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Profit Oil calculated based on well productivity can be a good alternative (to Revenue over Cost) for a progressive fiscal terms
- Although well productivity isn’t a direct indication of profitability, similar to production it still can be a good and reliable proxy.
- Unlike production (total volume or rate), it also “considers” the cost part with inclusion of well counts
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It can be modeled to behave dynamically to number of producer you need to have with average well productivity especially towards the end of PSC life
- This makes it more agile than Revenue over Cost that relies on cumulative summation (yearly RoC is not practical due to cost-revenue mismatch)
- This also makes it more forgiving when productivity is low and able to quickly readjust and ensure prolonged economical production year. Reverse is also that it can quickly clawback when well productivity is high.
Example of PO based on well productivity
| Price / Productivity |
5kbd | 10kbd | 15kbd | 20kbd | 25kbd |
|---|---|---|---|---|---|
| USD25/bbl | 70% | 65% | 60% | 55% | 50% |
| USD50/bbl | 65% | 60% | 55% | 50% | 45% |
| USD75/bbl | 60% | 55% | 50% | 45% | 40% |
| USD100/bbl | 55% | 50% | 45% | 40% | 35% |
| USD125/bbl | 50% | 45% | 40% | 35% | 30% |
References
- Personal experience with Brazil’s PSC
Metadata
- topic:: 00 Engineering Economics00 Engineering Economics
#MOC / for economics notes with focus on petroleum fiscal and engineering
- updated:: 2022-11-08 Private or Broken Links
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- reviewed:: 2022-11-08 Private or Broken Links
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