Improving the methodology of investment activities of oil and gas enterprises
DOI:
https://doi.org/10.17762/msea.v71i4.1562Abstract
It is appropriate to begin this White Paper entitled “Investment Decision-Making in the Oil and Gas Supply Sectors” with the quote from Robert S. Pindyck, a well-known economics professor at MIT: “Despite its importance to economic growth and market structure, the investment behavior of firms, industries, and countries remains poorly understood. Economic models have had a limited success in explaining and predicting changes in investment spending”. . . . .(Pindyck, 1991). The above comment by Pindyck is equally true today as it was in 1991, particularly on how “price foresight” is used in making investment decisions in the energy supply sector. Still, observations from over two decades of data on investments in oil, gas and coal supply help provide empirical evidence of how industry investments relate to prices, cash flow and other decision variables, as set forth in this White Paper. PURPOSE The purpose of this White Paper is to provide an independent perspective on how industry makes capital investment decisions in the oil and gas supply sector. As such, this White Paper will address three topics:
