Lowering the cost of funds for exploration: the case for tax-based equity financing incentives

2020 ◽  
Vol 60 (2) ◽  
pp. 569
Author(s):  
Kenneth Wee
Keyword(s):  
Oil And Gas ◽  
Petroleum Industry ◽  
Equity Capital ◽  
Petroleum Exploration ◽  
Security Requirements ◽  
Equity Financing ◽  
Return On Capital ◽  
Oil And Gas Resources ◽  
The Cost ◽  
Taxation System

Exploring for, and discovering, new oil and gas resources is essential to an oil and gas company’s ability to replenish and enhance its reserves base. With rising future demand for clean, sustainable and affordable energy sources and the important role and contribution of the Australian petroleum industry in the evolving global energy mix, continual investment in exploration activity will be the key to unlocking the prospectivity of undeveloped acreage, particularly in frontier areas. However, exploration is inherently risky and costly. Companies constantly compete for scarce capital to provide the necessary funding to undertake exploration activities. Financial capacity underwrites the ability to bid for exploration acreage by offering commensurate work program commitments. For junior explorers in the early exploration stage, liquidity constraints can mean that the covenants, collateral security requirements and periodic servicing obligations associated with raising debt financing are prohibitive. Equity investors, on the other hand, typically demand a higher return on capital. A fresh policy approach to encouraging petroleum exploration in Australia should be considered by government to incentivise the providers of equity capital to risk money for exploration ventures. This paper considers three models that are used internationally: (1) flow-through shares, (2) worthless stock deductions and (3) notional interest deductions for equity financing. This paper provides a comparative in-principle analysis of each model and offers some suggestions on how these models may be adapted to an Australian context and embedded into the existing taxation system.

PETROLEUM EXPLORATION ON OUR PUBLIC LANDS

Geophysics ◽  
1953 ◽  
Vol 18 (1) ◽  
pp. 201-211 ◽  
Author(s):  
John R. Killough
Keyword(s):  
Oil And Gas ◽  
Petroleum Industry ◽  
Public Lands ◽  
Oil And Gas Industry ◽  
Petroleum Exploration ◽  
Bureau Of Land Management ◽  
Gas Industry ◽  
Conservation Policies ◽  
Conservation Projects ◽  
The Cost

Exploration for oil and gas has soared to an all time maximum, and it will continue to increase. In eleven western states such exploration will be predominantly on our public lands. These lands are managed to (1) conserve and perpetuate natural resources, (2) give greatest good to the greatest number, and (3) have the benefits exceed the cost. The conservation program of the Bureau of Land Management is engaged in the construction of soil and moisture conservation projects, range improvements, and revegetation. At the present time the Bureau is actively engaged in controlling the poisonous invader Halogeton, employing herbicides and reseeding. Seismic methods, as often employed, may be destructive to soil and vegetation or surface resources and therefore opposed to other activities and interests. Direct losses occur through improperly bulldozed trails and the use of stockwater reservoirs. Shot holes left unplugged are dangerous. The oil and gas industry must develop conservation policies within its own ranks. Roads may be properly constructed and damage repaired. The petroleum industry must decide by its own actions its future place on our public domain.

scholarly journals Evaluating the Petroleum Contracts of Kurdistan Region in the Surveying and Applying the Deloitte Data (A Comparative Review)

2021 ◽  
Vol 8 (7) ◽  
pp. 236
Author(s):  
Beston Muhammed Qadir ◽  
Hazhar Omer Mohammed ◽  
Hawre Latif Majeed
Keyword(s):  
Oil And Gas ◽  
Cost Recovery ◽  
Large Contribution ◽  
Regional Government ◽  
Kurdistan Region ◽  
Oil Companies ◽  
Production Sharing ◽  
Comparative Review ◽  
Oil And Gas Resources ◽  
The Cost

A production sharing contract has been chosen by the Kurdistan Regional Government as supposedly the most appropriate contract model for the oil and gas resources of the Kurdistan Region, among several other forms of contract. In general, in terms of royalty, cost recovery, and sharing the residual sales as negotiated, the Kurdish model is similar to its foreign model, although the proportions are most likely to differ. The model of the Region specified 10 percent for the Royalty: Up to 45 percent for cost recovery, often between 7-9 percent of the company's share of the profit in the agreement. Investigating Deloitte reports and then comparing the 2017 to 2019 data shows the unstable output with a fair boost and stability at the later date as for 2017. A large contribution from the Kirkuk oil fields to the production of the overall region is noted until 16 Oct 2017. Around one-third of the revenues of oil went to the production oil companies, although as agreed for cost recovery, it is still less than 40 percent. The payment of the companies of Oil production could be explained as a collective sum between 9% of the profit oil and 25-28% of the sales oil's gross values! The cost recovery payment could not have been funded in the contract, which explains the region's claim about the debts of the companies, in its agreed manner.

Australian States and Northern Territory acreage update at APPEA 2010

2010 ◽  
Vol 50 (1) ◽  
pp. 35
Author(s):  
Peter Green
Keyword(s):  
Oil And Gas ◽  
Petroleum Industry ◽  
Northern Territory ◽  
Petroleum Exploration ◽  
Tight Gas ◽  
Extensive Experience ◽  
Green Is ◽  
Australian State ◽  
Petroleum Resources ◽  
Exploration And Production

Peter Green is the Geoscience Manager: Energy Geoscience in the Geological Survey Queensland and has extensive experience in basin studies, geoscience and the development of petroleum regulation in Queensland. This paper provides a summary of the land releases for petroleum exploration for onshore areas and coastal waters of Australia for 2010. The summaries include upstream petroleum acreage opportunities for the states and the Northern Territory, and geothermal energy exploration opportunities. The rise in interest in export liquefied natural gas projects has ensured petroleum exploration and production has remained strong. Interest in acquiring petroleum acreage to explore for both conventional and non-conventional plays remains high. Australian state and the Northern Territory governments continue to provide access to land and promotional opportunities for companies to undertake exploration and development of our petroleum resources. Acreage on offer provides a mix of exploration opportunities from conventional oil and gas through to the unconventional plays such as shale gas and tight gas. This change in acreage on offer reflects the changing nature of the onshore petroleum industry in Australia.

Solar Power for Sustainable Offshore Petroleum Exploration and Production in Africa

2016 ◽  
Author(s):  
Samuel Tawiah ◽  
Solomon Adjei Marfo ◽  
Daniel Benah
Keyword(s):  
Gas Turbines ◽  
Oil And Gas ◽  
Solar Power ◽  
Petroleum Industry ◽  
Sub Saharan Africa ◽  
Petroleum Exploration ◽  
Weight Restrictions ◽  
Power Requirement ◽  
Energy Applications ◽  
Exploration And Production

ABSTRACT A substantial percentage of Africa's upstream petroleum activity occurs offshore in high risk environments with attendant environmental concerns. Power demands on offshore rigs are met principally through the use of diesel engines and gas turbines. This adds to the already high safety hazards and environmental threat through greenhouse gas emissions, heat and noise generation. Additionally, petroleum generated power is an expensive venture that can have significant impact on oil and gas project economics. Moreover, some of these offshore locations are so remote that accessibility to petroleum fuel may be challenging. As petroleum exploration and production pushes steadily into deeper, farther waters especially in sub-Saharan Africa, safety, environmental and logistical security may be key for sustainability. Situated almost entirely within the tropics, Africa is a very suitable place for solar energy applications. This study assesses the potential of solar power for offshore oil and gas operations in Africa to mitigate the issues associated with the use of fossil fuel thereby ensuring sustainability of the upstream petroleum industry in Africa. The size of the solar power system that may meet the power requirement of a sample floating storage and production vessel (FPSO) in offshore Angola was estimated. Appropriate areas and extent of potential solar power application on this sample rig were also assessed. This was followed by some cost analysis to compare the two sources of power economically. It was found that solar power can currently provide only a small part of the power needed on offshore rigs primarily due to lack of space and weight restrictions.

scholarly journals The Impact of Employee Stock Ownership Plan on the Cost of Equity Capital: Evidence from China

2021 ◽  
Vol 2021 ◽  
pp. 1-17
Author(s):  
Fu Cheng ◽  
Shanshan Ji
Keyword(s):  
Listed Companies ◽  
Equity Capital ◽  
Stock Ownership ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Equity Financing ◽  
Employee Stock Ownership ◽  
Chinese Listed Companies ◽  
The Cost ◽  
The Impact

Due to the immaturity of bond market and the defects of internal governance structure, Chinese-listed companies have a strong preference for equity financing. How to reduce the cost of equity capital is particularly important for Chinese-listed companies. As an equity incentive system, employee stock ownership plan (ESOP) can reduce the agency conflicts among shareholders, executives, and employees to some extent. These reduced conflicts will, in an efficient capital market, be reflected in a lower cost of equity capital. This paper investigates whether the implementation of ESOP in a new era in China affects the cost of equity capital and further explores whether the impact of ESOP on the cost of equity capital is affected by the ownership nature, the firm size, and the contract design of ESOP. The results show that the implementation of ESOP reduces the cost of equity capital of enterprises. Compared with state-owned enterprises and large enterprises, the implementation of ESOP is more likely to reduce the cost of equity capital in non-state-owned enterprises and small enterprises. Furthermore, the reduction effect of ESOP on the cost of equity capital is influenced by the contract design of ESOP. This study not only enriches the literature on the relationship between employee stock ownership and the cost of equity capital but also provides a new idea for listed companies to reduce the cost of equity financing.

scholarly journals ANALYSIS OF OPEX, OIL LIFTING AND INDONESIA CRUDE PRICE IN AFFECTING CONTRACTOR’S NET SHARE ON AN OIL AND GAS COMPANY IN INDONESIA

2013 ◽  
Vol 5 (2) ◽  
pp. 197-223
Author(s):  
Endah Widiastuti ◽  
Rudy Kurniawan
Keyword(s):  
Oil And Gas ◽  
Action Plan ◽  
Oil And Gas Industry ◽  
Petroleum Exploration ◽  
Gas Industry ◽  
Operating Expenditure ◽  
Contractual Arrangements ◽  
Production Sharing ◽  
Global Issue ◽  
Oil And Gas Resources

Oil and gas industry is an international scale of business which is very affected with the global issue and situation. Indonesia is a country that known for its wealth of natural resources especially in oil and gas resources. Production-Sharing Contract is the form cooperation types of contractual arrangements for petroleum exploration and development in Indonesia. With current oil and gas business situation, where oil prices are fluctuative, oil lifting is decreased, operating expenditure of a company tends to increase. The trend of contractor’s net shares on this oil and gas company in Indonesia is fluctuative, it seems very unpredictable pattern. If its continuing, it can obstruct the company’s sustainability and growth. In order to know the significance factor and  to optimize the contractors net share of this unpredictable pattern during time limitation to the end of contract then it raises the need to quantify, model and know the significant factors that is affecting the performance of Production Sharing Contract’s net share. Thus can be done based on historical financial data report. The data obtained is used to measure the relationship of independent variables such as operating expenditure, oil lifting and Indonesia crude price to the dependent variable: contractor’s net share in order having a base of decision making to determine the action plan for the PSC by using multiple regressions as its methods. The result showed that oil liftings and Indonesia crude price significantly affect the contractor’s net share.

2009 Release of offshore petroleum exploration acreage

2009 ◽  
Vol 49 (1) ◽  
pp. 463
Author(s):  
John Hartwell
Keyword(s):  
Advisory Committee ◽  
Carbon Capture ◽  
Oil And Gas ◽  
Petroleum Industry ◽  
Carbon Capture And Storage ◽  
Oil And Gas Industry ◽  
Petroleum Exploration ◽  
Asia Pacific ◽  
Australian Government ◽  
Wide Range

John Hartwell is Head of the Resources Division in the Department of Resources, Energy and Tourism, Canberra Australia. The Resources Division provides advice to the Australian Government on policy issues, legislative changes and administrative matters related to the petroleum industry, upstream and downstream and the coal and minerals industries. In addition to his divisional responsibilities, he is the Australian Commissioner for the Australia/East Timor Joint Petroleum Development Area and Chairman of the National Oil and Gas Safety Advisory Committee. He also chairs two of the taskforces, Clean Fossil Energy and Aluminium, under the Asia Pacific Partnership for Clean Development and Climate (AP6). He serves on two industry and government leadership groups delivering reports to the Australian Government, strategies for the oil and gas industry and framework for the uranium industry. More recently he led a team charged with responsibility for taking forward the Australian Government’s proposal to establish a global carbon capture and storage institute. He is involved in the implementation of a range of resource related initiatives under the Government’s Industry Action Agenda process, including mining and technology services, minerals exploration and light metals. Previously he served as Deputy Chairman of the Snowy Mountains Council and the Commonwealth representative to the Natural Gas Pipelines Advisory Committee. He has occupied a wide range of positions in the Australian Government dealing with trade, commodity, and energy and resource issues. He has worked in Treasury, the Department of Trade, Department of Foreign Affairs and Trade and the Department of Primary Industries and Energy before the Department of Industry, Science and Resources. From 1992–96 he was a Minister Counsellor in the Australian Embassy, Washington, with responsibility for agriculture and resource issues and also served in the Australian High Commission, London (1981–84) as the Counsellor/senior trade relations officer. He holds a MComm in economics, and Honours in economics from the University of New South Wales, Australia. Prior to joining the Australian Government, worked as a bank economist. He was awarded a public service medal in 2005 for his work on resources issues for the Australian Government.

TAXATION ASPECTS OF SOLE RISK, OR, HOW TO MAKE THE TAX SYSTEM WORK FOR YOU

1986 ◽  
Vol 26 (1) ◽  
pp. 123
Author(s):  
P.A. Wilson
Keyword(s):  
Risk Premium ◽  
Income Tax ◽  
Petroleum Industry ◽  
Petroleum Exploration ◽  
Financial Cost ◽  
Resource Rent ◽  
Scarce Resources ◽  
Work Program ◽  
Work Programs ◽  
The Cost

Two of the problems currently facing the petroleum industry are the cost of funding petroleum and the relatively few major discoveries. Without major discoveries it is difficult, and will become more difficult, to attract new money into the petroleum exploration business.With these factors in mind it becomes more necessary for few companies to spend more money to fund major exploration programs and for the costs to be adequately shared by all participants in a venture.As currently drafted, the sole-risk provision in a Joint Operating Agreement acts as a rationer of scarce resources (i.e. money) for the finding of major new reservoirs. However, by restructuring the sole-risk premium clause it is possible to increase the financial cost (through income tax, resource rent tax, or resource rent royalty, as applicable) upon a party allowing another party to conduct a sole-risk project. This increased penalty might be a major factor in reducing the incidence of sole-risk programs without reducing the number of programs brought forward outside of permit work programs commitments.To achieve this end the sole-risk clause should be restructured to require the sole-risk party to own the project (information, wells, completion, deepening, etc) and then for it to create undivided interests on the sole-risk project for disposal to the non-sole-risk party. In this way, the premium would be received as consideration on sale of an interest in the project and not a disproportionate allocation of product.If this restructure were conducted then the interaction of income tax, and where applicable resource rent tax and resource rent royalty, might well induce all parties to agree to participate in non-work program operations leaving all work programs subject to sharing.

Is there any room for gravity in petroleum exploration? Let's open the door again!

2020 ◽  
Vol 60 (2) ◽  
pp. 761
Author(s):  
Sergey Shevchenko
Keyword(s):  
Oil And Gas ◽  
Gravity Data ◽  
Low Cost ◽  
Petroleum Industry ◽  
Oil And Gas Industry ◽  
Petroleum Exploration ◽  
Geophysical Method ◽  
Gas Industry ◽  
Gravity Method ◽  
1960S And 1970S

The seismic method has been thriving in the oil and gas industry for decades. Technological progress in acquisition, processing and interpretation have made it practically the only geophysical method used for petroleum exploration. Unfortunately, gravity, as a pioneering geophysical method appears to have been completely forgotten in Australia’s oil and gas industry. Most of the gravity data in Australia were collected in the 1960s and 1970s. Only government agencies and a few exploration companies have conducted gravity surveys in petroleum basins since that time. Australia’s mostly flat terrain, economical aspects of the gravity method such as low cost and the ability to cover vast underexplored onshore basins in the country, all seem to be positive factors indicating that this method should be commonly used as a part of petroleum exploration. Given the petroleum industry is currently trying hard to make exploration more economically effective, this may be an opportunity to revive the gravity method in petroleum exploration.

Prospects and Challenges of Developing Unconventional Petroleum Resources in the Anambra Inland Basin of Nigeria

2016 ◽  
Author(s):  
K. Mosto Onuoha ◽  
Chidozie I. Dim
Keyword(s):  
Shale Gas ◽  
Oil And Gas ◽  
Petroleum Industry ◽  
Organic Content ◽  
Shale Oil ◽  
Thermal Maturity ◽  
Total Organic Content ◽  
Anambra Basin ◽  
Petroleum Resources ◽  
Oil And Gas Resources

ABSTRACT The boom in the development of unconventional petroleum resources, particularly shale gas in the United States of America during the last decade has had far reaching implications for energy markets across the world and particularly for Nigeria, a country that traditionally has been Africa’s leading crude oil producer and exporter. The Cretaceous Anambra Basin is currently the only inland basin in Nigeria where the existence of commercial quantities of oil and gas has been proven (outside the Tertiary Niger Delta Basin). The possibility of similarly finding commercially viable resources of unconventional petroleum resources in the basin appears quite attractive on the basis of the existence of seepages of shale oil and presence of coal-bed methane in some of the coal seams of the Mamu Formation (Lower Coal Measures) in the basin. This paper presents the results of our preliminary assessment of the shale oil and gas resources of the Anambra Basin. Our main objective is to locate the zones of very high quality plays within the basin, focusing on their depositional environments (whether marine or non-marine), areal extent of the target shale formations, gross shale intervals, total organic content, and thermal maturity. Data on the total organic content (TOC %, by weight) and thermal maturity of shales from different wells in the basin show that many of the shales have high TOCs (i.e greater than 2%) comparable to known shale gas and shale oil plays globally. Shale oil seepages are known to occur around Lokpanta in south-eastern Nigeria, but there is a general predominance of gas-prone facies in our inland basins indicating good prospects for finding unconventional petroleum in this and other Nigerian inland sedimentary basins. The main challenge to the exploration of unconventional resources in Nigeria today has to do with the absence of the enabling laws and regulatory framework governing their exploration and subsequent exploitation. The revised Petroleum Industry Bill (PIB) currently under consideration in the National Assembly is expected to introduce drastic and lasting changes in the way the petroleum industry business is conducted in the country, but all the provisions of the draft law pertain mainly to conventional oil and gas resources.

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