A proposed PSC fiscal regime for South Sudan's oil market: a new model harmonising contractor's and government's NPVs

Abstract

Investment decision of any company is depended on the economic benefits accruable from such project and to what rate its returns on investment would be. Economic evaluation of project's feasibility is largely based on NPV estimation which involves the discounting of future earnings to present and then, finding the net value to ascertain the present worth of the project and how much it could increase the company's share value. This paper presents a study on the impact of production sharing formula on the contractor's and government's net present values (NPVs) by using the production sharing contract (PSC) of four different countries: Malaysia, Indonesia, Brunei and South Sudan. Result reveals the significant influence of PSC regimes on project's NPV and a new PSC term is proposed to South Sudanese government that will increase its NPV to 13.4% and that of the contractor to 0.434% as against the current regime.