Abstract
Fiscal systems used by various governments in the oil and gas industry are integral to the economic analysis of projects. Complete economic models which aid decision making should incorporate the terms of these fiscal systems. The terms vary by country and frequently by the resource location; onshore, offshore or deepwater, and by resource type; gas, oil, conventional, or unconventional. Despite the variability of these specifics, consistencies exist within the main types of contractual structures. Our work has focused on developing these consistencies into a modeling framework addressing royalty and tax regimes, leasing contracts and production sharing agreements with sufficient flexibility to account for system-specific terms, easily, quickly, and with a high degree of customizability.
We describe an approach to modeling fiscal systems implemented with a modular framework based on the 3 main types of resource development contracts. The framework has 5 design goals: 1. decrease modeling time by an order of magnitude, 2. increase model transparency to enable understanding, 3. provide an auditable environment that can easily be used by both modelers and users, 4. make models adaptable to global changes by implementing modules common to all models, 5. make models accessible and extensible by users without significant programming knowledge.
In addition to these design goals, the framework must satisfy the requirements of its ultimate purpose: to support and inform effective decision making in contractual negotiations and reveal with accuracy the economic impact of the controlling fiscal regime. It is designed to simplify constructing the structure of the model, and to be individually customizable to specific terms. This approach has been attempted by a number of companies with some success, and this is the first time of which we are aware that work is being published on the subject.
Fiscal regimes are a key feature of the international petroleum business, and an objective, transparent, and trusted model is integral to quickly generating insight. A good implementation of such a framework can drastically reduce model development time and highlight critical terms for profitable outcomes, freeing stakeholders to focus on decision making and implementation strategies rather than building models.
