Production Royalty Sliding Scales

Gowharzad, H. T.; Al-Harthy, Mansoor H.

doi:10.1080/15567240903419393

Cited by 5 publications

(6 citation statements)

References 3 publications

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“…On the other hand, investors participate in royalties through production to the surface, and most of the investors attempt to extend their interest through demand to adjust royalty rates to suit them and warn that any attempt to increase royalty rates may discourage investment (Onifade, 2017). Moreover, concerning changes in production as relating to royalty, Gowharzad and Al-Harthy (2011) argued that there will be a higher royalty rate as production increases; therefore, the government will eventually benefit from an increase in production and also charge lower royalty rate as production decreases. Cawood (2001) submitted that the broad range of mineral royalties found globally could be subdivided in to three main categories as follows: lump sum; profit royalties; and production royalty, while profit and production royalties are basically periodic, the lump sum royalties signify an outright purchase of mineral rights at fair market value. …”

Section: Literature Reviewmentioning

confidence: 99%

“…However, oil companies are faced with many decision-making issues nowadays, especially on investment decisions to choose the appropriate and more profitable business to embark upon. To determine the success of investment decisions by oil companies in the international oil and gas setting, fiscal regimes are key factors in determining the success of investment decisions (Gowharzad and Al-Harthy, 2011). Manaf et al (2016) states that petroleum fiscal system is usually categorized under three subheadings; production sharing contract, service contract, and concessionary which is popularly known as Royalty/Tax.…”

Section: Introductionmentioning

confidence: 99%

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Validating oil and gas royalty rate measurement scale: evidence from Nigeria

Ya’u¹,

Saad

Mas’ud

2020

IJESM

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Purpose This study aims to validate the royalty rate measurement scale by using rigorous scale validation procedures. Design/methodology/approach Evaluation of reliability and validity of the measures of royalty rate was performed through confirmatory factor analysis (CFA) using SPSS version 25 and PLS-SEM version 3.8. Findings The results provide evidence that the royalty rate measurement scale has achieved reliability and validity criteria. Research limitations/implications Consequently, policymakers, practitioners and researchers can adopt this scale to assess the royalty rate in other energy sectors where royalty arrangements exist in different jurisdictions across the globe. Practical implications The practical contributions of the study are threefold. First, the validated scale presented in Table IV can serve as a checklist for oil and gas producing countries while assessing the stringiness or otherwise of their royalty rates. Second, the validated scale can be used to assess the perception of oil and gas companies with regards to the royalty rate as whether the rate is too high and worrisome or is acceptable. Finally, it could also be used to assess the role of regulatory bodies in assessing royalty rates while dealing with multinational and local oil companies. Eventually, the scale can assist policymakers across the globe to adapt in investment decision-making, particularly regarding royalty arrangement. Originality/value This study undoubtedly builds the existing literature and contributes to the subject area; by implication, the validated scale will assist host oil and gas countries with stringent royalty rate to revise the royalty policy in such a way to ensure neutrality, thereby not chasing away the current investors or discouraging prospective ones from investing in their oil and gas industry.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Validating oil and gas royalty rate measurement scale: evidence from Nigeria

Ya’u¹,

Saad

Mas’ud

2020

IJESM

View full text Add to dashboard Cite

show abstract

“…On the other hand, investors participate in royalties through production, and most investors extend their interests through demands to adjust the royalty rates to suit them and warn that any attempt to increase royalty rates may discourage investment (Onifade, 2017). Moreover, concerning changes in production relating to royalty, Gowharzad and Al-Harthy (2011) argued that there will be a higher royalty rate as production increases, therefore, the government will eventually benefit from an increase in production and also charge lower royalty rates as production decreases. Though the relationship between royalty rates and petroleum profit tax compliance has not been critically investigated, studies are available that indicate the significance of studying the sector as well as the variables concerning taxation which could serve as the basis for forming the hypotheses.…”

Section: Royalty Ratesmentioning

confidence: 99%

Effect of Tax Rates, Penalty Rate, Detection Probability, Cost of Compliance, Royalty Rates, Environmental Regulations, and Petroleum Profit Tax Compliance the Moderating Role of Trust in Government: A Conceptual Framework

Ya’u

Saad

Mas’ud

2019

JBMA

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The paper presents a theoretical framework on the moderating effect of trust in authority on the relationship between tax rates, penalty, detection probability, cost of compliance, royalty rates, environmental regulations, and petroleum profit tax compliance. The objective of the proposed framework is to expand the Allingham and Sandmo (1972) model of tax compliance by adding two more predictor variables relevant to the oil and gas industry (royalty rates and environmental regulations), and moderating variable (trust) to better explain the relationship. Allingham and Sandmo (1972) model received a lot of criticisms for not considering other non-human factors that can help in determining taxpayers’ compliance behavior, hence the expansion of the model to include new variables, purely non-human factors which are relevant to the industry in question. A thorough search of the following databases: Scopus database, Web of Science, Emerald, Google Scholar, among others was conducted to come up with the relevant and related literature on the subject matter. Providing empirical evidence through validation of this framework would have important implications for policymakers in host oil and gas producing countries, oil and gas operators, the deterrence theory as well as future research.

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“…To address the regressive nature of the fiscal element certain royalty methods based on sliding scale, ROR or R Factors are used. It is evident from the Gowharzad and Al‐Harthy () that there is an incentive to increase production for the method of weighted and unweighted sliding scale royalty rates and the country can select either of the method based on the factual nature of their resource availability. Contractors have more incentive to raise production under the weighted method than non‐weighted method.…”

Section: Non‐tax Elementsmentioning

confidence: 99%

Fiscal regime design elements and relative regime ranking for concessions

Rao¹

2017

OPEC Energy Review

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The technological breakthrough in the oil and gas sector has made it possible for the companies to diversify their investment portfolio but it is quite challenging to select a balanced and stable regime to mitigate the country risks associated with investments especially in a volatile price environment. The project economics calculation to evaluate fiscal regime sometimes proves out to be a difficult task for corporate planners to model and make conclusions for investments. It is also a challenge for the government to maximize the revenue from their resources and for the contractor to choose a suitable investment destination. There is a scope in current fiscal analysis literature for a single indicator which can contribute towards the overall comparison of fiscal regimes. This paper will evaluate the design aspects of fiscal terms of a concession regime and will address the generic concern of fiscal regime evaluation through a Relative Fiscal Ranking (The Relative Fiscal Ranking is the evaluation of two or more fiscal regimes benchmarked against the most attractive fiscal regime with desired fiscal terms set/calculated by the investors.) methodology applied on a set of concession regimes. This method will directly establish a unique functionality between the fiscal terms and their attractiveness which will ultimately expose the relative risk associated with fiscal regimes when they are compared against each other. It generates key insights for investment decisions and can help the policy makers and corporate planners to take informed decisions.

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Production Royalty Sliding Scales

Cited by 5 publications

References 3 publications

Validating oil and gas royalty rate measurement scale: evidence from Nigeria

Validating oil and gas royalty rate measurement scale: evidence from Nigeria

Effect of Tax Rates, Penalty Rate, Detection Probability, Cost of Compliance, Royalty Rates, Environmental Regulations, and Petroleum Profit Tax Compliance the Moderating Role of Trust in Government: A Conceptual Framework

Fiscal regime design elements and relative regime ranking for concessions

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