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Fiscal Systems Comparison World Fiscal Systems f or Oil & Gas Presentation for ESNA Edmonton Barry Rodgers October 30 th , 2012 Rodgers Oil & Gas Consulting Edmonton, Alberta, Canada www.bgrodgers.com // [email protected] // (780) 634 - 3405 // Cell: (780) 905 - 3622

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Page 1: Fiscal comparison

Fiscal Systems Comparison

World Fiscal Systems

for Oil & Gas

Presentation for ESNA

Edmonton

Barry Rodgers

October 30th , 2012

Rodgers Oil & Gas Consulting

Edmonton, Alberta, Canada

www.bgrodgers.com // [email protected] // (780) 634 - 3405 // Cell: (780) 905 - 3622

Page 2: Fiscal comparison

WFSOG Scope – 6 Volumes• North America

– Wells: Vt & Hz

• World - Fields

– Deep Water

– Arctic

– Shallow Water

– Onshore

• Conventional

• Unconventional

– Oil Sands

– Shale Oil

– Shale Gas

– CBM

1

Page 3: Fiscal comparison

1. Report Fiscal Changes & Trends

2. Compare Government Shares

3. Identify Fiscal Best Practices

WFSOG - Objectives

2

Page 4: Fiscal comparison

WFSOG – Intention …1. TO ASSIST PRODUCERS AND INVESTORS IN IDENTIFYING

THE FISCAL COSTS OF DOING BUSINESS AROUND THE WORLD;

2. TO HELP GOVERNMENTS IN:

A. DETERMINING THE GOVERNMENT SHARE and,

B. IDENTIFYING FISCAL PRACTICES THAT WORK BEST IN ACHIEVING VARIOUS POLICY OBJECTIVES; and,

3. TO SUPPORT NEGOTIATORS AS THEY WORK TO BRING HOST GOVERNMENTS AND INVESTORS TOGETHER TO DEVELOP THE ENERGY SUPPLIES THAT WE ALL NEED.

4. TO PROMOTE FISCAL SYSTEM RESEARCH

3

Page 5: Fiscal comparison

Major Fiscal Trends

Fiscal Environment:1. Increased Diversity and Complexity2. Special Terms for Unconventional Resources3. Special Terms for Gas Resources4. Haves and Have-Nots - Wider Range

Fiscal Design:1. Lack of Risk Appreciation2. Absence of Re-Investment Incentives3. “Mismatch” - Fiscal Terms vs Policy & Resources

4

Page 6: Fiscal comparison

FISCAL ENVIRONMENT

Page 7: Fiscal comparison

Diversity & Complexity

6

• The Canadian province of British Columbia has 17 different sets of fiscal terms for various classes of oil and gas.

• Internationally, there are:

• 28 Royalty Types, Scales, or Formulas

• 20 R-Factors

• 35 Profit Oil/Cost Structures

• 12 Price-Sensitive Windfall Profit Features

• 31 Forms of State Participation

Page 8: Fiscal comparison

Unconventional Development

Oil Sands– Strong SAGD Economics– No Longer the High Cost Producer

Shale Oil– North America - Cost Advantage

Shale Gas– North America - Cost Advantage and

Price Disadvantage– International - Price and GT Advantage

Oil Shale– Some Possibilities Emerging!!

7

Page 9: Fiscal comparison

Special Terms for Gas

8

60 Jurisdictions have Special Terms for Gas

Argentina Egypt Mali Sierra Leone

Australia Ethiopia Morocco South Sudan

Belize France Nicaragua Sudan

Benin Ghana Niger Tanzania

Brunei Guatemala Nigeria Thailand

Cambodia India Oman Trinidad & Tobago

Cameroon Indonesia Pakistan Tunisia

Canada - Alberta Iraq - Kurdistan Papua New Guinea United Kingdom

Canada - British Columbia Kazakhstan Paraguay USA-Arkansas

Canada - Nfld. & Lab. (Proposed) Kyrgyzstan Poland USA-Louisiana

Canada - Nova Scotia Laos Portugal USA-Michigan

Central African Republic Latvia Qatar USA-North Dakota

Chad Liberia Russia Venezuela

China Libya Sao Tome & Principe Vietnam

Colombia Madagascar Saudi Arabia Zambia

Cote de I'voire Malaysia Senegal

Gas-Favourable Fiscal Terms

Jurisdictions with

Page 10: Fiscal comparison

Wider Range:

Distribution of Government Share

9

• 28% of Systems with GT < 50%• 28% of Systems with GT > 75%

0

5

10

15

20

25

GT

< 3

0

GT

< 3

5

GT

< 4

0

GT

< 4

5

GT

< 5

0

GT

< 5

5

GT

< 6

0

GT

< 6

5

GT

< 7

0

GT

< 7

5

GT

< 8

0

GT

< 8

5

GT

< 9

0

GT

> 9

0Nu

mb

er

of

Fisc

al S

yste

ms

Government Share Range

Page 11: Fiscal comparison

The Extremes: Haves vs Have-Nots

10

0% 10% 20% 30% 40% 50%

ITALY-ON(Gen)

MADAGASCAR: ON(Block3104)

LITHUANIA: ON(General)

ZIMBABWE: Modeled Terms

SOUTH AFRICA: ON(Gen)

GERMANY: ON(Gen-MinimumTerms)

CANADA - BRITISH COLUMBIA: 3RD…

SWITZERLAND: ON(Gen-LAT)

BULGARIA- ON(New'10Terms)

PARAGUAY: Hydrocarbon Law…

HUNGARY: (Gen Post '10 Terms)

SPAIN: ON(Gen)

TURKEY: ON(Concession Terms)

IRELAND-ON(Standard Terms)

CZECH REPUBLIC: ON(Gen-LAT)

TAJIKISTAN: Bokhitar PSC

PORTUGAL-ON(Gen)

SLOVAKIA: ON(Gen-LAT)

ROMANIA: ON(Gen)-Domestic

MOLDOVA: General Terms

ISRAEL: ON(Current)

TURKEY: ON(Prop'07)

POLAND: ON(General Terms)

SLOVENIA: Grove Energy Terms

SERBIA: GEN-LAT

Government Share - Lowest 2550% 60% 70% 80% 90% 100%

UAE-ABU DHABI - Concession

RUSSIA: ON(Gen)

VENEZUELA: ON(General Terms)

NIGERIA: ON-Current Terms with…

ANGOLA-ON(Cabinda-…

UKRAINE: ON(General Terms '10)

ARGENTINA-ON-Low-Royalty

TANZANIA-ON('08PSC)

SAUDI ARABIA-ON (Saudi-Kuwait…

QATAR: ON(Negotiated Contract…

LIBYA-Oil: ON-EPSA IV - Example…

OMAN: ON(PSC Terms 2006)

ALGERIA: ON(Zone D)

MALAYSIA: ON (R-Factor)

UZBEKISTAN: PSA Terms

INDONESIA: ON(Round '11 (East…

IRAQ-Kurdistan-Talisman-PSC

MYANMAR: ON(Modeled Terms)

VIETNAM-ON(Regular > 2010)

ECUADOR: AGIP Service Contract…

BRUNEI-PSA(Typical ON Terms)

CROATIA: ON(PSA Terms)

TRINIDAD&TOBAGO: ON-Con. -…

Bolivia-YPFB-Service Contract…

CAMEROON: ON(Typical PSC'05)

Government Share - Highest 25

Page 12: Fiscal comparison

Systems with GT Range 50% - 75%

11

Page 13: Fiscal comparison

World Government Share Summary

12

Page 14: Fiscal comparison

FISCAL DESIGN

Page 15: Fiscal comparison

Lack of Risk Appreciation

14

Most Fiscal Systems Add Risk Contribute to Front End Loading

– Signature Bonuses

– Upfront Fees

– Fixed Royalties & Severance Taxes

– Low Cost Petroleum Limits (PSC’s)

– Slow Depreciation

Also: Very little fiscal recognition of geological

risk and incentives for reinvestment.

Page 16: Fiscal comparison

Lack of Reinvestment Incentives

15

General Lack of Incentives to Encourage Reinvestment.

Increases the Risk of Leakage Increases the Need to Capture the

Economic Rent Directly Increases the Desire to Front-End Load

Page 17: Fiscal comparison

Policy Mismatch - ROR vs GT (SW)

16

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Sou

th A

fric

a-G

en

eral

Un

ite

d K

ingd

om

-(2

01

1Te

rms)

Ire

lan

d-O

ff(S

W)

Bah

ama

s-O

ff(G

en)

Ne

the

rla

nd

s-(M

ine

Act

'10

)

Bu

lga

ria-

SW('

10

Term

s)

Sie

rra

Leo

ne

-Off

(SW

)

Nig

eri

a-SW

:HB

15

9

Ne

w Z

eal

and

-Off

(Ge

n)

Can

ada-

NFL

D&

LAB

Ru

ssia

: C

asp

ian

Sea

Ind

ia-N

ELP

(SW

-R9

<4

00

)

De

nm

ark-

Off

: N

ew

Te

rms

Uru

guay

-Ro

un

d II

(>

25

AP

I)

Gu

yan

a: C

GX

20

11

Un

ite

d S

tate

s-G

OM

<4

00

('0

8)

Ch

ile-C

on

cess

ion

Te

rms

Lib

eri

a-B

lock

14

Mau

rita

nia

-Off

SW(B

lock

1)

Bra

zil-

Ab

ove

Sal

t (<

40

0 m

)

Sen

ega

l-C

on

cess

ion

Te

rms

No

rwa

y

Ch

ina-

Off

SW(T

yp. C

on

trac

t)

Thai

lan

d-S

W (

Gu

lfo

fTh

aila

nd

)

Kaz

aksh

tan

-Off

(Ge

n -

20

11

)

An

gola

-Off

(SW

PSC

-B9

Bid

)

Nig

eri

a-SW

-NN

PC

Par

t

Ve

ne

zue

la-(

Ince

nt

Term

s)

Arg

en

tin

a-O

ff(G

en

)

Un

dis

cou

nte

d G

ove

rnm

en

t Ta

ke (

GT0

)

Inte

rnal

Rat

e o

f R

etu

rn (

IRR

)

IRR (%)

GT0 (%)

Page 18: Fiscal comparison

Key Messages:Fiscal System Design

Many Fiscal Systems Can be Improved by:

1. Reducing Complexity

2. Better Fiscal System Design

3. Recognizing the Environment

17

Page 19: Fiscal comparison

How Alberta Compares- It’s About Government Policy -

Consider

Russia, USA – Louisiana,

the United Kingdom, and Australia

Page 20: Fiscal comparison

Systems with GT Range 50% - 75%

19

Page 21: Fiscal comparison

How Alberta Compares

20

Page 22: Fiscal comparison

Alberta - Observations

• Government Share:– Consistent w

Government Policy to Achieve High Levels of Activity

• Fiscal System– Complex.

– Gas can be More Transparent

21

Challenges:1. Low Netback Prices

Gas & Oil Sands

Excess Supply

USA Domestic Supply

2. Cost Escalation

3. Social License/Environment

Page 23: Fiscal comparison

World Fiscal Map for Oil

22

Page 24: Fiscal comparison

WFSOG - Acknowledgements

• World Fiscal Systems for Oil & Gas – 2012 is published jointly by:

– Van Meurs Corporation

– Rodgers Oil & Gas Consulting

– PFC Energy

The co-producers acknowledge special assistance from Barrows Company and from the Ernst & Young Oil and Gas Centre and Moscow Office.

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