Abstract
Production sharing contract (PSC) is one of the most common types of cooperation modes in international petroleum contracts. The elements that affect PSC economics mainly include royalty, cost oil, profit oil as well as income tax. Assuming that oil price follows the stochastic process of Geometric Brownian Motion, this paper takes the net present value (NPV) and the internal rate of return (IRR) as two economic indexes and models the PSC through setting 11 different scenarios by changing the value of each contract element. Then, according to the value of NPV and IRR, we mark off different intervals and calculate the cumulative probability followed by comparative analysis of how the changes of different elements influence the contract economics. The study concludes that the impacts of income tax and profit oil are more significant than the royalty and cost oil, while a tax holiday could improve the company's financial status significantly under oil price uncertainty.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
