Oil and Gas Investment and Profitability Projections. Final Report

摘要

The Capital Formation submodel of the mid-term Oil and Gas Supply Modeling System (MOGSMS) is designed to provide the supply models with period-by-period adjustments in the domestic petroleum industry's cost of capital which might have an effect on the quantity of investment that the supply models would otherwise choose to undertake. This feature adds to the soundness of the economic foundations of the supply modeling system by making the industry's prospective investments in domestic oil and gas exploration and development reflect accurately the costs of capital, the costs of capital structure adjustments, and the opportunity cost of using these funds elsewhere in the economy. The submodel provides these period-by-period adjustments in captial costs by measuring the effects on industry capital structure of the quantities and timing of investments implied by the price and resourse related calculations of the drilling profile submodel of MOGSMS. The effect of these adjustments in capital structure is to alter the industry's respective costs of equity and debt, which can then be combined into an updated cost of capital. This new measure, which reflects investment and capital formation history up to each year in the forecast period, is sent back to the supply models to be used as the relevant discount rate for the next year's price- and resource-related calculations of exploration and development activity. (ERA citation 11:031406)