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Appropriate Financing for Petroleum Development in Developing Countries

Tamir Agmon, Donald R. Lessard, and James L. Paddock

Year: 1984
Volume: Volume 5
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol5-No3-3
View Abstract

Abstract:
The availability of appropriate financing is likely to be a dominant factor determining the scope and pace of energy investment by developing countries in the 1980s. Reliance on self-finance will severely limit development for most countries, but traditional external finance-credit from private banks or multilateral agencies such as the World Bank-will probably play a smaller role than it did in the 1970s. External financing is less likely to be readily available now; at the same time, borrowers have become more aware of its limitations. Because of the time lags and uncertainties involved in most energy-related investments, the nature and volume of financing are likely to have a significant impact on the character and rate of investment.1 In fact, for enterprises or governments that are constrained1. While the relevance of finance to energy policy is clear, the research conducted to date has only scratched the surface. In one of the earliest studies of links between energy and finance, Agmon et al. (1979) examined the financial behavior of key OPEC members and considered the likely effect of changes in financial markets on their capacity and production decisions. Ben-Shahar (1976) and Moron (1978) evaluated the "revenue needs" of OPEC countries and related them to oil production scenarios. Dailami (1978, 1979a, 1979b) constructed econometric macrofinancial models of several oil-exporting countries; he then analyzed the impact of oil revenues on the countries' economy and the attendant influence of policy variables.



Assessing the U.S. Federal Tax Burden on Oil and Gas Extraction

Robert Lucke and Eric Toder

Year: 1987
Volume: Volume 8
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-5
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Abstract:
This paper assesses the burden of the Federal income tax on oil and gas extraction. It examines departures from neutrality between oil and gas and other activities, among different types of oil and gas properties, and between independent and integrated producers.' Effective tax rates on different oil and gas properties are derived by computing the required profitability on new investments, given the tax laws and an assumed after-tax discount rate.Our analysis shows that oil and gas extraction is taxed more favorably than most other business activities under both current law and the law in effect prior to the Tax Reform Act of 1986 (TRA). The effective tax rate on oil and gas investments is very sensitive to characteristics of the property and of the company developing it, but it is lower than effective tax rates on otherindustries in all the cases we examined.



Project Evaluation: A Pracitcal Asset Pricing Method

Henry D. Jacoby and David G. Laughton

Year: 1992
Volume: Volume 13
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No2-2
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Abstract:
This paper presents a practical approach to project evaluation using techniques of modern financial economics, with a sample application to oil development under a complex tax system. The method overcomes shortcomings of conventional discounted cash flow (DCF) methods which are either imprecise about the relation between economic value and uncertainty, or are rigid and unrealistic in the required assumptions about how a project's risks (and therefore its value) are influenced by market conditions, the project physical structure, and tax and contract provisions. It is based on the formulation and estimation of an "information model" which represents the resolution over time of uncertainties underlying a project (oil prices in the examples shown). The project can then be valued using derivative asset valuation, which replicates the consequences of a complex asset by a traded portfolio of simpler assets (in our case, riskless bonds and future claims on oil).



International Petroleum Taxation in the 1990s

Alexander G. Kemp

Year: 1994
Volume: Volume 15
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-NoSI-16
View Abstract

Abstract:
Since the major oil price explosion and collapse over the last 20 years, host governments in producing countries have made substantial changes to their petroleum tax systems. In many cases, these changes have resulted in more profit related systems being established. These have an inherent flexibility which is more appropriate for an environment of fluctuating prices. They are generally not accurately targeted on economic rents, however, and if oil prices remain low further discretionary changes may be required. In some important countries reliance on old-style systems targeted on gross revenues still remains. These are not well adapted to an era of low oil prices, and investment disincentives are present.



A Resource Whose Time Has Come? The Alberta oil Sands as an Economic Resource

Frank. J. Atkins and Alan J. MacFadyen

Year: 2008
Volume: Volume 29
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI-6
View Abstract

Abstract:
The Alberta oil sands, which comprise over 170 billion barrels of proven recoverable reserves, are a resource of an order of magnitude similar to many estimates of ultimate world conventional oil reserves. Campbell Watkins maintained a long-standing emphasis on the essential economic component of any meaningful definition of the world�s natural resources. The fact is that the Alberta oil sands have had a very shaky economic foundation until only recently. The intention of this paper is to examine this emerging resource from an economic perspective; one, it is hoped, similar to that which Watkins evinced, in order to fully assess the extent to which the Alberta oil sands may be regarded as being no different in any meaningful way from other oil resources.





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