1.0 Introduction
1.1. Overview
Deepwater offshore exploration as much as it is a breakthrough in Petroleum Exploration and Production as it offers significant benefits over onshore production, still poses challenges to the oil and gas industry. The Gulf of Guinea (GOG) is an attractive place for investment in the oil and gas sector, opportunities abounds for petroleum exploration and production. Exploration and production in deepwater offshore have been proven to produce more oil and gas, add to proven reserves and generate more income for such producing nations. in the long run, production in deep waters will help the growing economies hence the demand for oil and gas globally.
The analysis of fiscal regimes which is one of the determinants of investment decision in the exploration and production of oil and gas is imperative for the Gulf of Guinea as it affects the interest of the investor and the production of crude oil. Several authors such as Temmy D. And Tumbur P. (2002), Costa Lima G.A. et al (2010) due to its significance, analyzed profitability of Fiscal regimes in the Asia Pacific countries and Brazil respectively, however, risk and uncertainties were not accounted for.
The Gulf of Guinea is the arm of the Atlantic Ocean, western Africa, between Cape Palmas, at the south-eastern tip of Liberia, and Cape Lopez, Gabon. Among the many rivers that drain into the Gulf of Guinea are the Niger and the Volta. The coastline on the gulf includes the Bight of Benin and the Bight of Bonny. The Niger River in particular deposited organic sediments out to sea over millions of years which became crude oil. This region is now regarded as one of the world's top oil and gas exploration hotspots and most promising petroleum provinces (Microsoft Encarta, 2009). The countries of the Gulf of Guinea, an area in the West and Central Africa coast are made up of Nigeria, Equatorial Guinea, Gabon, Ghana, Liberia, Togo, Cameroon, Benin, Ivory Coast, Angola, Congo, Guinea, and the islands of Sao Tome and Principe. Islands in the GOG that are part of Equatorial Guinea are Annobon, Bioko, Corisco, Elobey Grande and Elobey Chico (Wikipedia, 2011). Some countries like Nigeria and Angola are already producing from offshore areas in the GOG, while others are starting to conduct exploration activities. By some estimates, West Africa already has up to 547 major offshore oil and gas structures.
Currently, offshore production accounts for up to 30% of the world's oil and gas production. That percentage is expected to rise in the future. Estimates indicate that the GOG and African countries already supplies about 11% of world's oil and gas needs and holds about 10% of the world's proven reserves (PWC, 2010). However, this number is expected to grow, given that exploration is only now commencing in some offshore areas.
1.2. Statement of the Problem
Several studies have been done on the comparative competitiveness of Petroleum Fiscal Systems (PFS) in the Gulf of Mexico (GOM), Brazil, Australia, Malaysia, etc., but none has been done for the GOG. Though Merak Projects PEEP has fiscal models for some GOG countries, they are in isolation for commercial purposes. Therefore, in this study, an integrated PFS of various fiscal regimes in the GOG will be modelled; implemented and proposed PFS in countries in the GOG will be analyzed as well as the uniqueness of each country. The same field data (hypothetical or real) will be used to forecast production and costs.
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