ABSTRACT

This chapter addresses the main parameters that affect the economics of a petroleum project. These are often misunderstood by governments (and even more so by the media and the general public). From outside the industry there is a problem of comprehension of the sheer scale of the costs and the extent of risks involved in all the various phases related to the exploration, appraisal development, production and abandonment of an oil field. The aim here is to show not only how difficult it is for policy-makers to focus on the range of diverse circumstances which occur during the full activity cycle in the life of an oilfield, but how complicated in consequence the computation of taxation can be. Inevitably, although modern administrations contain many bright and knowledgeable minds, one is left wondering whether governments can be aware of these complications and whether they can understand them fully.