especially in the non-OECD area. With more than 60

per cent of primary energy supply, oil and natural gas play a dominant role in

today’s global energy market. Even with high ambitions to contain

greenhouse gas emissions and arrest global warming, petroleum is likely to

remain an important source of energy in a 20-year perspective. A good

understanding of the investment process among oil and gas companies is

important to grasp the full picture of oil and gas supply. Insights from oil and

gas investment studies may translate into policies to improve the security of

energy supply, to promote energy efficiency and economic growth, and to pull

people out of poverty through the extension of affordable energy.

In petro-states like Norway, oil and gas investments play an important role for

macroeconomic fluctuations in the short to medium term. A proper

understanding of investment behaviour in the oil and gas industry is therefore

useful for economists, market analysts, policy-makers, and everyone who

takes an interest in economic and financial market fluctuations. Moreover,

strategies for resource management become important for any country rich in

petroleum resources. In this context, the links between exploration, reserve

accumulation, field development and production become important both to

corporate strategists and to policy-makers.

Profit maximisation is the key behavioural assumption for international oil

and gas companies, as for most other industries. However, some features are

specific to oil and gas production. The reserve concept is unique to nonrenewable

resource industries, and so is exploration activity. High capital

intensity, imperfect competition, and extensive political attention are some

other distinguishing characteristics. Industry-specific methods and tailored

analyses are therefore required. Combining industry-specific theories of

investment behaviour with the best statistical methods available, this thesis

adds new empirical insights on issues of capital formation and interaction

between companies and markets in the international oil and gas industry.