Authors : Saad Balhasan, Biltayib Misbah, Mohamed Omar, Ibrahim Musbah and Belkasim Khameiss
Abstract: The Libyan economy is generating revenue through exploration and production oil agreements (EPSA). The contemporary taxation system when implemented on the project 137B offshore under the original EPSA 1, the project appraisal exposed that is was economically less attractive to the second party (TOTAL). To avoid that conflict of interest, it was suggested that EPSA 1 must be accordingly amended. This study is an attempt to document those proposed amendment to EPSA 1 and EPSA 3 to avoid the conflict of interest between Libyan National Oil Corporation (First Party, FP) and Total (Second Party, SP) and consequently to develop the 137 B, an economical offshore oil field. Based on estimates, two different decision-making models were coded in a spread-sheet program to estimate profitability indicators for the 137 B offshore field. The proposed amendments of EPSA 1 are as following: the production sharing 81% to first party and 19% to second party in addition, the Operating Expenditure (OPEX) sharing also 81% to first party and 19% to second party. Moreover, the Capital Expenditure (CAPEX) was sharing 50% to first party and 50% to second party. Furthermore, 100% exploration costs to be paid by the first party. It is proposed that the project profitability indicators Net Present Value (NPV) and Internal Rate of Return (IRR) of the second party were improved from $15 million to $165 million and 7-23%, respectively. The proposed amendments of EPSA 3 are as following: the total production to be shared equally by both parties in addition, the OPEX also to be shared equally by both parties. Moreover, the CAPEX was sharing 50% to first party and 50% to second party. Furthermore, the exploration costs 100% paid by the first party. The project profitability indicators NPV and IRR of the second party were improved from-$15-$319 million and 7-44%, respectively.
Saad Balhasan, Biltayib Misbah, Mohamed Omar, Ibrahim Musbah and Belkasim Khameiss, 2018. Impact of Proposal Changes to Libyan Oil Taxation System on Developing the 137 B Offshore Field. Journal of Engineering and Applied Sciences, 13: 6085-6090.