Assessment of Upstream Petroleum Fiscal Regimes in Myanmar

Wint Thiri Swe,Nnaemeka Vincent Emodi

doi:10.3390/jrfm11040085

Wint Thiri Swe, Nnaemeka Vincent Emodi

Open Access

https://doi.org/10.3390/jrfm11040085

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Abstract

This study aims to assess Myanmar’s upstream petroleum fiscal regimes by applying comprehensive indicators to rank the level of attractiveness of Myanmar. The indicators include government take (GT), front loading index (FLI), and composite score (CS). The decision maker’s attitude for GT and FLI were considered in CS linear weighting method in ranking the fiscal terms attractiveness. The results showed that Myanmar’s upstream petroleum fiscal regime has low attraction compared to its competing countries from the investor’s point of view, both in terms of the risk to the investor in the earlier part of the project and in terms of evaluation with or without the time value of money. Also, royalty and cost recovery were identified to have an impact on the attractiveness rank of petroleum fiscal regime in Myanmar. Therefore, Myanmar should consider improving its fiscal regimes that are not neutral—particularly, royalty, tax, profit split, and cost recovery—for a favorable investment climate.

Highlights

The petroleum industries in oil and gas producing nations play an important role in economic growth through revenue generation for the government (Odularu 2008)
This study aims to analyze Myanmar’s upstream petroleum regimes, to ascertain whether its current regimes are attractive when compared to its competing countries, from the investor’s perspective
Different indicators—namely, government take (GT), front loading index (FLI), and composite score (CS)—are included in this evaluation method

Summary

Introduction

The petroleum industries in oil and gas producing nations play an important role in economic growth through revenue generation for the government (Odularu 2008). The investors tend to focus on the country’s fiscal regimes with regard to the valuation of oil and gas exploration and production (Nakhle 2015). Petroleum fiscal regimes are set of laws, regulations, and agreements in a country which governs the benefits derived from petroleum exploration and production (Gudmestad et al 2010). This links the host government as the political entity and the international oil company as the legal entity in the transaction. The petroleum fiscal regime sets a standard for the production of oil and gas as well as the income allocation between these two entities (Bindemann 1999; Sunley et al 2003; Løvås and Osmundsen 2009). Petroleum fiscal regimes influence their investment decisions in any country of interest (Hvozdyk and Mercer-Blackman 2010)

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Results