The Fiscal System Influence on Oil Fields Development and Government Participation

Abstract

AbstractIn 2010, the Brazilian government changed its regulatory framework for the exploration and production of the pre-salt reserves, located in the Campos and Santos basins, from royalty and tax (R&T) to a production-sharing contract (PSC) to increase the government take (GT). When defining an oil or natural gas reservoir production strategy, not only all available reservoir characteristics and economic scenarios must be considered, but also the fiscal system involved. Previous works have shown that, in more optimistic economic scenarios, the optimal recovery strategy presents low dependency on fiscals systems. This work aims to evaluate the fiscal system dependency on an oil field development under different economic scenarios to verify if that behavior continues. Two different reservoir models were submitted to a production strategy selection process for both fiscal systems in four economic scenarios. The results were compared using technical and economic evaluation indicators. Considering the development and production strategy based on the company objective-function net present value (NPV), results showed that the fiscal system influences the strategy and level of investments, mainly in pessimistic economic scenarios, where fewer investments reduce the government return compared to the former tax system. The PSC was designed aiming to generate higher government participations. Results suggest that, in fact, the GT of the optimized strategies for PSC are superior to the results from R&T. However, this is not a pattern when analyzed from the viewpoint of government revenues (GR). Reservoir models with high volumes of original oil in place (OOIP) generate higher total revenue (TR) when developed under R&T, leading to higher revenues for both the company and the government. Results indicate the importance of analyzing the government participations with care when interpreting both indicators and the influence of the fiscal system when selecting a production strategy under more pessimistic economic scenarios.