Impacts of R/T Elements on Contract Economics under Oil Price Uncertainty

摘要

Royalty-Tax system contract (R/T) is one of the most common types of cooperation modes in international petroleum contracts. The elements that affect R/T economics mainly include royalty and income tax. Assuming that oil prices follows the mean-reversion process, this paper takes the net present value (NPV) and the internal rate of return (IRR) as two economic indexes and models the PSC through setting 11 different scenarios by changing the value of each contract element. Then, after getting 100 oil price change routes, we mark off different intervals and calculate the cumulative probability according to the value of NPV and IRR, followed by comparative analysis of how the changes of different elements influence the contract economics. The study concludes that the impact of income tax is more significant than the royalty, and the FOC's ability to withstand oil price volatility will reduce drastically once the tax rate exceeds 30%.