Estimation of net oil and gas reserves and sensitivity analysis of influencing factors for net present value under royalty & tax contracts – a case study on X project, Kazakhstan

Abstract

The Royalty & Tax Contract is one of the most common cooperation modes in the international petroleum industry. Under this mode, contractors take the share of net oil and gas reserves in kind, and pay royalties, income taxes and other taxes/fees to the landowner. The net reserves owned by a contractor refer to the remaining economical recoverable reserves that the contractor can obtain during the remaining contract period, and represent the contractor’s actual revenue. Taking the XX project in Kazakhstan as an example, this paper presented the method for estimating net oil and gas reserves under the Royalty & Tax Contract, discussed how the production, decline rate, development plan, oil prices, costs and taxes affect net reserves from the technical, economic, commercial and engineering perspective, and made sensitivity analysis of the most critical influence factors like oil production, oil prices, operation expenditure and investment. Finally, some development optimization and evaluation strategies were proposed to maximize the contractors’ economic benefits.