Evaluating the Impact of Fiscal Provisions in the Draft Petroleum Industry Bill on Offshore E&P Economics and Take Statistics in Nigeria

Abstract

Abstract The structure and conduct of the global E&P industry have changed significantly over the years; to the extent that the search for and development of petroleum resources have become mostly driven by the attractiveness of fiscal regimes rather than geological prospectivity only. A dynamic and stable fiscal arrangement must now include contract terms and instruments that will willingly give up an appropriate proportion of economic rents to investors to guarantee sustainable capital investment flow for resource development. A high exploration risk and low prospective region must balance government takes with an attractive rate of return on investment. Of course, where exploration risks are low and geological prospects are high, the host government can be expected to want to capture a high economic rent per unit of hydrocarbon production. This paper reviews the economics of offshore petroleum exploration and production (E&P) operations within the context of the ensuing petroleum industry institutional restructuring and reforms in Nigeria. The paper provides a careful review of the fiscal terms and instruments in the draft petroleum industry bill (PIB) and the effects on the economic measures and government take statistics of an archetypal deepwater oil and gas venture in offshore Nigeria.