| ID | 166925 |
| Title Proper | Risk and rewards dynamics |
| Other Title Information | Measuring the attractiveness of the fiscal regime in the presence of exploratory risks |
| Language | ENG |
| Author | Furtado, S |
| Summary / Abstract (Note) | The government needs to consider risk when designing a fiscal regime and oil companies need to assess prospect's risks when facing investment decisions. This paper analyzes how the fiscal regime dictates the risk-reward partition between companies and the government in a portfolio of prospects. The expected monetary value is provided as the decision criteria, and a decision model is presented where all the prospects are graphically represented. The fiscal regime's contract is generalized as a mathematical function and plotted together with the exploratory opportunities. This type of representation helps the policymakers to fine-tune petroleum contracts. It is also of great value to companies because it helps to understand the risks and rewards of a portfolio. We used the recent Brazilian fiscal regime change from a royalty and tax contract (R/T) to a partition share contract (PSC) to understand the impacts of the fiscal regime in the risk-reward balance of the prospects located at the recently discovered Pre-Salt geologic province offshore Brazil. We show how the policymakers can fine-tune the fiscal regime and how companies can better understand the contracts considering both the rewards and the risks involved. |
| `In' analytical Note | Energy Policy , No.132; Sep 2019: p.1274-1287 |
| Journal Source | Energy Policy 2019-09 |
| Key Words | Brazil ; Risk Assessment ; Exploration ; Fiscal Regime ; Oil Economics ; Pre-Salt |