A study carried out by petroconsultants in 1995

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share of profits (Rutledge and Wright 1998). A study carried out by Petroconsultants in 1995 showed that the government take in more than 90 percent of the 110 countries examined ranged from 55 to 75 percent. Other studies have shown similar results (Johnston 1994b; Kemp 1987; Van Meurs and Seck 1995; Van Meurs and Seck 1997).
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time; 36 countries typically use more than one arrangement; and contracts are often renegotiated as political and economic conditions change, or as better information becomes available. 37 In industry statistics the government take is usually determined on the basis of the- oretical price and cost assumptions. As noted above, the actual government take can be quite different from the theoretical average. The take is inconsistent with the economic measures mentioned above, since it is frequently calculated and reported on an undiscounted basis. There can be a signif- icant difference in the level of take depending on the manner in which the cash flow elements are discounted. For example the discounted take is normally much higher than the undiscounted one for regressive front-loaded systems. 38 As the government take is made up of different elements, more or less regressive, the risk-profile, hence the attractiveness to investors, of two fiscal regimes that present the same percentage government take can be dramatically different. 39 The government take does not capture the spill over effects of oil and gas projects on the economy at large. 40 Using economic measures like the profitability index or the return on investment is also difficult as each government and each company has a unique risk-reward profile, and hence uses a specific discount rate. This of course provides the scope for negotiating contract and fiscal terms. Nevertheless, and keeping in mind the limitations expressed above, a compar- ison of various countries’ fiscal systems on the basis of the government take, the effective royalty rate, 41 and the percentage of government participation is shown in Appendix B. 20 World Bank Working Paper 36. When “model” contracts are available, these are normally used as a starting point for negotiation, and the final negotiated fiscal terms are not normally disclosed or released to the public. 37. According to a study conducted by the Minerals Management Service in March 2004, each year a licensing round is launched in 25–50 countries; new model contracts or fiscal regimes are introduced in approximately 20 countries; and tax laws are revised by many countries during their annual budgetary process. 38. It is important to note that given the cash flow profile typical of oil and gas projects, an undis- counted take can be quite misleading as it would underestimate the effective government take and over- estimate the effective company take.
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