13 A Critical Intertemporal Analysis of Uganda’s Fiscal Regime …
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characteristics constant. A theoretical regime for the future projects with
a progressive-based profit oil sharing mechanism based on the R-factor
was presented in line with recommendations from Cotarelli (2012),
Mintz and Chen (2012), and Mintz (2016).
The methodology utilized faced difficulties in choosing a reasonable
discount rate to account for risk subjected to the various components of
the project at different stages and prediction of the highly volatile future
resource prices. Hurdle rates of 9 and 12.5% were utilized as per Daniel
et al. (2010, 2016) and Osmundsen et al. (2017). The oil price uncertainty was handled by use of a base price and a monte carlo simulations
of the key project metrics to changes in the oil price (Daniel et al. 2010,
2016).
The study faced limitations with regard to obtaining proper estimates
and schedules of the exploration costs incurred to date. The analysis,
therefore, did not evaluate the impact of the exploration costs on the
key project metrics as the study assumes they were sunk costs. Furthermore, the fields were grouped as per the development proposals laid out
in Ward and Malov (2016) and subjected to the same fiscal regimes to
determine the required project metrics. However, in practice, it is anticipated that while the production facilities of the different fields will be
physically integrated, the fields in different license areas will be fiscally
separate.
13.2.3 Background on Uganda
Uganda has been cited as one of the fastest-growing economies in the
World in the past decade (Polus and Tycholiz 2016). In 2016, Uganda’s
Gross Domestic Product was approximately $25.53 billion (World Bank
2017) with an average annual growth rate of 4.5% over the past five
years to 2016 generating tax revenue of 14.6% of GDP (CIA 2017). The
country’s economy is constituted of 24.5% agriculture, 21% industry
and 54.4% services with the country largely dependent on agriculture
for both revenue and employment (World Bank 2017).
403
characteristics constant. A theoretical regime for the future projects with
a progressive-based profit oil sharing mechanism based on the R-factor
was presented in line with recommendations from Cotarelli (2012),
Mintz and Chen (2012), and Mintz (2016).
The methodology utilized faced difficulties in choosing a reasonable
discount rate to account for risk subjected to the various components of
the project at different stages and prediction of the highly volatile future
resource prices. Hurdle rates of 9 and 12.5% were utilized as per Daniel
et al. (2010, 2016) and Osmundsen et al. (2017). The oil price uncertainty was handled by use of a base price and a monte carlo simulations
of the key project metrics to changes in the oil price (Daniel et al. 2010,
2016).
The study faced limitations with regard to obtaining proper estimates
and schedules of the exploration costs incurred to date. The analysis,
therefore, did not evaluate the impact of the exploration costs on the
key project metrics as the study assumes they were sunk costs. Furthermore, the fields were grouped as per the development proposals laid out
in Ward and Malov (2016) and subjected to the same fiscal regimes to
determine the required project metrics. However, in practice, it is anticipated that while the production facilities of the different fields will be
physically integrated, the fields in different license areas will be fiscally
separate.
13.2.3 Background on Uganda
Uganda has been cited as one of the fastest-growing economies in the
World in the past decade (Polus and Tycholiz 2016). In 2016, Uganda’s
Gross Domestic Product was approximately $25.53 billion (World Bank
2017) with an average annual growth rate of 4.5% over the past five
years to 2016 generating tax revenue of 14.6% of GDP (CIA 2017). The
country’s economy is constituted of 24.5% agriculture, 21% industry
and 54.4% services with the country largely dependent on agriculture
for both revenue and employment (World Bank 2017).