NATURAL-GAS IN THE US - HOW FAR CAN TECHNOLOGY STRETCH THE RESOURCE BASE

We review the theoretical underpinnings of the exponential model, the amount of gas discovered per unit effort, a quantity called yield-per- effort (YPE), and estimate an econometric model that represents the hi storical determinants of the YPE for nonassociated gas discoveries in the lower 48 states from 1943 to 1991, the entire period for which the requisite data are available. Results indicate the YPE declines as th e exponential function of cumulative drilling when short run changes i n drilling effort, real gas prices, and shifts between onshore and off shore are accounted for. We explicitly test and reject the hypothesis that technological change has arrested or reversed the long run declin e in YPE. We also discuss some alternative models of YPE that misrepre sent the interplay of depletion and technical innovation, as well as t he process of innovation itself, and the statistical and methodologica l shortcomings of the empirical analyses used to support several alter native models of YPE.