fiscal comparison
TRANSCRIPT
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
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
1. Report Fiscal Changes & Trends
2. Compare Government Shares
3. Identify Fiscal Best Practices
WFSOG - Objectives
2
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
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
FISCAL ENVIRONMENT
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
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
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
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
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
Systems with GT Range 50% - 75%
11
World Government Share Summary
12
FISCAL DESIGN
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.
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
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 (%)
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
How Alberta Compares- It’s About Government Policy -
Consider
Russia, USA – Louisiana,
the United Kingdom, and Australia
Systems with GT Range 50% - 75%
19
How Alberta Compares
20
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
World Fiscal Map for Oil
22
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.
23