How governments tax petroleum Will it change

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How governments tax petroleum-- Will it change?
Pedro van Meurs Thursday, March 15,
2007 BEAR STEARNS Van Meurs Corporation Nassau,
Bahamas Tel [phone] e-mail
info_at_vanmeurs.org
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How governments tax petroleum-- Will it change?
YES
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Government Take Trends

• The government take on oil and gas consists of
  many components
• bonuses
• royalties
• corporate income tax
• production sharing
• equity participation by governments
• special taxes and profit shares, and
• import duties, property taxes, etc.
• The government take is the total of all these
  payments as a share of the profit (before
  government take).

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Government Take Trends

• Three phases since 1974
• 1974 1984 strong increases in government
  take
• -- Increase in oil prices
• -- Reduction in acreage through
  nationalizations
• 1984 2003 decreases in government take
• -- Decrease in oil prices
• -- Expansion of acreage (political,
  privatizations, technology)
• 2003 2007 increases in government take
• -- Increase in oil prices
• -- Reduction of acreage (partial
  re-nationalizations, political
  restrictions)

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Government Take Decline 1984 - 2003Increase in
political acreage availability

• Eastern Europe
• Former Soviet Union Russia, Kazakhstan,
  Turkmenistan, Azerbaijan
• Venezuela, Peru, Brazil, Argentina,
  Bolivia, Cuba, Mexico
• China, Mongolia, Myanmar, Cambodia,
  Vietnam, India
• Saudi Arabia, Iran, Qatar
• Remaining Kuwait ?, Iraq ?

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Government Take decline 1984-2003 Increase in
technical acreage availability

• Rapid development of deep water technology
• New and improved pipelines opened inland
  basins Bolivia, Siberia, Chad and Sudan
• Improved LNG technology makes gas now a world
  wide commodity

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Government Take decline 1984 2003

• Many nations lowered their government take
• North Sea UK, Norway, the Netherlands,
  Denmark
• North America Canada, USA,
• Latin America Peru, Bolivia, Argentina
• Asia Pakistan, Thailand, Malaysia.
• North Africa Algeria, Egypt
• Africa Nigeria, Congo, Gabon, Angola

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Government Take Increase 2003 2007Oil

• Since 2003 oil and gas prices are increasing
• Acreage expansion has now reached a saturation
  point - Most petroleum basins are now
  accessible. No more new previously unexplored or
  unavailable acreage is coming on the market.
• In fact, political developments are now reducing
  acreage availability or making acreage less
  attractive Russia, Iraq, Iran, Venezuela,
  Bolivia
• Result Government take on oil is increasing
  again

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Government Take Increase 2003 2007Oil

• Increase in government take on oil is taking
  place along four different paths
• Fiscal systems are adjusting automatically
  upward because of the progressive structure of
  some systems Angola, Malaysia, Trinidad and
  Tobago, Russia and India
• Governments are changing fiscal terms UK,
  Alaska, Algeria and Kazakhstan. Alberta is
  now conducting a royalty review
• Companies are bidding up government take in
  bid rounds Libya, India
• Partial re-nationalizations Russia
  (Gazprom), Venezuela, Bolivia

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Government Take Increase 2003 2007Gas

• Government take trend for gas is less clear.
• Still considerable stranded gas reserves exist
  around the world.
• Therefore government takes for gas in some
  countries may stabilize or continue to decline
  and governments may instead seek greater market
  access Qatar, PNG, Peru, Venezuela, Norway,
  and Egypt.
• Nevertheless some other governments are
  increasing government takes on gas Nigeria,
  Russia, Bolivia and Algeria.

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Other important trendsLarge resource access

• Private petroleum companies may gain access to
  large resources through political change
• Middle East Iraq, Kuwait
• Mexico

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Other important trendsGlobal tax developments

• More homogeneous corporate income tax and
  continued decline of the corporate income tax
  rate.
• Greater use of Value Added Taxes
• Reduction of import duties and other cost based
  taxes

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Other important trendsIncreased diversity of
government take

• Special terms for
• natural gas
• heavy oils, oil sands, oil shale, coal bed
  methane, gas hydrates
• Frontier areas, deep water
• Gas to Liquids (GTL)
• Enhanced oil recovery or further field
  development contracts

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Conclusions

• The main new trends for oil and gas fiscal
  systems are
• a higher government take for oil
• in some cases a higher government take for gas
• lower corporate income tax
• more diverse fiscal systems

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