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Mr. James L. Smith

, even a modest rise in oil price could effect a substantial increase in IOC NPV, so delay becomes attractive. Thus, we should be concerned about diligence issues and conflicts mainly in the realm of high-cost, low-margin developments like oil sands, heavy oil, and deepwater or Arctic operations. Figure 7 illustrates the strength of the private incentive to delay development of a high-cost field due to expectations of rising prices. For these calculations, most parameters are kept to previous values, but variable operating cost is increased to $60 per barrel (from