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Economic Evaluation of Nigerian Marginal Oil and Gas Field using Financial Simulation Analysis

Author

Listed:
  • Yusuf Opeyemi Akinwale

    (Faculty of Economic Sciences and Information Technology, North West University, Vaal Triangle Campus, South Africa,)

  • John-Felix Kayode Akinbami

    (Centre for Energy Research and Development, Obafemi Awolowo University, Ile-Ife, Nigeria.)

Abstract

Marginal oil and gas field could contribute immensely to wealth creation, employment generation and confidence in local oil firms if properly exploited by the indigenous firms. Despite the laudable marginal field initiative by the government, indigenous players still face challenges in exploiting these fields in Nigeria. This study evaluates the fiscal regime and the economic factors that could be hindering oil field development among the indigenous oil firms. The result of the financial cash flow modelling found that the marginal oil field s project is viable with post-tax net present value (NPV) and expected monetary value above $29 million. The petroleum profit tax, royalty and crude oil price have more impacts on the field s NPV. The study suggests a periodic assessment of the fiscal regime and appropriate policy by the government to encourage the local players in developing the marginal oil field.

Suggested Citation

  • Yusuf Opeyemi Akinwale & John-Felix Kayode Akinbami, 2016. "Economic Evaluation of Nigerian Marginal Oil and Gas Field using Financial Simulation Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 6(3), pages 563-574.
    • Handle: RePEc:eco:journ2:2016-03-22
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    References listed on IDEAS

    as
    1. Alexander G. Kemp, 1992. "Development Risks and Petroleum Fiscal Systems: a Comparative Study of the UK, Norway, Denmark and the Netherlands," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Luo, D.K. & Dai, Y.J. & Xia, L.Y., 2011. "Economic evaluation based policy analysis for coalbed methane industry in China," Energy, Elsevier, vol. 36(1), pages 360-368.
    3. Kaiser, Mark J. & Yu, Yunke, 2010. "Marginal production in the Gulf of Mexico - II. Model results," Applied Energy, Elsevier, vol. 87(8), pages 2526-2534, August.
    4. T. R. Stauffer & John C. Gault, 1985. "Exploration Risks and Mineral Taxation: How Fiscal Regimes Affect Exploration Incentives," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Zhang, Rongda & Wei, Jing & Zhao, Xiaoli & Liu, Yang, 2022. "Economic and environmental benefits of the integration between carbon sequestration and underground gas storage," Energy, Elsevier, vol. 260(C).

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    More about this item

    Keywords

    Indigenous; Marginal Oil and Gas Field; Financial Simulation; Government;
    All these keywords.

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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