Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2017/16: Creaming - and the depletion of resources: A Bayesian data analysis

Jostein Lillestøl () and Richard Sinding-Larsen ()
Additional contact information
Jostein Lillestøl: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Richard Sinding-Larsen: Dept. of Geoscience and Petroleum, Norwegian University of Science and Technology, Postal: NTNU, Department of Geoscience and Petroleum, 7491 Trondheim, Norway

Abstract: This paper considers sampling in proportion to size from a partly unknown distribution. The applied context is the exploration for undiscovered resources, like oil accumulations in different deposits, where the most promising deposits are likely to be drilled first, based on some geologic size indicators (“creaming”). A Log-normal size model with exponentially decaying creaming factor turns out to have nice analytical features in this context, and fits well available data, as demonstrated in Lillestøl and Sinding-Larsen (2017). This paper is a Bayesian follow-up, which provides posterior parameter densities and predictive densities of future discoveries, in the case of uninformative prior distributions. The theory is applied to the prediction of remaining petroleum accumulations to be found on the mature part of the Norwegian Continental Shelf.

Keywords: Log-normal distribution; sampling proportional to size; resource prediction

JEL-codes: C00; C10; C11; C13

29 pages, November 16, 2017

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