Before deciding whether to invest in an exploration program, companies typically make an economic calculation based on a number of factors:
of the geological risk
of expected production
processing facilities and pipelines
and interest rates
that might be earned by investing elsewhere
The result tells
companies if a geological prospect is worth exploring and how much they can
afford to spend to acquire the mineral rights for a parcel of land.
decide the numbers are too discouraging and shelve the prospect until there is
some change in economic conditions or an improvement in geological knowledge of
the area. They may decide to reduce the risk by asking the company's land
department to find a partner.
Petroleum Communication Foundation. Our Petroleum Challenge: Exploring Canada's Oil and Gas Industry, Sixth Edition. Calgary: Petroleum Communication Foundation, 1999. With permission from the Centre for Energy.