Title: Influence of fiscal regime adjustment on investment climate of marginal oil fields in Malaysia: a scenario analysis

Authors: Abdulsalam Mas'ud; Nor Aziah Abdul Manaf; Natrah Saad

Addresses: Department of Accountancy, Hussaini Adamu Federal Polytechnic, PMB 5004, Kazaure, Jigawa State, Nigeria ' School of Accountancy, Universiti Utara Malaysia, 06010, Sintok Kedah, Malaysia ' School of Accountancy, Universiti Utara Malaysia, 06010, Sintok Kedah, Malaysia

Abstract: Since 1970s, oil and gas sector in Malaysia has been undergoing series of fiscal regime adjustments. The rationale of which was connected to the country's desire to improve the investment climate of its remaining oil and gas fields. Recently in 2010, the fiscal changes were made for marginal fields. These new fiscal changes resulted in increase in tax incentives and change in fiscal arrangement from production sharing contract to risk service contract. In this study, a comparison of the marginal fields' investment climate under old and new fiscal regimes was conducted using nine different scenarios relating to oil prices and reserve levels. The results using investor's net present value and internal rate of return revealed that the new fiscal regime would likely render investment climate more favourable in the majority of the scenarios - with the exception to those relating to high oil prices, which fiscal regime under production sharing contract would likely be more favourable. The policy implication is that offering windfall incentive or increasing field's contractors' remuneration would likely improve the attractiveness of the new fiscal regime under risk service contract. However, the caveat is that considerations should be given to the assumptions employed in the study while applying its findings for a decision.

Keywords: fiscal regime; fiscal arrangement; production sharing contract; PSC; risk service contract; RSC; tax incentives.

DOI: 10.1504/IJETP.2018.090694

International Journal of Energy Technology and Policy, 2018 Vol.14 No.2/3, pp.276 - 291

Received: 09 Dec 2015
Accepted: 18 Aug 2016

Published online: 02 Jan 2018 *

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