Time, iron, and technology are the key words for economics of offshore exploration and production.

Timing for opportunities (lease sales) has an important bearing on overall economics both for individual operators as well as the industry. Real time means money in view of significant investments made in the early part of exploration and production cycle. When present value profit is employed as an economic criterion, environmental, operational, and political delays, and the time value of money, become most critical.

Sheer tonnage of steel for platforms, facilities, support activities, etc. is a considerable item in addition to the cost of fabrication and engineering required. Platform costs in the Gulf of Mexico go up at the rate of roughly $1 million for each 100 ft of water depth. Cook Inlet platforms cost approximately eight times those for comparable water depths in the Gulf. Cash flow for model cases in the Gulf of Mexico shows the importance of time as related to the heavy development capital outlays and allowable production rates.

Technological capabilities are not a serious limiting factor in offshore operations, even including underwater facilities in continental shelf depths. The industry does not lack for unique and novel concepts of underwater operations, and engineering science will solve the problems if appropriate incentives exist.

Geological interpretation and economic incentives are perhaps the more serious limiting aspects. Better predictability and interpretation of geologic structures and reservoir conditions are desirable prerequisites for recognition of the large investments characteristic of offshore operations. The Department of Interior's recent publication, U.S. Petroleum Through 1980 recognized that "^hellip cost is the key to future petroleum availability."

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