We examine the impact of technological change on oil and gas exploration in the Gulf of Mexico from 1947 to 1998, using a unique micro-data set. An index variable for technological change is constructed to capture both the number and significance of technological innovations in the offshore industry over the study period. Empirical models of exploration-discovery and of drilling cost are used to assess the effect of technological change at both the field level and the regional level. Our results indicate that technological change played a very significant role in the offshore industry over the past 50 years, increasing reserves and lowering cost. Although depletion effect was dominant over the first two decades, the effect of technological change was able to offset that of resource depletion over the entire 50-year study period. (C) 2003 Elsevier Ltd. All rights reserved.