Title: A proposed PSC fiscal regime for South Sudan's oil market: a new model harmonising contractor's and government's NPVs

Authors: Mac Darlington Uche Onuoha; Mijwok Opec Amaykway; Menglan Duan; Henry Okafor Elochukwu; Peifang Yang

Addresses: Institute for Ocean Engineering, China University of Petroleum-Beijing, 18 Fuxue Road Changping, Beijing, 102249, China ' Academy of Chinese Energy Strategy, China University of Petroleum-Beijing, 18 Fuxue Road Changping, Beijing, 102249, China ' Institute for Ocean Engineering, China University of Petroleum-Beijing, 18 Fuxue Road Changping, Beijing, 102249, China ' Department of Petroleum Engineering, Curtin University Sarawak, CDT 250, 98009, Sarawak, Malaysia ' Academy of Chinese Energy Strategy, China University of Petroleum-Beijing, 18 Fuxue Road Changping, Beijing, 102249, China

Abstract: Investment decision of any company is depended on the economic benefits accruable from such project and to what rate its returns on investment would be. Economic evaluation of project's feasibility is largely based on NPV estimation which involves the discounting of future earnings to present and then, finding the net value to ascertain the present worth of the project and how much it could increase the company's share value. This paper presents a study on the impact of production sharing formula on the contractor's and government's net present values (NPVs) by using the production sharing contract (PSC) of four different countries: Malaysia, Indonesia, Brunei and South Sudan. Result reveals the significant influence of PSC regimes on project's NPV and a new PSC term is proposed to South Sudanese government that will increase its NPV to 13.4% and that of the contractor to 0.434% as against the current regime.

Keywords: PSC; production sharing contract; NPV; net present value; MROR; minimum rate of return; internal rate of return; payback period; sensitivity analysis.

DOI: 10.1504/IJRM.2018.096317

International Journal of Revenue Management, 2018 Vol.10 No.3/4, pp.227 - 258

Available online: 22 Nov 2018 *

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