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Oil Project Economic Analysis Guide

This document provides details on the Tawes Project, including capital expenditures, annual oil production volumes, pricing assumptions, tax rates, and operating expenses. It requests an economic analysis of the project, including a cashflow analysis for the contractor, calculation of NPV at various discount rates, IRR using graph and interpolation methods, sensitivity analysis using tornado and spider plots, and a recommendation on whether the project should proceed given a 20% company hurdle rate.

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Pejal Sahak
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230 views2 pages

Oil Project Economic Analysis Guide

This document provides details on the Tawes Project, including capital expenditures, annual oil production volumes, pricing assumptions, tax rates, and operating expenses. It requests an economic analysis of the project, including a cashflow analysis for the contractor, calculation of NPV at various discount rates, IRR using graph and interpolation methods, sensitivity analysis using tornado and spider plots, and a recommendation on whether the project should proceed given a 20% company hurdle rate.

Uploaded by

Pejal Sahak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Project

Given the details as below on the Tawes Project.

YEA CAPEX, Q,
R MM$ bbl/d
1 70
2 20
3 1,500
4 2,500
5 4,000
6 5,000
7 5,200
8 5,000
9 4,300
10 2,100
11 1,100
12 950

Simple PSC:
Oil Price, $/bbl 100
Royalty rate 10%
Cost oil ceiling 30%
Contractor's profit oil sharing 35%
Depreciation rate 10% from total CAPEX
Income Tax rate 40%
Fixed OPEX per year, MM$ 2.00
1 year = 365 operating days
Assumption No bonus payment, no research cess, no supplementary
payment, all oil for domestic used.

1. Perform the economic analysis on this project, and provide complete cashflow for Contactor. You
must consider tax losses carryforward.

Tax paid will be zero for the year that the taxable income is negative. This negative taxable income for
that particular year, is to be carry forward to the following year, hence, it will reduce the taxable
income for the following year.

2. Plot and discuss the graph that represent the Net Cash Flow (NCF) and Cumulative Cash Flow
(CCF).
3. Determine NPV@ 5%, 10%, 15%, 20%, 25% and 30%.
4. Determine the IRR using both graph method and interpolation method, discuss if there is
difference on values obtained between these two methods.
5. Determine/calculate other economic indicators that can assist in decision making.
6. Perform Sensitivity Analysis using Tornado Diagram and Spider Plot for +/- 10%, 20% and 30%
changes on these parameter: - oil price, oil production, CAPEX, OPEX. Discuss your results gains
from both methods.
7. Assume that the company hurdle rate is 20%. Discuss either your company should proceed with
this project or not.

Please use Arial size 10, for your report. Your report must include: -
1. Front page (Title of Project, Student Name & ID, Date and Lecturer’s Name).
2. Executive Summary.
3. Results and Discussion.
4. Complete table of each cashflow, which can be put as Appendix.

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