52 the government take was calculated on an

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52. The government take was calculated on an undiscounted and on a discounted basis. To simplify the comparison with the contractor’s take, all cash flows were discounted at 10 percent. In reality, the gov- ernment’s cash flow should be discounted at the social rate (see note 34 above). This is likely to be lower than 10 percent, thus increasing the percentage government take. 53. The Saving Index (SI) is defined as the part of an additional one dollar in profit (arising from a one dollar saving in cost) that accrues to the contractor. It measures the degree to which the contractor will benefit from a reduction in costs (see Johnston 2003). Table 4. Key Project Parameters Parameter Field A Field B Field C Field D Recoverable Reserves 20 MBO 50.0 MBO 100 MBO 600 MBO Peak Production 6.0K Bopd 15.0K Bopd 28.5K Bopd 150.7K Bopd Rate 44 Field Life 20 years 20 years 20 years 20 years Oil Price US35/ Bbl US$35/Bbl US$35/Bbl US$35/Bbl Total Capital costs US$123 Million US$234 Million US$336 Million US$4,615 Million (Capex) Full cycle Operating US$4.54/Bbl US$4.24/Bbl US$3.05/Bbl US$2.31/Bbl costs (Opex) The economics of these hypothetical assets were calculated under PSC. 45 Four alternative types of sliding scales were modeled: daily production, cumulative production, R-Factor, 46 and RoR. 47 Their relative performance was assessed by allowing a selected number of fiscal and sys- tem parameters to change. 48 The results were measured in terms of break-even price, 49 NPV of the project’s cash flow, IRR, PR, net present value per barrel of oil equivalent (NPV/BOE), 50 operating leverage, 51 percentage government take, 52 and saving index [SI] 53 ). These are sum- marized in Table 5. Detailed calculations are shown in Appendix D, Tables 22 to 25.
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Table 5. Fiscal System Indices Field A Fiscal Fiscal Fiscal Fiscal Model 1 Model 2 Model 3 Model 4 Contractor’s Cash Flow (NPV10%) 70.6 70.6 73.5 79.9 Break-Even Price 18.64 18.64 17.48 17.07 Project’s IRR 26.0% 26.0% 28.2% 29.0% NPV(10%)/BOE 3.53 3.53 3.67 3.99 PR(10%) 0.60 0.60 0.62 0.68 Operating Leverage (%) 43.2% 43.2% 43.2% 43.2% Government Take (%) 57.6% 57.6% 55.9% 52.0% Saving Index (US$) 0.53 0.53 0.52 0.56 Field B Fiscal Fiscal Fiscal Fiscal Model 1 Model 2 Model 3 Model 4 Contractor’s Cash Flow (NPV10%) 213.7 213.7 212.4 211.0 Break-Even Price 15.05 15.05 14.13 13.79 Project’s IRR 33.4% 33.4% 36.6% 36.4% NPV(10%)/BOE 4.27 4.27 4.24 4.22 PR(10%) 0.88 0.88 0.88 0.87 Operating Leverage (%) 35.5% 35.5% 35.5% 35.5% Government Take (%) 54.6% 54.6 54.9% 55.2% Saving Index (US$) 0.53 0.52 0.49 0.49 Field C Fiscal Fiscal Fiscal Fiscal Model 1 Model 2 Model 3 Model 4 Contractor’s Cash Flow (NPV10%) 515.3 469.7 456.0 363.4 Break-Even Price 10.56 11.32 10.00 9.62 Project’s IRR 49.7% 49.4% 55.2% 50.4% NPV(10%)/BOE 5.15 4.70 4.56 3.63 PR(10%) 1.50 1.37 1.33 1.06 Operating Leverage (%) 24.9% 24.9% 24.9% 24.9% Government Take (%) 53.0% 57.1% 58.4% 66.8% Saving Index (US$) 0.52 0.47 0.42 0.36 Field D Fiscal Fiscal Fiscal Fiscal Model 1 Model 2 Model 3 Model 4 Contractor’s Cash Flow (NPV10%) 386.4 (14.4) 1,751.8 2,423.0 Break-Even Price 29.41 35.23 20.30 19.44 Project’s IRR 12.1% 9.9% 19.2% 21.2% NPV(10%)/BOE 0.64 (0.02) 2.92 4.04 PR(10%) 0.10 (0.00) 0.45 0.62 Operating Leverage (%) 47.4% 47.4% 47.4% 47.4% Government Take (%) 91.6% 100.3% 61.7% 47.1% Saving Index (US$) 0.34 0.18 0.51 0.64
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Our simplified analysis illustrates that the anticipated size and distribution of pro- duction in a given geological province is a key element in the design of a fiscal system. This
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