Sensitivity and Scenario-Based Assessment of Petroleum Investment Resilience Under Nigeria’s PIA 2021 Fiscal Regime
DOI:
https://doi.org/10.54536/ajenr.v5i1.8783Keywords:
Investment Resilience, Petroleum Industry Act, Petroleum Investment, Scenario Base Analysis, Sensitivity Analysis, Upstream Oil & Gas SectorAbstract
The Nigeria Petroleum Industry Act (PIA) 2021 introduced a revised fiscal framework aimed at improving investment attractiveness and strengthening transparency and revenue generation in Nigeria’s upstream petroleum sector. However, petroleum investment projects are exposed to uncertainties from market factors, economic, and operational conditions, creating the need to access the upstream oil and gas petroleum investment resilience under the PIA 2021 fiscal regime. Using a Python-based Economic Evaluation and Investment Decision Support Tool (EEIDST) which was built by incorporating the fiscal provisions of PIA 2021, sensitivity and scenario-base analyses were conducted to examine the effects of varying the prices of crude oil and natural gas, hydrocarbon production, CAPEX, and OPEX on Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), Payback Period, and Government Take. The results from the sensitivity analysis showed that crude oil and hydrocarbon production are key drivers of project economic performance. At the base-case oil price of US$70/bbl, the project generated an NPV of $83.78 million, but at an oil price of $80/bbl, the NPV increased to $130.51 million, while it reduced to $26.95 million at an oil price of $60/bbl. Similarly, a 20% increase in the production relative to the base-case, generated a positive NPV of $127.47 million, which decreased to $30.73 million when production declined by 20%. The findings in this study indicates that the investment resilience of PIA 2021 is highly responsive to fluctuations in prices of crude oil and production. This study quantitatively evaluates the resilience of petroleum investment projects, which could be applied by stakeholders in the upstream oil and gas sector.
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