Task and Mark distribution: The First Oil from Offshore Ghana is expected in August 2020. The peak production will be 80,000 barrels per day. The STOIIP is evaluated to be 521 MMbls. The USD $9 billion project will be undertaken by Tullow Oil and its Partners. Production from the field is expected to last for at least 20 years at a water depth > 1000m. The Crude Oil will be transported by tankers and associated gas and formation water used for pressure maintenance via re-injection. The Offshore Volta Prime Point meets international Health, Safety and Environment (HSE) standards. The OVPP is expected to award contracts to Ghanaian Joint Ventures and indigenous companies valid at USD $ 2.5 Billion compliance to the Local Content Regulations- LI2204 Royalties 20% of annual production if water depth is< 600m, and 15% if water depth is > 1300m. Note: GNPC has no carried interest hence the high royalty. Income Tax and Additional Oil Entitlement A general Income Tax of 35% is to be applied to the project ROR AOE 12.5% 10% 17.5% 12.5% 22.5% 16% 27.5% 20% Exploration Cost US$405M SPS Capex: US$395M R&F Capex: US$560M Rig Rate: US$1.2M/day FPSO: Cost US$4.8B Sealine: US$430M Prices: Oil US$80/barrel Start Up-1st oil/ 2018 Down Time: 5% Other Fiscal Terms The New Income Tax Act 2015, Act 896 permit carry forward of Losses for 5 years and capital expenditure are allowed for 5 years to aid companies recover capital investment For this project Carry Forward Losses will not be allowed (Exclusivity). Additional Information The CAPEX for the IOC is USD $16 per barrel. The company uses 8% internal rate of return (IRR) as clearing/ hurdle rate for project in OECD countries but applies 12 % to this project due to the Countries profile. Your Task: As the Petroleum Economist on this project, execute the following tasks; 1. Evaluate the viability of the Offshore Volta Prime Point asset. 2. As part of your analysis, perform an evaluation of the fiscal regime to recommend potential changes that would support a win-win contract agreement between the host government and potential contractor Your submission must include: Clear indication of all technical (geological and engineering) and economic assumptions. For example water depth, production profile, field life, number of wells (production and injection), etc. Note that some assumptions will require justification/ evidence/ references as appropriate. 1. Sound cash flow analysis, to evidence all costs from exploration, development, production and marketing as well as al revenues. You must research appropriate natural gas prices and on that basis justify the natural gas price for this project 2. Use of data to justify your arguments/ proposals about the suitability of the fiscal regime 3. Evidence of research through critical analysis and synthesis of data sources 4. Recognition of the effects of fiscal provisions on the oil and gas project success 5. Sensitivity analysis to the projects input and output variables to recognise the changing impacts of operational, market and wider economic and political issues What is expected from this coursework? You will research and critically evaluate the fiscal/ (tax) regime for natural gas extraction in the Ghana and recommend any good fiscal practices for the Ghana Government for the development of its natural gas resources, using the OCTP project as a case study. Suggested themes to consider Introduction to the Ghana oil and gas industry 10 marks A concise introduction to the emerging oil and gas industry in Ghana and its state at present. Review of Ghanas fiscal regime for oil and gas development 15 marks A complete review of the Ghana fiscal regime, including relevant tax laws, local content laws, and all other regulatory provisions for oil and natural gas development and a critical analysis of the full impacts of fiscal provisions for industry and government short term and longer term effects of policies. [You will be rewarded for researching the full range of fiscal provisions for natural gas development in the Ghana, including references to, and analysis of the full range of relevant tax laws, regulatory provisions, permitting issues, environmental laws, (This will earn you up to 15marks). Economic Modelling 35 marks Here, you are expected to include evidences on the fiscal regimes economic viability and demonstrate a critique of the evidences/ modelled results, of the effects for government and industry. Your economic modelling should include as a minimum summarised tables, graphs, etc. of the results of net cash flows, Net present values, IRR, Payback period, Government Take, etc. analyses (this will earn you up to 20 marks). An inclusion of relevant research and justified set of assumptions will earn you up to (5 marks). You should then run a price- IRR sensitivity analysis or price NPV sensitivity analysis, production or EUR (estimated ultimate recovery) sensitivity analysis, opex sensitivity analysis and summarise the results for discussion about the commercial viability of the fiscal regime and hence its suitability. (The sensitivity analysis results will earn you up to 10 marks). Suitability of the fiscal regime 20 marks From your economic analysis, you are expected to summarise the economic implications of the fiscal regime and evidence its potential effects on the OCTP project and natural gas development in Ghana more generally. On the basis of your analysis and wider discussions on basin potential, markets, operating costs, political and economic risks, etc., propose an alternative fiscal framework or recommend suitable amendments or justify the suitability of the existing fiscal regime. (This section will earn you up to 20 marks). Conclusion and recommendation 10 marks [You will be rewarded for clearly summarising your research of the fiscal policy and emerging issues from your economic analyses (5 marks). In addition, you will be rewarded for making at least 5 recommendations regarding the viability and hence suitability of the Ghana fiscal regime for the development of natural gas in Ghana. This will earn you a further (5 marks) Referencing/ Appendices/ Structure, etc. (10 marks) You must use relevant Ghana government material tax/ fiscal documents, academic material journal articles, industry material and clearly reference these in a consistent manner. You must use relevant figures (and thoroughly discuss and outline their relevance to the report. Appendices You must include all models developed for this assignment and attach all relevant material to the coursework as well. You will lose marks if you fail to comply with this requirement. 12. Further Guidance Marks will be awarded based of the following: Notes: 1. You are expected to use the Harvard referencing format. For support and advice on how this students can contact. 2. Please notify your registry course support team and module leader for disability support. 3. Any student requiring an extension or deferral should follow the university process as outlined. 4. The University cannot take responsibility for any coursework lost or corrupted on disks, laptops or personal computer. Students should therefore regularly back-up any work and are advised to save it on the University system. 5. If there are technical or performance issues that prevent students submitting coursework through the online coursework submission system on the day of a coursework deadline, an appropriate extension to the coursework submission deadline will be agreed. This extension will normally be 24 hours or the next working day if the deadline falls on a Friday or over the weekend period. This will be communicated via email and as a CUMoodle announcement.