Are tougher African fiscal terms achieving their aim? Report

Insight 04 November 2014

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Report summary

World-class exploration success in a number of Sub-Saharan countries has encouraged governments to toughen fiscal terms. However, it is unclear if increasing government take is achieving the aim of maximising government revenues. Tougher terms increase the economic threshold of future discoveries and can discourage further exploration investment. But if fiscal change is managed correctly, countries can avoid creating the ‘boom-and-bust’ cycles in investment and revenue generation.

Executive Summary
- Constant evolution, but delayed effect
  - Total government take in Sub-Saharan commercial assets (at 10% discount rate)
- Mature and emerging players are modifying terms
- but is it too much, too late for some plays?
  - Volumes discovered by licensing round and respective government share
  - Exploration investment and discovery size in Angola and Nigeria
  - Volumes discovered by licensing round and government share
- What can be done?
  - Appendix 1: Fiscal Terms for new Licenses/Contracts