SHARE-OWNERSHIP DISTRIBUTION AND EXTRACTION RATE OF PETROLEUM IN OIL FIELDS

Abstract

We investigate the role of ownership distribution in determining the extraction rates of oil fields. We formulate an empirical equation where the percentage stake of the largest licensee and the percentage share held by the largest shareholder in the dominant company enter as dependent variables. Our sample consists of 44 oil fields in UK Continental Shelf over the period 1997-2001. We employ both fixed-effects and random-effects panel data models. The main results show that the share ownership of the largest licensee and the largest shareholder of its multinational company both have a positive and significant effect on the extraction rate. Moreover, we confirm the role of typical control variables: pay thickness has negative impact on the extraction rate, while remaining reserves are positively correlated with extraction rate. The sensitivity analysis shows that our results are robust to alterative sample selections and model specifications.