Analysis of Environmental Bonding System for Oil and Gas Projects |
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Authors: | Ferreira Doneivan F Suslick Saul B Moura Paula C S S |
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Institution: | (1) Department of Geology and Natural Resources, State University of Campinas (UNICAMP), P.O. Box 6152, Campinas, SP 13083-970, Brazil;(2) Department of Mathematics, Statistics, and Computer Sciences, State University of Campinas, P.O. Box 6065, Campinas, SP 13083-970, Brazil |
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Abstract: | This paper is concerned with potential financial impacts of different bonding instruments on oil and gas projects. An algorithm was prepared in order to assist decision makers, both regulators and industry, evaluate potential Net Present Value (NPV) impacts of financial instruments used to satisfy bonding requirements. Instrument option is the main variable for the proposed model. The user will be able to select between four instruments (Letters of Credit, Prepaid Collateral Closure Accounts, Leasing Specific Closure Accounts, and Ex-post Insurance Policies). This study includes simulations for three producing fields of different economically recoverable reserves (9 MMbbl, 53 MMbbl, and 148 MMbbl5), where four financial instruments, in addition to a no instrument scenario, are tested under a proposed bonding regime. Sensitivity analysis of NPV and Government Take (GT) value indicate ex-post insurance policies and letters of credit cause fewer impacts yielding significantly better payoffs. Preliminary simulations also confirm that small projects, around 9 MMbbl, can be severely affected when collateral account instruments are used. |
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Keywords: | Financial assurance economic model bonding system |
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