Comparative Economic-Performance Analysis of Production-Sharing Contracts in Angola, Equatorial Guinea, Gabon, and Nigeria

Abstract

Summary The petroleum fiscal system (PFS) is a key determinant of investment decision in the exploration and production (E&P) of oil and gas. It describes the relationship among the host governments, the investors, and community stakeholders with respect to how costs are recovered and profits are shared equitably. A comparative economics of the performance of fiscal regimes becomes imperative because it affects stakeholders in making informed decisions on the oil-and-gas business investments worldwide. This paper evaluates the structure, conduct, and performance of production-sharing contracts in Angola, Equatorial Guinea, Gabon, and Nigeria in the Gulf of Guinea (GOG). These countries hold approximately 90% of the GOG proved reserves. Economic analysis of the same E&P phases with hypothetical field and cost data under different PFSs are presented and discussed for comparative PFS performance evaluations. Comparison of the effects of front-loaded government take, profit oil split, and taxation show that production-sharing contract fiscal terms and instruments in Angola, Equatorial Guinea, Gabon, and Nigeria are relatively competitive among these nations. We found that as the risk in deepwater investment increases with water depth, return on investment rises in Nigeria. Monte Carlo simulation process incorporated to account for risk and uncertainties reveals early discounted payout for investors in these GOG countries with significant degree, ceteris paribus.