The concept of fiGovernment Takefl is often used to compare International Exploration and Production (E&P) fiscal regimes for potential investments in oil and gas projects. fiGovernment Takefl is commonly defined as the percentage of all payments to Governments, over the life of a project, as a portion of the cash flows that remain after all project capital investment and operating costs have been paid. Examples of payments to Governments are: income taxes, royalties, profit petroleum share, bonus payments, value-added taxes, excise taxes, excess profits taxes, remittance taxes, state oil company carries, import duties, etc.

Virtually all Oil and Gas Companies use discounted cash flow analysis in project decision making. Likewise, when utilizing the concept of fi Government Take fi in comparing projects in different fiscal regimes, it is important to consider the opportunity cost of capital as it applies to the payments made to Governments, as well as the project™s revenues and costs. Since the timing of payments to Governments can vary widely depending on the structure of fiscal regimes, it is important to include the effect of this timing in the calculation of fiContractor Takefl. Payments to Governments can occur at the front end of a project (i.e. front-end loaded); for example-signature bonuses, import duties or value-added taxes, or they can occur later in a project™s life, such as is usually the case with profit Œ based taxes. If this variability of timing of the payments to Governments is not considered, two identical projects which are in different fiscal regimes may have identical Government Takes over the life of the projects, and yet the present values of those payments, discounted at an appropriate opportunity cost-of-capital, may be very different.

In order to avoid these potential distortions in comparison, it is suggested to utilize the concept of fiDiscounted Government Takefl to compare different international E&P fiscal regimes.

This paper will illustrate the utility of this concept by comparing the economics of several generic E&P projects in different International Oil and Gas E&P fiscal regimes based on fiGovernment Takefl and fiDiscounted Government Takefl. It will be shown that there can be significant differences between fi Discounted Government Takefl and fiGovernment Takefl, and that as a result, the relative attractiveness of countries™ fiscal regimes can be quite different when ranked based on using the more economically sound fi Discounted Government Takefl than when comparison is made on fi Government Takefl.

In addition, it will be shown that the difference between Government Take and Discounted Government Take can be used to measure the degree of front-end loading of Government Take.

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