Competitiveness of shallow water hydrocarbon development projects in Mexico after 2015 actualization of fiscal reforms: Economic benchmark of new production sharing agreement versus typical U.S. federal lease terms

Competitiveness of shallow water hydrocarbon development projects in Mexico after 2015... Development of Mexican hydrocarbon reservoirs by foreign operators has become possible under Mexico's new Hydrocarbon Law, effective as per January 2015. Our study compares the economic returns of shallow water fields in the Gulf of Mexico applying the royalty and taxes due under the fiscal regimes of the U.S. and Mexico. The net present value (NPV) of the base case scenario is US$1.4 billion, assuming standard development and production cost (opex, capex), 10% discount rate accounting for the cost of capital and revenues computed using a reference oil price of $75/bbl. The impact on NPV of oil price volatility is accounted for in a sensitivity analysis. The split of the NPV of shallow water hydrocarbon assets between the two contractual parties, contractor and government, in Mexico and the U.S. is hugely different. Our base case shows that for similar field assets, Mexico's production sharing agreement allocates about $1,150 million to the government and $191 million to the contractor, while under U.S. license conditions the government take is about $700 million and contractor take is $553 million. The current production sharing agreement leaves some marginal shallow water fields in Mexico undeveloped for reasons detailed and quantified in our study. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Energy Policy Elsevier

Competitiveness of shallow water hydrocarbon development projects in Mexico after 2015 actualization of fiscal reforms: Economic benchmark of new production sharing agreement versus typical U.S. federal lease terms

Loading next page...
 
/lp/elsevier/competitiveness-of-shallow-water-hydrocarbon-development-projects-in-X0hRaMTOaJ
Publisher
Elsevier
Copyright
Copyright © 2016 Elsevier Ltd
ISSN
0301-4215
D.O.I.
10.1016/j.enpol.2016.05.048
Publisher site
See Article on Publisher Site

Abstract

Development of Mexican hydrocarbon reservoirs by foreign operators has become possible under Mexico's new Hydrocarbon Law, effective as per January 2015. Our study compares the economic returns of shallow water fields in the Gulf of Mexico applying the royalty and taxes due under the fiscal regimes of the U.S. and Mexico. The net present value (NPV) of the base case scenario is US$1.4 billion, assuming standard development and production cost (opex, capex), 10% discount rate accounting for the cost of capital and revenues computed using a reference oil price of $75/bbl. The impact on NPV of oil price volatility is accounted for in a sensitivity analysis. The split of the NPV of shallow water hydrocarbon assets between the two contractual parties, contractor and government, in Mexico and the U.S. is hugely different. Our base case shows that for similar field assets, Mexico's production sharing agreement allocates about $1,150 million to the government and $191 million to the contractor, while under U.S. license conditions the government take is about $700 million and contractor take is $553 million. The current production sharing agreement leaves some marginal shallow water fields in Mexico undeveloped for reasons detailed and quantified in our study.

Journal

Energy PolicyElsevier

Published: Sep 1, 2016

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches

$49/month

Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.

$588

$360/year

billed annually
Start Free Trial

14-day Free Trial