BONUS PAID 

 $M 



OIL 



MILLION BARRELS 

 PER DAY 



120 



100 



80 



60 



40 



20 



BONUS 



OIL, GAS, AND CONDENSATE 

 PRODUCTION IN EQUIVALENT 

 BARRELS OF OIL 



100 



80 



60 



40 



20 



THIRTEEN INDIVIDUAL COMPANIES 



Figure 8. Bonus spent 1954, 1955, 1960, and 1962 sales and mid- 1966 production from 

 purchased leases thirteen operators-offshore Louisiana. Source: T.D. Barrow, "Economics 

 of Offshore Development, " in Exploration and Economics of the Petroleum Industry 

 (Houston: Gulf Publishing Co.. 1967). 



wildcat lease sale, historically it has taken the 

 industry over three years to achieve only 10,000 

 barrels per day of production from the successful 

 leases. About 90 per cent of all oil and gas 

 produced from offshore Louisiana in 1965 came 

 from fields discovered prior to 1957. 



There is Uttle doubt that development of 

 petroleum resources in deeper waters and more 

 remote areas wiU require improved technology, 

 larger and more proUfic fields, more attractive 

 economics, or all three in order to justify con- 

 tinued large expenditures. 



Many of the technological advances to date 

 have been developed under cooperative and cost- 

 sharing research plans between oil companies- 

 environmental prediction, welding techniques, 

 foundation design, underwater equipment, joint 

 geophysical surveys, metal corrosion and fatigue. 

 Most of the engineering data required by the 

 industry is obtained in-house. 



Such cooperative efforts appear to be of great 

 value and could be encouraged, without amending 

 the antitrust laws, in order to minimize redundant 



expenditures where they involve basically non- 

 competitive aspects. Moreover, proprietary infor- 

 mation thus obtained is often made available to 

 non-participants subject to a reasonable Ucensing 

 system. Similarly, the smaller producing compa- 

 nies have been able in several instances to com- 

 pete with the larger companies in the high 

 economic framework offshore by joining together 

 in small groups and jointly sharing the risks and 

 capital requirements. 



Present insurance rates for offshore operations 

 and drilling rigs are extremely high, and increasing 

 regularly. It is doubtful that the U.S. and London 

 insurance markets will have the capacity to under- 

 write this kind of risk at a cost which would be 

 commercially feasible. It has been suggested that 

 the petroleum industry consider organizing so- 

 called reciprocal insurers or self-insurance pools to 

 reduce these costs. Such reciprocal insurers are 

 authorized by existing state insurance laws and do 

 not violate antitrust laws if boycotts and coercion 

 practices are avoided. Such insurance arrangements 

 could in the future reduce this major expense in 

 offshore operations. 



VII-210 



