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Investment Allocation with Capital Constraints. Comparison of Fiscal Regimes

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  • Petter Osmundsen, Kjell Løvås, and Magne Emhjellen

Abstract

The dramatic fall in oil prices after 2014 has led to more extensive capital rationing in international oil companies, and subsequent fierce competition between resource extraction countries to attract scarce investment. This situation is not adequately addressed by the large general literature on international taxation and multinational companies, since it fails to take account of capital rationing in its assumption that companies sanction all projects with a positive net present after-tax value. The paper examines the effect of tax design on international capital allocation when companies ration capital. We analyse capital allocation and government take for four equal oil projects in three different fiscal regimes: the U.S. GoM, UK upstream and Norway offshore. Implications for optimal tax design are discussed.

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  • Petter Osmundsen, Kjell Løvås, and Magne Emhjellen, 2022. "Investment Allocation with Capital Constraints. Comparison of Fiscal Regimes," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej43-1-osmundsen
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    Cited by:

    1. Abdul-Salam, Yakubu & Kemp, Alex & Phimister, Euan, 2022. "Energy transition in the UKCS – Modelling the effects of carbon emission charges on upstream petroleum operations," Energy Economics, Elsevier, vol. 108(C).
    2. Abdul-Salam, Yakubu, 2024. "Examining the effect of the UK oil and gas windfall tax on the economics of new fields in the UKCS province," Resources Policy, Elsevier, vol. 88(C).

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    JEL classification:

    • F0 - International Economics - - General

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