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The extent to which future United States demand for natural gas is satisfied by imports of LNG is contingent on the adequacy and cost competitiveness of North American supplies. One of the cheaper and more important sources of natural gas supply is accounted for by reserve appreciation, i.e., reserve growth, in known fields. Based on an extensively applied methodology developed by Arrington (1960), the increase in proved ultimate recovery is presumed to increase at a diminishing rate with the age of the field. In this paper, a single equation model of natural gas reserve growth in the Gulf of Mexico is developed and estimated. The results strongly suggest that the annual growth rate in the reserves of afield is significantly affected by initial discovery size, price, water depth, and unobserved field-specific effects. Hence, estimating oil and gas reserve growth using an Arrington based approach may underestimate the response of reserve growth to changes in economic fundamentals. [ABSTRACT FROM AUTHOR]

Over the last 20 years, the offshore exploratory success rate has more than doubled for a group of large producers which includes Exxon, Shell, Mobil, and Texaco, according to the U.S. Energy Information Administration (EIA). It is tempting to conclude that this increase can be attributed to the many advances in seismic and drilling technologies that have occurred over the same period. However, such a conclusion may be premature given that much of the increase in the success rate occurred in the late 1970s and early 1980s, well before the major advancements in seismic technology. The conclusion may also be premature in that it ignores the relationship between price and the success rate. Increases in the price may positively (negatively) affect the success rate. Given this, and the decline in price over the past decade, one would expect the success rate to have declined (increased) in the absence of technological change. This paper develops an econometric model that attempts to disentangle and quantify the effects of the major factors hypothesized to affect the offshore exploratory success rate. The analysis relies on company level data from the EIA's Financial Reporting System over the period 1978 through 1995. [ABSTRACT FROM AUTHOR]