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Petroleum tax systems and risk sharing

Technical Report:

Abstract

We have focused on four different measures of risk, well known from the finance literature, namely sensitivity, standard deviation, coefficient of variation and finally probability of a negative expected net present value (NPV). While the two first measures show that the state carries most of the risk, the latter measures show the opposite result. Whether or not the project is developed on a stand-alone or on-going basis, has a crucial impact on much risk the company carries. We have also looked at the risk development as a consequence of changes in tax regime. While the two first measures of risk (sensitivity and standard deviation) show an increase in risk for the company from the pre 1987 tax regime to the 1987-1991 tax regime, and a decrease in risk as a consequence of the last change, the opposite is the case when we look at the two last measures of risk, namely coefficient of variation and probability of a negative expected NPV. The same is the conclusion for the state, except that the sign of change is the opposite that of the company. This analysis could have been extended to include a risk concept based on the well known Capital Asset  More>>
Authors:
Publication Date:
Dec 01, 1992
Product Type:
Technical Report
Report Number:
CMR-92-A30013
Reference Number:
SCA: 294002; 290201; 020700; PA: NW-93:005477; EDB-94:018733; NTS-94:008467; ERA-19:006817; SN: 94001129725
Resource Relation:
Other Information: PBD: Dec 1992
Subject:
29 ENERGY PLANNING, POLICY AND ECONOMY; 02 PETROLEUM; NORWAY; PETROLEUM; TAXES; GOVERNMENT POLICIES; ECONOMICS; RISK ASSESSMENT; STATISTICS; MONTE CARLO METHOD; SENSITIVITY ANALYSIS; 294002; 290201; 020700; ECONOMIC, INDUSTRIAL, AND BUSINESS ASPECTS
OSTI ID:
10115171
Research Organizations:
Christian Michelsen Research A/S, Bergen (Norway)
Country of Origin:
Norway
Language:
English
Other Identifying Numbers:
Other: ON: DE94730368; TRN: NO9305477
Availability:
OSTI; NTIS; INIS
Submitting Site:
NW
Size:
25 p.
Announcement Date:
Jun 30, 2005

Technical Report:

Citation Formats

Sunnevaag, K. Petroleum tax systems and risk sharing. Norway: N. p., 1992. Web.
Sunnevaag, K. Petroleum tax systems and risk sharing. Norway.
Sunnevaag, K. 1992. "Petroleum tax systems and risk sharing." Norway.
@misc{etde_10115171,
title = {Petroleum tax systems and risk sharing}
author = {Sunnevaag, K}
abstractNote = {We have focused on four different measures of risk, well known from the finance literature, namely sensitivity, standard deviation, coefficient of variation and finally probability of a negative expected net present value (NPV). While the two first measures show that the state carries most of the risk, the latter measures show the opposite result. Whether or not the project is developed on a stand-alone or on-going basis, has a crucial impact on much risk the company carries. We have also looked at the risk development as a consequence of changes in tax regime. While the two first measures of risk (sensitivity and standard deviation) show an increase in risk for the company from the pre 1987 tax regime to the 1987-1991 tax regime, and a decrease in risk as a consequence of the last change, the opposite is the case when we look at the two last measures of risk, namely coefficient of variation and probability of a negative expected NPV. The same is the conclusion for the state, except that the sign of change is the opposite that of the company. This analysis could have been extended to include a risk concept based on the well known Capital Asset Pricing Model, which is relevant risk, or covariance risk. This model concludes that the return on any risky asset is a function of the correlation between the return on this asset and the market portfolio. In this case only the projects contribution to the portfolio risk should be accounted for. For the Norwegian state it is not unreasonable to assume that the risk contribution of a medium sized oil field to a big portfolio of fields and onshore activities only is marginal. For the national or international oil company it is somewhat less marginal, and for a company developing the field on a stand-alone basis it is substantial. 12 refs., 15 figs.}
place = {Norway}
year = {1992}
month = {Dec}
}