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Petroleum taxation. The effect on recovery rates

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  • Hiorth, Aksel
  • Osmundsen, Petter

Abstract

Petroleum tax design analysis usually abstracts from the fact that taxation affects not only project selection but also concept design and drainage strategy, and thereby the extraction and recovery rate. The implicit assumption is that oil companies are unresponsive to tax changes where concept selection and production decisions are concerned. In his novel approach, Smith (2014) develops a broader model which accounts for the additional effects. This provides a consistent framework which permits analysis of specific settings. Berg et al. (2018) apply the model to establish the effect of a reduction in uplift on the Norwegian continental shelf (NCS) and find, for this case, that the traditional assumption of an unresponsive company still holds.

Suggested Citation

  • Hiorth, Aksel & Osmundsen, Petter, 2020. "Petroleum taxation. The effect on recovery rates," Energy Economics, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:eneeco:v:87:y:2020:i:c:s0140988320300591
    DOI: 10.1016/j.eneco.2020.104720
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    References listed on IDEAS

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    1. Petter Osmundsen, Magne Emhjellen, Thore Johnsen, Alexander Kemp and Christian Riis, 2015. "Petroleum Taxation Contingent on Counter-Factual Investment Behaviour," The Energy Journal, International Association for Energy Economics, vol. 0(Adelman S).
    2. Smith, James L., 2013. "Issues in extractive resource taxation: A review of research methods and models," Resources Policy, Elsevier, vol. 38(3), pages 320-331.
    3. Robert D. Cairns and James L. Smith, 2019. "The Green Paradox, A Hotelling Cul de Sac," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    4. Smith, James L., 2014. "A parsimonious model of tax avoidance and distortions in petroleum exploration and development," Energy Economics, Elsevier, vol. 43(C), pages 140-157.
    5. Osmundsen, Petter & Roll, Kristin Helen & Tveteras, Ragnar, 2012. "Drilling speed—the relevance of experience," Energy Economics, Elsevier, vol. 34(3), pages 786-794.
    6. Skjerpen, Terje & Storrøsten, Halvor Briseid & Rosendahl, Knut Einar & Osmundsen, Petter, 2018. "Modelling and forecasting rig rates on the Norwegian Continental Shelf," Resource and Energy Economics, Elsevier, vol. 53(C), pages 220-239.
    7. Berg, Magnus & Bøhren, Øyvind & Vassnes, Erik, 2018. "Modeling the response to exogenous shocks: The capital uplift rate in petroleum taxation," Energy Economics, Elsevier, vol. 69(C), pages 442-455.
    8. James Poterba, 2010. "The Challenge of Tax Reform and Expanding the Tax Base," The Economic and Social Review, Economic and Social Studies, vol. 41(2), pages 133-148.
    9. A.G. Kemp & A.S. Kasim, 2005. "Are Decline Rates Really Exponential? Evidence From the UK Continental Shelf," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 27-50.
    10. Lorentzen, Sindre & Oglend, Atle & Osmundsen, Petter, 2017. "Cost overruns on the Norwegian continental shelf: The element of surprise," Energy, Elsevier, vol. 133(C), pages 1094-1107.
    11. Smith, James L. & Paddock, James L., 1984. "Regional modelling of oil discovery and production," Energy Economics, Elsevier, vol. 6(1), pages 5-13, January.
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    1. Eichhorn Colombo, Konrad W., 2023. "Financial resilience analysis of floating production, storage and offloading plant operated in Norwegian Arctic region: Case study using inter-/transdisciplinary system dynamics modeling and simulatio," Energy, Elsevier, vol. 268(C).

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    More about this item

    Keywords

    Petroleum taxation; Extraction rate; Drilling incentives;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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