The Impact of Oil Price Plunge on Global Regime Attractiveness
One of the impacts of the global oil price plunge in 2015 is on the relative attractiveness of some host countries versus others. The following is a brief review on recent analysis by Palantir which was presented in SPE Calgary chapter (see the full report here).
The assumptions: Medium Oilfield 100 million bbls; lifting cost $30/bbl; Palantir forward curve (Q1’15); see more on assumptions on the slide deck.
Worst places to be
The analysis shows that the government take in R/T and PSC Brazil, R/T U.S., R/T Russia and PSC Yemen have increased by about 13 to 16 per cent in Q1’15 versus Q1’14. There might be room to optimize the business plan of investments in those countries through optimization of development plan (prioritization, schedule shift, phasing, de-risking the play, technology).
Best places to be
Interestingly there are contracts that actually the government take has diminished. Investments in such regimes are relatively more attractive in 2015/2016 low price environment. Also investments as such can be the anchor to the portfolio and can reduce portfolio risk. Top winner regimes where government take has diminished between Q1’14 to Q1’15 are R/T Norway, R/T U.K., PSC Angola, PSC Azerbaijan and Service Iraq (see below).
Newfoundland R/T regime least impacted to the 2014-2015 price plunge, so East Coast investments are still attractive from contracting regime point of view in 2015 low price environment. The next best regime is Alberta R/T oil sands that shows only a moderate increase of 2.7% in government take.
Being more immune to low price environment from contracting regime, coupled with the oil grade and proximity to the market offshore Newfoundland R/T stands out in the investment opportunity ranking in Canada. This is while Alberta Conventional had a hit of 16% value shift to government.