This paper examines how the desires of the Nigerian government as expressed in the Petroleum Development policies have acted as incentives or disincentives to further investment in oil field development in the face of uncertain economic environmental conditions and reserve sizes.
An economic analysis package was used in evaluating past and present fiscal and contractual policies. The Net Present Values (NPV) of large, medium and small hypothetic fields were computed for the principal environments of oil exploitation (onshore and offshore) in the Niger Delta. This was done for various policy combinations to determine the sensitivity of the policy based profitability to oil price, production cost, delay in field development and production, operating companies share of profit and discount rates. The results were analysed and the attractiveness of policy packages to new investors were compared and ranked.
It concludes that Government policies have evolved to diminish the profitability of investors from oil exploitation. The present policies would require incentives to attract new investors unless production costs are reduced, oil prices rise and medium to large fields are the most likely to be discovered. New entrants that have to "carry" government operate under the worst policies are not likely to be attracted under existing situations.