Abstract :

The 1993 production sharing contract (PSC) in Nigeria specifies different royalty rates for oil and gas investment. The royalty rates were fixed. This makes the fiscal arrangement to be regressive in nature. Royalty rate of 20% is to be paid for onshore investment using the 1993 PSC. Hence, there is a need to make the fiscal arrangement progressive. The delayed royalty framework was incorporated into the1993 PSC as a progressive measure to make it dynamic. Two economic models were developed using spreadsheet technique to evaluate the impact of the delayed royalty framework on onshore petroleum investment. The 1993 PSC fiscal framework was used to develop the economic models. The delayed royalty framework was incorporated into one of the models. The delay in royalty payment hinged on the payout period of the investment. It was observed that the delayed royalty framework increased the contractor’s revenue during the period of low oil price. Thus, increasing the sustainability of the investment during period of low oil price.

---

Keywords :

Delayed Royalty Framework, Economics, Petroleum Investment, Royalty, sustainability.

---

References :

1. Echendu, J. C., Iledare, O. O., Akinlawon, A. J., & Idowu, A. J. (2018). Replacing Petroleum Profit Tax with a Dual Petroleum Tax System: Implication on Petroleum Project Economics in Nigeria. SPE Nigeria Annual International Conference and Exhibition.doi:10.2118/193453-ms.
2. Echendu, J. C., Iledare, O. O., & Onwuka, E. I. (2015). Comparative Economic-Performance Analysis of Production-Sharing Contracts in Angola, Equatorial Guinea, Gabon, and Nigeria. SPE Economics & Management, 7(04), 157–166.doi:10.2118/162990-pa.
3. Echendu J. C and Iledare O. O. (2016). Progressive Royalty Framework for Oil- and Gas-Development Strategy: Lessons From Nigeria. SPE Econ. & Manag. 8(03), 68–77. doi:10.2118/174846-pa.
4. Echendu, J. C., Onwuka, E. I. & Iledare, O. (2014). Spreadsheet Modeling and Simulation Analysis of Production Sharing Contract Terms and Instruments in Nigeria. SPE Nigeria Annual International Conference and Exhibition, Lagos, 5–7 August. SPE-172389-MS http://dx.doi.org/10.2118/172389-MS.
5. Iledare, O. O. (2004). Analyzing the Impact of Petroleum Fiscal Arrangements and Contract Terms on Petroleum E&P Economics and the Host Government Take SPE Nigeria Annual Technical Conference and Exhibition, Abuja, Nigeria, 2-4 August. SPE-88969-MS. http://dx.doi.org/10.2118/88969-MS.
6. Iledare, O. O. (2010). Evaluating the Impact of Fiscal Provisions in the Draft Petroleum industry Bill on Offshore E&P Economics and Take Statistics in Nigeria. 34th Annual SPE International Conference and Exhibition, Tinapa-Calaba, Nigeria, 31 July-7 August. SPE-136972-MS. http://dx.doi.org/10.2118/136972-MS.
7. Iledare, O. O. (2017). Advanced Petroleum Economics. Lecture Note, African University of Science and Technology, Abuja, Nigeria.
8. Johnston, D. (1994). International Petroleum Fiscal Systems and Production Sharing Contracts, pp. 25. Tulsa, USA: PennWell Publishing Company.
9. Jahn, F. Cook, M. & Graham, M. (2008). Petroleum Economics. In F. Jahn, M. Cook & M. Graham (Eds), Hydrocarbon Exploration and Production (pp. 337-364). Oxford: Elsevier.
10. Mian, M. A. (2002). Project Economics and Decision Analysis, Vol. 1. PennWell Corporation.
11. Nyoor, B., Oyebimpe, A., & Iledare, O. O. (2019). The Impact of the Proposed Petroleum Industry Fiscal Bill PIFB, 2018 Tax Scheme on the Economics of Oil Production in Nigeria. SPE Nigeria Annual International Conference and Exhibition.doi:10.2118/198782-ms.
12. Nwosi-Anele, A. S., Adeogun, O., & Iledare, O. (2018). Analysis of Government and Contractor Take Statistics in the Proposed Petroleum Industry Fiscal Bill. SPE Nigeria Annual International Conference and Exhibition. doi:10.2118/193470-ms

13. Ogolo, O., & Nzerem, P. (2021). A delayed royalty framework for investments in the exploration and production of hydrocarbon. Petroleum Research. doi:10.1016/j.ptlrs.2021.04.004.
14. Ogolo, O. Nezrem, P., Iledare, O. O., Okafor, S. I., Iloegbunam, E., Ekeoma, P. I. (2020). Assessing theImpact of Deep Offshore and Inland Basin Production Sharing Contract Amendmentson the Economics of Deep Offshore E&P Assets in Nigeria. SPE Nigeria Annual International Conference and Exhibition.. doi.org/10.2118/203741-MS
15. Oyekunle, A. A. (2011). Impact of the Petroleum Industry Bill on Deepwater Economics. Nigeria Annual International Conference and Exhibition.doi:10.2118/150774-ms.