Effects of technological progress and external costs on upstream petroleum supply

Abstract

As the increase in world energy consumption over the coming decades will occur predominantly in Asia, the region will be influential in determining the role and combination of oil and gas in the world's energy mix. To assess physical and economic availability of these resources, supply curves are estimated in this study by distributing volumetric quantities across production cost categories. The supply figures show how Asian oil and gas resources, both conventional and unconventional, vary with costs over time. The role of exogenous technological advancement until the year 2035 is included, as are the external (environmental) costs of production. On an axis showing quantities, the curves include resources estimated with a size-distribution method. The findings suggest that oil and gas in Asia is abundant and economically feasible to produce, with costs potentially decreasing in the future as technology progresses. Given appropriate public policies, gas in particular may experience rising market share in the energy mix and aid in the transition towards a low carbon economy.