Empirical analysis of competing factors influencing exploration investment in international oil and gas industry: evidence from OPEC countries

This study examines the influence of competing economic, uncertainty, and geological factors in driving the exploration investment of organization of petroleum exporting countries (OPEC) countries. We specify and estimate a fixed-effects model with Driscoll-Kraay standard errors on data for 1980-2011. Our findings show a significant positive influence of oil prices, production, reserves replacement, and the geological potential of petroleum basins. The results also reveal a significant negative influence of resource depletion on exploration expenditure. In terms of impact, the estimated results show a significant elastic response of exploration investment to changes in oil prices and production, suggesting the dominating influence of economic factors on exploration investment behavior. From policy perspectives, the estimated results suggest the desirability of OPEC's market development policies to favour high oil prices to ensure fair returns on exploration investments and justify incremental investments. Similarly, production control policies have the potential to impede exploration investment.