Page 360 - Hydrocarbon Exploration and Production Second Edition

Petroleum Economics 347

OPEX ¼ $15 million
Technical cost ¼ $95 million
Royalty ¼ Revenues royalty rate ¼ $600 million 0.10 ¼ $60
million
Fiscal allowances ¼ Royalty + OPEX + capital allowance
¼ $60 million + $15 million + $50 million
¼ $125 million
Taxable income ¼ Revenue fiscal allowances
¼ $600 million $125 million ¼ $475 million
Tax ¼ Tax rate taxable income
¼ 0.50 $475 million
¼ $237.5 million
Project net cashflow ¼ Revenues CAPEX OPEX royalty tax
¼ $600–80–15–60–237.5 million
¼ $207.5 million
Host government take ¼ Tax+royalty
¼ $207.5 + 60 million
¼ $267.5 million

The above calculation has been demonstrated for just 1 year of the project.
In practice, the project net cashflow is constructed by performing the calculation for
every year of the project life. A typical project cashflow is shown in Figure 14.5,
along with a cumulative net cashflow showing how cumulative revenue is typically
split between the CAPEX, OPEX, the host government (through tax and royalty)
and the investor (say the oil company). The cumulative amount of money
accruing to the company at the end of the project is the cumulative net cashflow
(Figure 14.6).

600 net
cashflow
500
capex
400
tax
300
Cashflow $m 200 royalty

opex
100

0
1 2 3 4 5 6 7 8 9
100
Time (years)
-200
Figure 14.5 Components of a project cash£ow.