Quick Test

Fiscal regimes in petroleum economics

Fiscal regimes in petroleum economics
Fiscal regimes in petroleum economics

Today’s oil and gas investments are highly complex, risky and multidisciplinary ventures that require careful planning and precise implementation. Fundamental to the success of all project management is extensive economic modeling and risk analysis, since a large numbers of interrelated factors and unforeseen events (operational, technical and financial) determine a drilling, completion, or workover project’s economic feasibility and ultimate success.

One of the key factors that is affecting the economic model is the fiscal regimes. Fiscal regimes describes all legislative, taxation policy, contractual and fiscal elements under which operations are conducted in petroleum provinces.

Usually, the primary objective of the host government is to maximize the benefits from the underground resources and sustainable economic growth without necessarily seeking total control of all exploration and production (E&P) terms and conditions, investments, and/or production. One the other hand, investors tend to maximize the shareholder’s profit and therefore tend to view host countries’ fiscal regimes critically on the basis of their financial objective.

Type of contract

Contractor

Host Government

Concession or (R&T)

· Assume all risk.

· Take part in all rewards

· Reward Depends on production and Oil price

Production – Sharing Contract

· Assume Exploratory risk.

· Share reward

· Share in the reward of oil.

· Share in reward from price (taxation)

Joint – Venture

· Share risk in exploration, production, etc.

· Share in reward

· Share in risk of business.

·  Share in the reward

Pure Contract Service

No risk for contact because payment is under contract

· All risk from exploration, production, etc.

· All reward from production, price, etc.

 

 

Check more in the Full: Petroleum Economics Course

By Eng. Amr Hegazy