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Effect of Annual Oil Cost Recovery Ratio on the Optimal Oil
Production Path and Payoffs in the Production Sharing Agreements
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Abstract: (4081 Views) |
Production sharing agreement and joint ventures are frequently used in upstream oil industries. The contractual framework determines the affect the payoffs for each party. In this paper, the optimal production path explored using the Generalized reduced gradient method (GRG), and its sensitivity to the changes in annual cost recovery ratio is analyzed. According to the despite the different prospects of the two parties regarding the optimal path of production, changes in the annual oil cost recovery ratio do not chande the optimal path of oil production. Therefore, any increase in the annual oil cost recovery ratio would reduce the NPV of per barrel of oil extraction (NPV/q) for the host government, increase it for the investing company and reduces the payback priod of capital expenditures without changing the production path.
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| Keywords: Joint Venture Co, Host Government, Optimum Path of Oil Production, Generalized Reduced Gradient Method, Annual Oil Cost Recovery Ratio |
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Full-Text [PDF 492 kb]
(2809 Downloads)
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Type of Study: Research |
Subject:
Special
Received: 2018/06/18 | Accepted: 2018/06/18 | Published: 2018/06/18
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