PETROLEUM INDUSTRY REFORM IN NIGERIA: SIMULATION ...

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Government Take Statistic Fifty Percent Certainty Range—Standalone OOILEDARE 24 OOILEDARE USAEE 2010, Calgary, Canada
Conclusions • Ongoing petroleum industry reform legislation in Nigeria has fiscal instruments and terms that enhance government access to gross revenue and still makes E&P operations profitable in Nigeria. • There is a fifty percent likelihood that the legislation will give 78‐79 percent of total profit from a 100 MMB deepwater oil project to the host government. • Justification for this high government take is being tied to high hydrocarbon prospectivity in Nigeria, but undue fiscal burdens may also disenfranchise investors as evident in the sensitivity of IRR to selected decision variables. • If contractors spend low proportion of its expenditures abroad, project profitability, ceteris paribus, tend to increase • Allowing all CAPEX to be expensed in NHT and CITA calculations increases project profitability as expected. • Deep water profitability is higher for existing operators in deepwater than new comers because CITA and NHT are allowed to be consolidated rather than being ringfenced. OOILEDARE USAEE 2010, Calgary, Canada 25
Page 1 and 2: PETROLEUM INDUSTRY REFORM IN NIGERI
Page 3 and 4: Petroleum Industry in Nigeria • N
Page 5 and 6: Broad Objectives of the Reform •
Page 7 and 8: Fiscal System Instruments Nigeria S
Page 9 and 10: Proposed Fiscal Instruments for Nig
Page 11 and 12: Proposed Example Fiscal of Instrume
Page 13 and 14: Modeling Deepwater Economics —DCF
Page 15 and 16: Production Sharing Contract Model D
Page 17 and 18: Incremental Deepwater Project: 100
Page 19 and 20: Sensitivity of Nominal IRR vs. HGT
Page 21 and 22: Sensitivity of Nominal IRR vs. HGT
Page 23: Internal Rate of Return: Fifty Perc

PETROLEUM INDUSTRY REFORM IN NIGERIA: SIMULATION ...

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