Assessing the Impact of Deep Offshore and Inland Basin Production Sharing Contract Ammendments on the Economics of Deep Offshore E&P Assets in Nigeria

Abstract

Nigeria recently amended the Deep Offshore and Inland Basins Act. The Act seeks to generate aditional annual revenue of over $1 billion for the government. The 2019 Law seems attractive to the government in the short run in terms of early rent extraction; on one hand, the seeminglly attractiveness of the fiscal terms in the Ammended Act, which is to expand output from investment in Nigeria deep offshore in the country is conjectural. The purpose of this paper is to evaluate the impact of the amendments to the PSC Act on value creation and addition to stake holders using systems and economic metrics that include investment earning power and discounted government take. A designed petroleum economic modeling framework applied to the fiscal terms in the new Act show a significant decrease in value addition to contractor portfolio of assets by about 25% but increases government discounted take statistics from 63.70% to 72.64% in comparison to the fiscal and contract terms in PSC 1993. The IRR and FLI obtained using the terms in the new Act were 23.66% and 0.043, respectively.