Exploration Incentives?

I received a comment from a consultant to exploration companies stating that I did not mention that our oil supply could be increased by greater exploration and that tax incentives should be used as a means to encourage increased exploration.  He indicated that exploration had decreased due to exploitation by the major oil companies.  They have done this by purchasing existing reserves and consolidation, thus controlling exploration of reserves.

The majors certainly have reduced their exploration budgets considerably, presumably because they have better uses for their money.  The independents are exploring at a record pace as indicated by the number of oil rigs in use.  Whether the majors are waiting for sustained price increases to do increased exploration or whether they believe their are few opportunities for exploration is beyond my knowledge.  The political uncertainty in Venezuela, Russia and in the Caspian Sea area may create risks greater than the majors are willing to take.  I don't think government incentives are likely and thus I believe we must let market forces resolve this issue.

Comments

[Jigar Shah]

Exploration Incentives don't work any more. It causes people to drill holes and waste money without any risk. There should be risk when investing in high rate of return projects.

With higher oil prices, Billions of dollars are sucked out of the US economy. We desperately need an insurance money and incentives for more drilling won't do it. We need to reduce oil usage drastically. Hybrid vehciles and Ethanol are a start. Plug-in hybrids would be better.

THey funny thing is that it is not hard. We just need to make a choice. The $8B in the hOuse energy bill is so much money it is ridiculous to think about. $8B could pay to upgrade all of us to Hybrid in the next 3 years.