Challenges of Designing an Optimal Petroleum Fiscal … · Challenges of Designing an Optimal Petroleum Fiscal Model in Latin America Roger Tissot I n recent years, a number of LatIn

Challenges of Designing an Optimal Petroleum Fiscal Model

in Latin AmericaRoger Tissot

In recent years, a number of LatIn amerIcan countrIes have experienced drastic changes in the fiscal structures of their petroleum sectors. these changes resulted

in significant rent increases by host governments but also declining investments in exploration. Lowered exploration activity reduces the ability to replace hydrocarbon reserves. as shown in figure 1,1 Latin american reserves have increased by a modest 0.7 percent per year since 1990.

energy

working paper

October 2010

Roger Tissot, a distinguished economist, is an independent consultant who focuses on Latin America’s energy policy, markets, and strategy, advising mostly Canadian and international oil and gas companies.

figure 2 shows the change in oil reserves in the main oil-producing countries of Latin america (bolivian data represents natural gas reserves measured as barrels of oil equivalent) between 2004 and 2008. except for brazil and Venezuela2 the rest of the region presents stagnating or declining reserves.

1 source: bP energy Journal statistics. the drop in oil reserves in 1998 is due to re-evaluation of reserves in mexico.

2 We excluded from the graph Venezuela’s oil reserves for visual purposes. Venezuelan reserves in 2004 were 79.7 bb barrels, and in 2008 they increased to 99.4 bb barrels, not including the massive reserves from the orinoco belt, which could be as high as 200 bb barrels or more according to government data and the u.s. Geological survey.

as shown in figure 3, oil prices in 2004 began a constant climb that peaked in the summer of 2008 when they surpassed $140/barrel. oil-producing countries, conscious of past price booms and busts, were initially reluc-tant to modify contractual terms.3 eventually

3 Venezuela changed its contractual terms in 2001 only three years after President Hugo chávez was elected. chávez’s drive for a different contractual model was motivated by political strategy centered on maximizing returns from a close cooperation within oPec. that led to higher oil prices, more control over the noc, and leveraging of the massive orinoco oil projects as a tool for foreign policy influence and local industrialization development. However, despite tightening terms, the chávez administration did not enforce them during the “low oil price period.” most of the resource-nationalist changes have been adopted since 2004.

0

20

40

60

80

100

120

140

160

Billi

ons

of b

arre

ls

–20%

–15%

–10%

–5%

0%

5%

10%

15%

20%

1990 1995 2000 2005 2008

Oil reserves Percent change in oil reserves

Figure 1. Latin American Petroleum Reserves and Percent Change

2 Challenges of Designing an Optimal Petroleum Fiscal Model in Latin America

governments started to change terms believ-ing that price increases were “structural.” the rise in oil demand from industrializing countries, particularly china and India, plus growing pessimism vis-a-vis the industry’s abil-ity to supply more oil, sparked a trend toward high oil prices. since that summer, prices have experienced a severe downgrading adjustment followed by a slow movement upward.

the ability to replace hydrocarbon reserves is influenced by the level of investment in explora-tion activities. Governments have two options:

1. invest directly in exploration activities or

2. ask private companies to invest

In the first case, the ability of the entity—usu-ally the national oil company (noc)—to make

investments is dependent on the skill level of the country’s workforce, the government’s finan-cial capabilities and its aversion to risk, and the noc’s level of financial and strategic independ-ence from other government authorities. Political authorities tend to be risk averse, preferring to use scarce financial resources for projects aimed at improving social conditions or economic development. Political ideology and constituency preferences also influence investment.

the noc has to compete with other government authorities for the funding to make its invest-ments. the more dependent the government is on noc revenues, the less independence the noc is granted. In this case, the noc is more likely to be risk averse, focus most investments on sustaining production from existing wells, and implement only modest exploration activities in the most prospective areas.

Billi

ons

of b

arre

ls

Mexico Argentina Brazil Colombia Ecuador Peru Trinidad& Tobago

Bolivia*0

2

4

6

8

10

12

14

162004 2008

Figure 2. Changes in Hydrocarbon Reserves in Latin America

*Bolivian data represents natural gas reserves measured as barrels of oil equivalent

U.S.

dol

lars

per

bar

rel

Figure 3. Brent Spot Price

1/1/

996/

18/9

912

/3/9

95/

26/2

000

11/1

7/20

005/

4/20

0110

/19/

2001

4/5/

2002

9/20

/200

23/

7/20

038/

22/2

003

2/6/

2004

7/23

/200

41/

7/20

056/

24/2

005

12/9

/200

55/

26/2

006

11/1

0/20

064/

27/2

007

10/1

2/20

073/

28/2

008

9/12

/200

82/

27/2

009

8/14

/200

91/

29/2

010

6/18

/201

0

0

20

40

60

80

100

120

140

160

The more dependent the

government is on NOC revenues, the less independence

the NOC is granted.

Inter-American Dialogue • Energy Working Paper • Roger Tissot 3

sometimes nocs manage to achieve sig-nificant independence from the government despite being the authorities’ main source of cash. However, the sustainability of noc independence hinges upon the:

1. noc’s ability to meet the government’s financial needs

2. capacity to produce and replace reserves efficiently

3. endorsement by the top political authorities of the noc’s strategic activities

If these conditions are not met, what often results is a cash-starved and risk-averse noc unable to carry on exploration alone.

the other option then is for governments to offer development rights via a concession to international oil companies (Iocs) or to part-ner with them in exchange for a share of the production or the profits. the option selected is defined by the government’s choice of petro-leum fiscal models.

It is often said that there are as many petro-leum fiscal models as there are oil plays in the world. However, most of the models can be arranged into the “family of models” presented in figure 4.4

the “family of models” represents legal con-tracts or agreements covering rights granted

4 Daniel Johnston, International Petroleum Fiscal Systems and Production Sharing Contracts (tulsa, oK: PennWell Publishing company, 1994) 25.

over a period of time and for an agreed level of activity. “the difference in these systems is mainly the mechanics of risk and reward sharing between the contractor and the government.”5 therefore, the choice of a fiscal system is often a signal by the government to the investors regarding the level of risk and re-ward the government is willing to offer them.

the design of the optimal fiscal model has profound implications. It defines how the petroleum rent is shared by the government and the Iocs. oil rents are the main source of government revenue and exports; thus, fiscal models have a direct impact on the macro-economic indicators such as fiscal and trade balance. finally, fiscal models impact the coun-try’s level of exploration activity and, therefore, the country’s ability to replace reserves.

Government Questions when Designing a Fiscal Model

“In designing a fiscal system, a government has to answer the following questions: What is the effect of the fiscal regime on oil and gas output? Does it discourage the development of marginal fields? Does it influence the pace of development? Does it favor early abandon-ment? Is it insensitive to oil/gas price and

5 m.a. mian, saudi aramco, “Designing efficient fiscal systems” (presentation, society of Petroleum engineers Hydrocarbon economics and evaluation symposium, Dallas, tX, march 9, 2010).

Figure 4. Family of Petroleum Fiscal Models

Family of Petroleum Contracts

Contractual

Pure ServiceContracts

Concessionary

Pro�t SharingAgreements

Risk ServiceContracts

It is often said that there are as many petroleum fiscal models as there are oil plays in the world.


cost variations? In other words, how flexible, neutral, and stable is the fiscal regime?”6

a flexible fiscal regime is one where the government will have an adequate share of the rent at different levels of profitability. the dif-ference between flexible or inflexible regimes depends on the moment of payment. the more back-end loaded the regime is—that is, the fur-ther down payments are made after revenues are generated—the more flexible the model would be. flexible models offer a greater degree of stability since as market conditions change, their flexibility reduces the need for renegotiation. However, the main challenge of these systems is the difference in the discount rate of the company and the “social discount rate” of the government. Governments with high social discount rates would prefer front-end systems.

neutral fiscal regimes are those that neither affect investment behavior in favor of or against oil exploration activities nor distort resource allocations. a tax is defined as neutral “when it leaves the pre-tax ranking of possible

6 silvana tordo, “fiscal systems for Hydrocarbons, Design Issues,” working paper no. 123, World bank, Washington, Dc, 2007.

7 based on Pedro Van meurs’ seminar, “World Petroleum fiscal system,” designed by author.

investment outcomes equal to the post-tax ranking.”8 Governments desiring to improve the geological knowledge of their country will offer a series of tax incentives aimed at reducing exploration risk for the Iocs. In some cases, governments may subsidize certain activities directly. exploration subsidies could result in inefficiencies as Iocs invest in exploration mostly because of the subsidy benefit, as opposed to expectations of a com-mercial discovery.

one of the main concerns for Iocs is the stability of contracts. oil projects are long-term ventures with significant upfront costs and high levels of uncertainty when it comes to cash- flow expectations. oil prices are volatile, and reserve levels and production profiles can also vary significantly. those are risks Iocs are willing to assume. risks caused by changes in agreed contract terms are considered unac-ceptable by Iocs. However, by the nature of the investments, Iocs are also subject to “obsolescence bargaining,”9 and, as external

8 tordo, “fiscal systems for Hydrocarbons, Design Issues,” 14.

9 obsolescence bargaining is a term coined by raymond Vernon and assumes that investors have limited influence on the investment environment ex post because the sunk costs associated with start-up shift the bargaining position to the host government.

Figure 5. Regressive and Progressive Petroleum Fiscal Models

Signaturebonuses

Import duties,VAT

Royalty

Cost oil limits

Productionbonuses

Income TaxesResourcerent tax

RegressiveFront-end Loaded

NeutralBack-end Loaded

Base Exploration Development Production Abandonment

Productionstarts

Payouttime

Carriedgovernmentparticipation

Risks caused by changes in

contract terms are considered unacceptable

by IOCs.


conditions change or new information regard-ing the geological potential of the country is available, governments are motivated to revise agreements. companies with large “stranded costs” invested in the country are reluctant to leave the project, opting instead to accept the new terms demanded by governments. companies in that situation, however, would also reduce or cancel new investment programs in the country.

a fiscal regime is defined as stable when it does not change over a certain period of time or its changes are predictable. royalty/tax-based regimes have an intrinsic instability since governments cannot deny future admin-istrations the right to legislate taxation. from that perspective, contractual regimes are more stable since income taxes are often paid by the government on behalf of the Ioc.

Iocs can demand “stabilization clauses.” Included in the agreement between the gov-ernment and the Ioc, these clauses guarantee the terms of the agreements will remain stable. examples of stabilization clauses are:

1. the agreement between the Ioc and the government takes the form of law and any future legislation that impacts the Ioc would require a change in the general legislation.

2. the government recognizes an economic balancing provision. for example, if a change in the tax regime is later legislated, an auto-matic change in the clauses of the contract is adopted to ensure the Ioc the expected returns agreed to under the original terms and conditions of the contract.

3. the contract includes renegotiation clauses that modify the initial agreement when certain events take place.

a common risk mitigation feature is Iocs’ demand for access to international arbitration in case of a legal dispute with the host coun-try. During the 1990s, a period characterized by low oil prices and governments’ desire

to attract private investments, governments agreed to bilateral trade agreements that tend to supersede local legislation. Governments also agreed to international arbitration in case of disputes.

In recent years, a number of Latin american countries have moved away from international arbitration, often seen as biased in favor of Iocs. this perception of bias may have more to do with the motivation and resources of both participants. Large Iocs have broad finan-cial capabilities and access to sophisticated expertise; they also tend to be more focused. Governments often have fewer financial capabilities and their focus and expertise are limited—often by the frequent rotation of key government officers in charge of the hydrocar-bon portfolio.

Mechanics of Different Fiscal Models

the first petroleum contracts were conces-sions that included vast tracks of land, in some cases entire countries. resource owners were entitled only to a small fee from the produc-tion of oil. Iocs had complete control of the operations and decisions regarding output. royalties were usually a small fixed percent-age of output. When prices were low, produc-ers could curtail output without any penalty but causing significant harm to the income of producing countries.

the de-colonization process of the 1950s and 1960s in the middle east brought significant changes to the concessionary model. the advent of “independent” companies weakened the oligopoly of the “seven sisters.” new contractual terms were negotiated, first by granting higher royalties to host countries. eventually, oil-producing nations wanted to secure more direct control over operations. Indonesia developed in the 1960s what became known as the Profit sharing agreement (Psa). some countries even closed their sector to

Large IOCs have broad financial capabilities and access to sophisticated expertise; they also tend to be more focused.


Iocs’ activities—or permitted only a modest participation through service contracts.10

Concessionary Agreementsunder a concession agreement, the Ioc is granted the exclusive right to explore and produce in the concession area. the Ioc is entitled to ownership of all hydrocarbons produced at the wellhead, minus a royalty payment. below-ground reserves are owned by the government in most cases.11

In exchange for the exclusive right to produce hydrocarbons, Iocs are charged a royalty and income taxes. other forms of government payments are common in concession systems, including bonuses, rentals, special petroleum taxes, windfall profit taxes, property taxes, and export duties. the royalty can be provided in cash or kind to the government. title expires at the end of the concession period, and usu-ally all assets transfer to the government. Iocs are also responsible for abandonment costs.

following is a list of the main sources of rent capture common in a concession system.

Bonuses. bonuses are usually paid by the Ioc at the time a contract is signed. they are often a biddable variable. bonuses are the most regressive of rents since they are paid before any investment has been made. Governments like bonuses because they provide an early income and require minimum administrative controls. However, bonuses increase explo-ration and production (e&P) costs, tend to discourage risk-averse investors (usually small

10 It is important to note that mexico closed its door to Iocs in 1938. However, by then the super majors had focused on Venezuela and, as Venezuela’s “resource nationalism” resulted in constant demands for higher government take, on the middle east. by the time the middle east nationalization occurred, contrary to mexico, the middle east was the largest and most prolific supplier of oil worldwide.

11 the united states and the united Kingdom are the rare cases where ownership of the resource is granted below ground.

companies), and usually shorten the economic life of a project.

Royalties. royalties are usually a charge on volume produced or on the value (add-valorem royalty) of production or export. royalties are considered a regressive form of rent capture since they are charged at the gross production level. to reduce regression, governments can apply sliding-scale royalties based on produc-tion levels, sale values, water or well depth, or r-factors.12

according to manzano and moldani,13 a royalty regime performs poorly in capturing rents during a period of increasing oil prices. “as oil prices rise, a set royalty rate captures less rent than a set income tax rate. royalty rates are typically lower than income taxes. If a government wants a specific share of the profits, leaving aside behavioural changes, it needs a higher income tax than a royalty rate. consequently, when prices rise, the share of the government in the increased price is lower with a royalty. an important amount of rents thus remains with the producer, and these rents are pro-cyclical.”14 moreover, if Iocs expect prices to increase, they may want to postpone production since the net present value of the royalty is expected to decline if prices are expected to rise.

12 r-factors are based on an ancient and fundamental payout formula. an r, which stands for ratio, will be a function of X divided by y. X is defined by accumulated receipts actually received by the contractor less tax. y is defined by accumulated capital expenditures (capex) and operating expenditures (opex). the r-factor is calculated in each accounting period; once a threshold is crossed, the new tax rate r=X/y will apply in the next accounting period. X=contractor cumulative receipts (after tax). y=contractor cumulative expenditures. at payout r=1. from Daniel Johnston, International Exploration Economics, Risk, and Contract Analysis (tulsa, oK: PennWell Publishing company, 2003).

13 osmel manzano and francisco monaldi, “the Political economy of oil Production in Latin america,” Economía 9.1 (2008) 59-98.

14 Ibid.

Bonuses increase exploration and

production costs, discourage risk-averse investors and shorten the life of a project.


this has been suggested as one of the main culprits of fiscal instability in Latin american petroleum contracts in the last decade. as shown in the following table, most Latin american petroleum fiscal models charge a royalty on production.

If set too high, royalties shorten the economic life of a project, resulting in higher levels of oil left underground. since royalties increase the marginal cost of producing oil, they also discourage investments in “marginal fields.” these are fields that, on aggregate, could make an important contribution to the overall production and export potential of a country but, more importantly, have an important impact on the level of fDI, employment, and local government revenues.

Governments like to use royalties because they provide some certainty in revenues and are easy to calculate, collect, and monitor.

Income Tax. Income taxes are usually levied on oil and gas companies, in some cases at rates higher than the income tax charged to other types of companies. a fixed income-tax rate tends to be regressive since the charge in

15 Ibid.

percentage terms remains the same at differ-ent levels of profitability.

to make the income tax more progressive, such as when projects’ profitability increases due to rising prices, governments could link income taxes to crude oil prices or sales value. on the other hand, if a government wants to provide incentives to e&P activity, it could allow for an accelerated recovery of explora-tion and development costs. “accelerated cost recovery brings forward payback for the investor and, possibly, retirement of debt. It can therefore reduce both investor risk and tax-deductible interest costs; it also facilitates project financing.”16 However, to protect the tax base of the country, governments will impose limits or restrictions on the use of debt financ-ing to avoid erosion of earnings by companies from payment of interests abroad.

Income tax paid to the producing country is often deducted in the Ioc’s home country. In

16 emil m. sunley, thomas baunsgaard and Dominique simard, “revenue from oil and Gas sector: Issues and country experience,” Fiscal Policy Formulation and Implementation in Oil Producing Countries, (ed. J.m Davis, r. ossowski and a. fedelino, Washington, Dc: International monetary fund, 2003).

Figure 6. Royalty Regime for the Oil Sector in Latin America15

Country Royalty rate on production

Argentina 12% for the local government

Bolivia 1990: 18% on new fields, 50% on old fields

2004: 18%

Colombia 20% on old fields, variable 8–25% on new fields

Ecuador Variable 12.5–18.5% depending on field conditions

President Correa’s administration has submitted changes to the fiscal model. The new model in Ecuador is a service contract in which companies pay 25% income tax, and 25% retention from gross revenues.

Mexico N/A

Trinidad & Tobago Royalties negotiated by contract

Venezuela 1990s: 1–16.66% depending on field

Post 2000: 30% on traditional fields, 20% on Orinoco

Present: 33%

Governments like to use royalties because they provide certainty and are easy to calculate, collect, and monitor.


the absence of an income tax, the Ioc may be subject to a higher tax rate in its home country.

Consolidation and Ring-fencing. a fiscal system’s attractiveness to Iocs can be affected by the level of consolidation or “ring-fencing” allowed in the producing country. “ring-fence refers to the delineation of taxable entities. When ring fence applies, at contract area or project level, income derived from one area/one project cannot be offset against losses from another area/project.”17

ring-fence matters. Without it, tax obligations to governments can be deferred by compa-nies that undertake a series of new projects. their new investment expenditures can be deducted from profits earned on other ven-tures. this encourages existing operators to invest in the country but discriminates against new entrants.

Resource Rent Tax. resource rent tax ties taxation to profitability, making the tax system less distortive for investors. the resource rent tax is imposed only if the accumulated cash flow from the project is positive. “In its purest form, taxes are deferred until all expenditures have been recovered and the project has yielded a predefined target return. then a very high mar-ginal tax is applied to all subsequent operating revenue.”18 negative cash flows are accumulated at an interest rate that, in theory, should equal the investor’s opportunity cost of capital.

resource rent tax has theoretical appeal since it captures rents over and above the company’s opportunity cost of capital, and it is perceived as being more stable since it automatically increases the government’s share in highly profitable projects.19 However, the design,

17 tordo silvana, “fiscal systems for Hydrocarbons, Design Issues” P 38


19 sunley, baunsgaard and simard, “revenue from oil and Gas sector: Issues and country experience,” 160.

implementation, and monitoring of resource rent tax is particularly difficult due to the com-plexity of allocating the proper discount rate. the government has access to the rent only when a targeted payback or rate of return has been reached. calculating the proper discount rate is particularly difficult. If the discount rate is too high, it is possible that the resource rent tax will not apply; if it is too low, the tax will deter investors.

Indirect Taxes. Indirect tax refers to value-added tax (Vat) and import and/or export duties. Import duties apply to all material and equipment imported into the country, usually as a mechanism to protect the local industry. Due to the capital-intensive nature of oil exploration activ-ity, import duties can be regressive. Governments would often exempt companies from import du-ties during the exploration phase as a mechanism to encourage e&P investments.

Vat is usually charged on a destination basis. Imports are charged a Vat but exports are not. since most of the oil in producer countries is exported, Vat calculations and charges are complicated. the taxpayer is in a constant process of claiming its Vat paid. for that reason the majority of countries exempt the Vat on oil-exporting projects.

Surface Taxes. these are taxes paid on the basis of the size of the area under lease. the goal of a surface tax is to prevent Iocs from hoarding land without investing. another mechanism used by governments is to force companies to relinquish a percentage of the leased area after a period of time.

Work Commitments. Work commitments are mandatory investments the contractor must make when granted a lease. these are usually measured in units, for example, kilo-meters of seismic data acquisition, numbers of wells to be drilled, etc. because of the high costs involved with drilling exploration, work commitments tend to have a significant impact on the project economics of an oil investment.

To protect their tax base, governments

will impose limits on the use of debit financing to avoid

erosion of earnings by companies

from payment of interests abroad.


Governments that want to increase the geolog-ical knowledge of the country designate some areas as “hot” and put more emphasis on work commitments in them. However, excessive focus on work commitments could result in an inefficient allocation of resources as companies bidding for an area would offer a higher level of work than technically required.

Contractual Systems (PSAs, Service Contracts)Profit-sharing agreements were a preferred option for rent capture in several developing countries that are oil producers. It offered them a mechanism to assert their sovereignty and allow their gradual entry into the complex-ities of oil e&P activities. However, “there is no intrinsic reason to prefer a tax/royalty regime to a Psa regime since the fiscal terms of a tax/royalty regime can be replicated in a Psa regime, and vice-versa.”20 Psas can deliver the same results in terms of government and com-pany “take,” or earnings from the agreement, as concession systems.

the main difference between the two systems is that under a Psa, the ownership of the re-source remains with the state, and the oil and gas company is hired to explore and produce hydrocarbons. usually the company—referred to as the contractor—assumes all the explora-tion costs in return for a share of the produc-tion. contractual agreements grant ownership of the share of the oil to the contractor at the delivery point.

the typical Psa consists of an agreement between the government, represented by the local noc, and the contractor. If explora-tion is successful, a pre-negotiated share of the production is given to the contractor in compensation for the risks and technical and

20 sunley, baunsgaard and simard, “revenue from oil and Gas sector: Issues and country experience,”163.

financial services provided. the contractor is entitled to recover capital and operating expenditures from production; this is what is defined as “cost oil.” often governments will impose a limit on how much contractors are entitled to recover. the limits discourage contractors from “gold plating,” or excessively increasing costs. this is perhaps one of the main challenges of Psas, since it requires a so-phisticated level of understanding of petroleum activities in order to properly monitor Iocs’ cost reports.

What’s left after subtracting the cost of oil from the total output is known as “profit oil.” the percentage split of profit oil is often a biddable item, or set up by legislation. In most cases, the noc assumes all the abandonment costs. In a Psa, the contractor usually is not taxed because it has no ownership of the resource. However, the income generated from the share of profit oil is subject to income tax.

a more restrictive agreement is the risk service contract (rsc) in which the con-tractor finances and carries out petroleum operations and receives a fee for its services in kind.21 the fee usually allows for the recovery of all costs and includes a profit component.

Governments may also want to participate in an oil venture through state equity. In this case, the government may offer a working interest as it becomes a partner in a joint venture with other investors. the government may also enter as an equity partner only after a discovery is made, letting the private company assume all the exploration and development costs and risks. In some cases, governments may assume some of those costs if a discovery

21 Humphrey onyeukwu, “fiscal regimes in a Volatile oil Price era: What options exist for balancing the Interest of the resource country and Investor company?” (presentation, society of Petroleum engineers International oil and Gas conference, beijing, china, June 8, 2010).

22 adapted from tordo, “fiscal systems for Hydrocarbons, Design Issues,” 10.

PSAs can deliver the same government and company “take,” as concession systems.


is made. finally the government can have a “carried interest” in which it pays its equity share from its share of oil output.

there are different motivations for partici-pating directly in a project. If the project is successful, direct participation can offer an at-tractive cash flow to the government and help with industrial growth and human and physical capital development. In some cases, however, direct participation can have a significant impact on the government budget.

Designing an Optimal Fiscal Petroleum Model

some countries have been very successful at increasing their hydrocarbon reserves, captur-ing a high rent for the government, attracting a strong level of investment, and offering an attractive rate of return to investors. While it would be tempting to copy the fiscal models of successful countries, a successful fiscal model must first reflect the political, social, and economic characteristics of the host country. In some countries, because of history, conces-sions to Iocs may be seen as highly controver-sial. In other countries, securing new reserves in order to postpone the need to import oil would be a sufficient incentive to allow Iocs’ participation under attractive fiscal conditions.

the main challenge in the design of an optimal fiscal system is the alignment of the govern-ment’s and the Ioc’s differing, and sometimes diverging, objectives. the government’s main objective is to maximize the value of its petroleum resources while attracting sufficient Ioc interest for investing in e&P activities. an Ioc’s objective is to ensure that the rate of re-turn of the capital employed is consistent with the project’s risk and with the strategic objec-tives of the corporation.23 It is, nevertheless, possible to develop a list of best practices that governments should consider when designing fiscal models. models should:

1. Aim for simplicity. simple models reduce administration and monitoring costs for the government. they offer more accurate projec-tions of the expected value of the project. simpler models also reduce the opportunity for contractual disputes and increase transparency regarding government revenues.

2. Encourage cost reduction. cost recov-ery is an important feature of fiscal models. In order to avoid inefficient practices such as “gold-plating,” fiscal models should encourage cost reduction behavior—but not to the extent of encouraging poor safety or environmental operating standards.


Figure 7. Main Differences between Concessionary Agreements and PSAs22

Concessionary System PSA

Ownership of the national min-eral resource

Held by sovereign state Held by sovereign state

Title transfer point At the wellhead At the export point

Company entitlement Gross production – royalty Cost oil/gas + profit oil/gas

Entitlement percentage Typically 90% Typically 50% to 60%

Ownership of facilities Held by company Held by NOC/government

Management and control Typically less government controlMore direct government control and participation

Government participation (working interest)

Not likely Likely

Ring-fencing Less likely More likely

Petroleum fiscal models should be

simple, reduce costs, and maximize

production.


3. Encourage maximization of production. fiscal models should encourage companies to carry out their investments as soon as possible and to develop the fields so as to maximize production without damaging the reservoir or endangering the environment.

A Brief Look at the Latin American Experience

Latin america has experience with a variety of petroleum fiscal models. this reflects not only the diversity of resources available in the region but also changing economic conditions and political ideologies. Latin america’s oil industry started with traditional concession systems but, due to its spanish legacy, it inher-ited a long tradition of state ownership of the mineral rights, although there have been short periods of private mineral ownership.24 a key feature of Latin america is the early creation of nocs.

24 bernard mommer, Petroleo Global y Estado Nacional, (caracas: ediciones comala.com, 2003) 79. the long tradition of state ownership of minerals was not disturbed by the wars of independence. on the contrary, it was reinforced with the french revolution. However, mexico in 1884 included oil and coal as exclusive private property rights. the privatization of mexican oil would end only in 1917 with the adoption of a new constitution.

Mexico

mexico has one of the most restrictive fiscal systems in Latin america. Pemex, the noc, pays out more than 60 percent of its revenues in royalties and taxes, leaving very little for e&P activities. Pemex used creative account-ing techniques to increase its level of debt in order to finance some of its production and basic exploration activities. Iocs are not al-lowed to operate in mexico except as service contractors for a fee paid in cash.

In 2008 the government approved a series of reforms aimed at improving Pemex’s cash flow and attracting more investors to the oil sector under a service agreement with Pemex. the new contracts offer some cost recovery incen-tives to contractors.

mexico’s oil production and reserves are declining fast, and the country is at risk of becoming a net oil importer. most future oil reserves are located in the deepwater Gulf of mexico. Pemex faces enormous challenges if it wants to develop those reserves alone. first, it has only limited experience in offshore drilling, most of it in shallow waters. second, its role as the government cash cow has made it a company starving for resources. offshore deepwater development is a particularly expen-sive venture, requiring massive capital. With

Mexico has one of the most restrictive fiscal systems in Latin America.

Billi

ons

of b

arre

ls

Millions of barrels per day

Oil reserves bb barrels Oil production MBD

Figure 8. Mexico Oil Reserves and Production

1990 1995 2000 2005 20080

10

20

30

40

50

60

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


economic uncertainty and elections looming in the next couple of years, the current govern-ment appears reluctant to reduce its depen-dency on Pemex oil rents and increase taxes on other economic activities.

In light of the recent oil spill in the macondo well in the Gulf of mexico, it is expected that governments will tighten regulations and, therefore, increase the cost of e&P activities in the gulf. nationalist forces may argue that Iocs do not a guarantee safe exploitation of the resource, even though thousands of deepwater wells have been drilled worldwide. Local communities would also demand state-of-the-art regulation, increasing the cost of doing business and the time required for permits.

forecasting mexico’s oil production is beyond the purpose of this paper. However, in the short to medium term a reversal of the current decline is unlikely unless there is a major redesign of mexico’s petroleum legislation in order to allow greater participation by Iocs. a return to petroleum-importing may be the detonator that finally frees political forces to open upstream activities in mexico.

Venezuela

Venezuela nationalized its oil industry in 1973 and set up a new noc: Petroleos de Venezuela (PDVsa). unlike mexico’s contentious nationalization of the industry, Venezuela’s nationalization was relatively amicable. PDVsa was granted the monopoly of all e&P activi-ties. the former foreign operators maintained the same operating structure but under a new owner (the government of Venezuela), and foreign cadres were kept on as advisers and consultants. this beginning helped PDVsa develop a unique corporate culture, in tune

with its private sector roots and the cultural differences of its previous owners. this new culture was reflected in the new family of companies forming PDVsa.25 the noc fought hard against political interference. through its own corporate promotion mechanism known as the “meritocracy,” it established an esprit de corps that worked against political interference.

In the mid 1990s, Venezuela opened its oil sector to Ioc participation under service contracts.26 the reason for this opening was twofold: to hedge the risk and cost of develop-ing the expensive reserves of the orinoco belt and to increase production from marginal fields that, because of their size, were unat-tractive to PDVsa.

the government offered a royalty incentive for companies bidding in the orinoco fields, charging for a limited period of time (eight years) a royalty of 1 percent. Iocs responded enthusiastically, oil production increased rap-idly, and new reserves were discovered.

the wrongly named “re-nationalization” of the oil industry by the chávez administration reversed most of these policies. However, Venezuela did not close the door to foreign oil companies’ participation. under the current model, Iocs form joint ventures with PDVsa, which retains majority equity and is the opera-tor of the project. because of financial difficul-ties at PDVsa, however, the noc has secured part of its equity in some of these projects in exchange for future oil production to be deliv-ered to the partners.

25 the main companies were Lagoven, corpoven, and maraven, all under the umbrella of PDVsa

26 the current administration challenged the legality of the service contracts, describing them as de facto concessions

Unlike Mexico’s contentious

nationalization of the industry,

Venezuela’s nationalization was relatively amicable.


Venezuela’s oil production has been in constant decline since 2000. the reduction in produc-tion was first due to chávez’s desire to comply with Venezuela’s oPec quotas, a marked difference from the previous administration, which focused on production growth and a higher share of the u.s. market. Production has also been affected by the strike at PDVsa that resulted in the dismissal of a large number of employees, many of them with sophisticated technical expertise. finally, production has been affected by the diversion of funds from oil activities to politically motivated projects. today PDVsa is the largest supplier of food in the country.

In recent years, most of the attention in Venezuela has focused on the repositioning of the orinoco belt. after ending previous agreements with the Iocs27 and requiring the companies to accept new terms and conditions, the government divided the orinoco oil belt into four large areas: boyacá, Junín, ayacucho, and carabobo. some nocs were invited to participate in the development of the fields, first by helping evaluate the reserves then as minority partners. the strategy clearly showed

27 In the 1990s, four heavy crude oil projects were signed with PDVsa: Hamaca (conoco, chevron); cerro negro (exxon, bP), PetroZuata (conoco), and suncor (total, statoil).

the government’s interest in favoring Latin american nocs, some of which do not have the technical or financial capabilities to pro-duce heavy crude oil. It also strengthened new relations with countries such as russia (an important supplier of military equipment and technology) and Iran (an important member of oPec and, since the Iranian revolution, a foe of the united states). of particular importance to PDVsa is access to the chinese market and chinese capital. chinese oil companies have become an important source of financing for cash-strapped PDVsa; the financing comes in exchange for future oil production.

Venezuela’s oil future depends on the ability of the foreign nocs and those Iocs that have accepted the new terms to successfully invest and expand output. It is unlikely that PDVsa, marred by financial problems and political interference, will be able to reverse the trend in production decline. However, since PDVsa is the operator of all projects in Venezuela, it remains to be seen if the new joint ventures will meet the company’s ambitious goals without giving foreign partners a larger control over the operations and, perhaps, migration toward some sort of Psa.

Billi

ons

of b

arre

ls


Figure 9. Venezuela Oil Reserves and Production

1990 1995 2000 2005 20080

20

40

60

80

100

120

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


It is unlikely that PDVSA, marred by financial problems and political interference, will be able to reverse the trend in production decline.


Brazil

brazil’s oil production has increased constantly over the last twenty years. as shown in the graph above, reserves have also increased. the data do not include the huge offshore re-serve discoveries from the pre-salt28 oil fields. those discoveries will permit brazil petroleum independence and allow it to become a large future exporter of hydrocarbons.

In 1994, brazil ended the monopoly of its noc, Petrobras, and returned to a concession model. since enacting that new fiscal model, brazil has held ten bidding rounds attracting strong inter-est from Iocs. However, in 2008, as a result of the discoveries made by the consortium led by Petrobras, bG Group, and Galp energia in the pre-salt area, the government suggested changes in the fiscal model.

28 “Pre-salt” refers to an aggregation of rocks located off the brazilian coast and with potential to generate and accumulate oil. It was called pre-salt because it sits under an extensive layer of salt which, in certain areas of the coast, can be as much as 2,000 meters thick. the “pre” expression is used because these rocks were deposited before the salt layer. the total depth of these rocks—the distance between the surface of the sea and the oil reservoirs under the salt layer—can be as much as 7,000 meters. source: http://www.petrobras.com.br/minisite/presal/en/questions-answers/

the government cited new geological infor-mation in justifying the changes from the concession system to Psas in the pre-salt area. With lower exploration risks, the government chose to increase its access and have greater control over the development of the resource. the new model, which applies only to the pre-salt area, makes Petrobras the operator; Iocs are minority equity partners. a new noc is also participating, not as an operator but as an entity in charge of protecting the nation’s interests, according to government comments.

brazil’s oil policies have been highly successful at increasing reserves, production, and allow-ing the government to capture a share of the petroleum rent. because of brazil’s economic diversification, however, the economy is not dependent on the rents generated by Petrobras and/or the Iocs. the challenge ahead is for brazil to manage its new oil wealth while avoid-ing common mistakes that come with windfall revenues, mistakes such as those affecting mexico in the 1980s after the discovery of the massive cantarell oil field or Venezuela during the high oil price shocks of the 1970s, the early 1980s, and the last oil boom of 2005–2008.

the new contractual agreement can be seen as a setback from a competitive model as it strengthens state-owned corporatism. this could not only erode the efficiency of

Billi

ons

of b

arre

ls


Figure 10. Brazil Oil Reserves and Production

1990 1995 2000 2005 20080

2

4

6

8

10

12

14

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000


The challenge ahead is for Brazil

to manage its new oil wealth while avoiding

common mistakes that come with

windfall revenues.


Petrobras but also increase the government’s dependency on the noc’s rents. although the government appears to be inspired by the norwegian model—which tends to favor conservation29 over production—it is unclear whether what is good for Petrobras is also good for brazil. In fact, Petrobras already has a strong monopolistic power in other areas of the hydrocarbon value chain in brazil, resulting in high costs for consumers (natural gas, for example) and exposing the company to further political influence. However, the pre-salt dis-coveries are of particular importance not only because of their size but also because they have the potential to transform brazil from a net oil importer to a large exporter of hydro-carbons. Petrobras rents will have a significant impact on brazil fiscal and trade balances. How the noc manages these challenges will define the outlook of brazilian petroleum.

Argentina

unlike brazil, argentina’s oil reserves and pro-duction have been in a steady decline since 2001, following rapid growth for most of the previous decade. although some basins in argentina are considered mature, the drastic change in the

29 conservation of the petroleum resource through a controlled pace of development.

production and reserves profiles is not just the result of reservoir depletion. changes in the petroleum fiscal model are also responsible.

argentina adopted one of the most liberal fiscal models in Latin america in the 1990s. that included privatization of national oil company yPf. but, in 2002, the government imposed a 25 percent export tax on oil, eroding Iocs’ interest in continued investment in exploration.

argentina’s natural gas reserves and production have also collapsed, as evidenced in the follow-ing graph. the country’s gas crisis has a bigger impact than the inability to export oil. natural gas accounts for more than 50 percent of argentina’s primary energy consumption. moreover, argentina’s gas crisis spilled into chile when argentina stopped exporting to its neighbor.

In recent months, the government has reacted to the rapid decline of production and reserves by adopting a “gas plus” program, which basi-cally offers better prices to producers of new natural gas discoveries and unconventional gas. although the gas plus program is a step in the right direction, the energy crisis can be addressed by simply removing price controls and barriers to Iocs.

Billi

ons

of b

arre

ls


Figure 11. Argentina Oil Reserves and Production

1990 1995 2000 2005 20080

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

100

200

300

400

500

600

700

800

900

1,000


Argentina’s natural gas reserves and production have also collapsed.


the local noc, ecopetrol, proved ineffective at replacing reserves.

facing the possibility of the country becoming a net oil importer—and the dire fiscal situation and trade balance consequences of that shift—the government of former president Álvaro uribe changed the petroleum fiscal regime, returning to the concession system, ending the monopoly of ecopetrol, and reducing the government take. since then, colombia has attracted substantial investments in exploration and production. oil output is at record highs of 800,000 b/d, although no major oil discoveries

Colombia

colombia’s oil reserves and production saw rapid growth in the early 1990s when the government offered an attractive fiscal model that resulted in an increase in exploration activ-ity and the discovery of the cusiana oil field, which followed the earlier caño Limón field discovery. as a result, colombia tightened the rules and adopted a Psa model, significantly increasing the government take. However, the move coincided with a collapse in oil prices and rapid deterioration of security conditions. Investments in e&P by Iocs disappeared, and

Billi

ons

of b

arre

ls


Figure 13. Colombia Oil Reserves and Production

1990 1995 2000 2005 20080

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

100

200

300

400

500

600

700

800

900

1,000


Trill

ion

cubi

c fe

et

Billions of cubic feet per day

Gas reserves Tcf Gas production bcfd

Figure 12. Argentina Gas Reserves and Production

1980 1985 1990 1995 2000 2005 20080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Colombia’s petroleum reserves

are relatively modest and unlikely

to last long.


have been made. most of the “new oil” comes from existing fields using enhanced oil recovery (eor) technology, thus developing reserves that before were seen as uneconomic, particularly the heavy crude oil deposits from Los Llanos basin.

since the passing of the 2004 reforms, colombian regulator anH has tightened the rules, mostly to capture windfall profits from high oil prices and to ensure interested investors have optimal technical and financial requirements.

colombia’s oil boom is likely to continue in the medium term, but the challenge is for the government to transfer revenues into tangible social development. In the past, colombia’s bonanzas have been wasted in corruption, con-spicuous consumption, and white elephant in-frastructure projects. managing this oil boom well is even more urgent since colombia’s petroleum reserves are relatively modest and unlikely to last long.

Ecuador

ecuador underwent rapid growth of reserves and production in the 1990s and early 2000s when advantageous geology, attractive fiscal terms, and relative peace within the country at-tracted Iocs. central to the expanded oil output

was the decision to let a private consortium construct and operate a heavy crude oil pipeline (ocP). since the existing pipeline (sote) was used at capacity by Petroecuador, the local noc, the ocP ended the transportation bottle-neck that had limited Iocs’ interest in ecuador.

but production entered a rapid decline after 2000, mostly due to Petroecuador’s drop in pro-duction and investments. the local noc was just one example of how political instability in that country since 2000 paralyzed government activities. In the last five years, the decline also reflects the collapse of Ioc investments because of deteriorating relations between the government and the oil industry. central to that was the government’s decision to change the fiscal model and increase the government take.

Peru

In the 1990s, Peru adopted an attractive fis-cal model that included the privatization of Petroperu, the national oil company, upstream assets, and a concession system. Peru’s rela-tively modest oil production (approximately 145 mm/bd) does not cover domestic needs. Production is predicted to increase as the government expects more companies to bid for additional concessions.

Billi

ons

of b

arre

ls


Figure 14. Ecuador Oil Reserves and Production

1990 1995 2000 2005 20080

1

2

3

4

5

6

0

100

200

300

400

500

600


Ecuador’s decline in production reflects the collapse of IOC investments.


more problematic is the natural gas situation. Peru is expected to become a major exporter of LnG. the discovery of the large camisea gas field prompted the government to offer attractive incentives for the development of natural gas in the electricity sector. at the same time, the demand for gas in the industrial sector and proposals for petrochemical de-velopments jumped. some influential economic and political observers fear Peru may not have sufficient reserves and, therefore, should not export LnG. moreover, many nationalists object to the low netback price charged to pro-ducers, approximately us$0.50 per thousand

cubic feet (mcf), which serves as the basis for royalty payments.

Peru’s hydrocarbon future will depend on whether the new bidding round translates into significant discoveries. that said, the more promising areas are located deep in the jungle (Loreto) where the quality of the oil is expected to be heavy, requiring costly upgrading. Local communities and indigenous opposition will add to the cost of doing business. If future govern-ments revert to a more nationalistic energy policy in the gas sector, Peru’s active explora-tion program is likely to suffer along with its rapid expansion of reserves and production.

Billi

ons

of b

arre

ls


Figure 15. Peru Oil Reserves and Production

1990 1995 2000 2005 20080

0.2

0.4

0.6

0.8

1.0

1.2

0

20

40

60

80

100

120

140


Trill

ion

cubi

c fe

et



Figure 16. Bolivia Gas Reserves and Production

1980 1985 1990 1995 2000 2005 20080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

President Morales has adopted

a nationalistic policy, but beyond

the rhetoric, the government’s

reach has been more modest.


Bolivia

bolivia became a gas power in the 1990s fol-lowing major economic reforms that included the end of the national oil company monopoly, yPfb, and an imaginative privatization pro-gram called “capitalization” in which private companies contributed 50 percent of the capital to state enterprises in exchange for control of the management of the companies. the model collapsed amid street protests and indigenous-led uprisings known as the Water Wars (over privatization of municipal water companies) and, later, the Gas War.

since assuming office, President evo morales has adopted a nationalistic policy, taking over local refineries and claiming a re-nationalization of bolivia’s hydrocarbon industry. beyond the rhetoric, however, the government’s reach has been more modest and has included adoption of a Psa. since then, bolivia’s production and reserves have declined. yPfb recently entered in a series of partnerships with several com-panies, including Gazprom from russia and PDVsa from Venezuela.

Trinidad and Tobago

trinidad and tobago experienced rapid growth in reserves from 1994 to 1996, followed by a constant decline amid increasing produc-tion. fiscal terms have been improved in order to attract more Ioc exploration in deepwater areas and in costly oil sands. the government has also tightened the rules, preferring to use most of the gas for domestic consumption or industrialization (petrochemicals) as opposed to LnG exports.

Conclusion

the design of a fiscal model is perhaps the most important component in a country’s hydrocarbon policy. Governments have two options for developing hydrocarbons: directly through their nocs or by inviting investors (Iocs) to share the risk. In the second option, the most common contractual models are con-cessions and Psas. technically, both offer the same level of government take. fiscal models can be more or less progressive depending on when the rents are captured. the later the payment is required, the more progressive the system is.

Trill

ion

cubi

c fe

et



Figure 17. Trinidad and Tobago Gas Reserves and Production

1980 1985 1990 1995 2000 2005 20080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Governments have two options for developing hydrocarbons: directly through their NOCs or by inviting investors to share the risk.


When designing fiscal models, governments should aim for simplicity but also ensure that the model encourages cost reduction and maximization of output.

Latin america has been a fertile ground for petroleum fiscal models. Whether the region’s policies are open or closed usually follows the political pendulum from populism to eco-nomic orthodoxy. In the latest version of that pendulum, in the 1990s, Latin america adopted market-oriented models, reduced government take, ended nocs’ monopolies and, in some cases, privatized them. the response of the pri-vate sector was positive, sparking rapid growth in reserves and production. However, most of the fiscal models failed to respond to the high price increases of the last decade. that failure coincided with the rise of new populist regimes that relied on resource nationalism as a key political platform.

since some of the region’s political shift to the left, Latin america has seen two very different oil policy paths. one favors state corporatism and maximizes rents even at the cost of invest-ments and additional reserves. Venezuela, bolivia, ecuador and, to a certain extent, brazil and argentina, are examples. the other path strengthens market-oriented models, resulting in a boom in investments in colombia, Peru and, to a lesser extent, trinidad and tobago.

as the cost of declines in reserves and produc-tion are felt through the region, it is expected that the pendulum will swing back toward re-gimes that are more attractive to private inves-tors. the challenge for policymakers is to take into account that history, learn from the past, and design more stable fiscal models that resist not only the uncertainties caused by price vari-ances but those due to political fluctuation.


About the Series

We are pleased to publish this Inter-american Dialogue report, “challenges of Designing an optimum Petroleum fiscal model in Latin america,” which explores key fiscal issues that national governments face in managing petroleum resources. It was written by roger tissot, a distinguished economist and independent consultant who focuses on Latin america’s energy policy, markets, and strategy, advising mostly canadian and international oil and gas companies. the Dialogue’s energy Policy Working Group was established in september 2009 with the support and cooperation of the Inter-american Development bank. It includes some twenty people drawn from a dozen countries—including energy specialists, policy and political analysts, business leaders, and former officials of private and public oil companies. the group meets regularly to discuss Latin america’s most pressing energy policy issues and choices. Participants review and comment on analytic papers drafted for each session, and prepare the way for dissemination and public discussion of the papers and recommendations of the group. these efforts are directed to informing and shaping national and regional policy debates on the energy challenges confronting the countries of Latin america, improving the quality of attention to those challenges, and encouraging multilateral cooperation to address them.

this report is part of a series. other reports are being published this year on Latin america’s energy matrix; the performance of Latin america’s national oil companies; the increasing resistance to energy development from indigenous groups and other local populations, and how countries and companies are dealing with the resulting conflicts; and the special challenges nuclear development faces in the region. In preparation are studies of the emerging market for natural gas in south america; how subsidies affect energy pricing and cooperation; and climate change and energy initiatives as a basis for greater hemispheric integration.

the Dialogue is pleased to recognize the support and cooperation provided by the Inter-american Development bank. the comments and opinions expressed in this series are those of the authors alone and not of the supporting institutions.

Inter-AmerIcAn DIAlogue BoArD of DIrectors

michelle Bachelet, Co-Chair, chile

carla A. Hills, Co-Chair, united states

enrique Iglesias, Co-Vice Chair, uruguay

thomas f. mclarty III, Co-Vice Chair, united states

Peter D. Bell, Chair Emeritus, united states

fernando Henrique cardoso, brazil

David de ferranti, united states

Alejandro foxley, chile

William l. friend, united states

francis fukuyama, united states

l. enrique garcía, bolivia

Donna J. Hrinak, united states

marcos Jank, brazil

Yolanda Kakabadse, ecuador

Jim Kolbe, united states

ricardo lagos, chile

thomas J. mackell, Jr., united states

m. Peter mcPherson, united states

Billie miller, barbados

Antonio navarro Wolff, colombia

Pierre Pettigrew, canada

Jorge Quiroga, bolivia

marta lucía ramírez, colombia

eduardo stein, Guatemala

martín torrijos, Panama

elena Viyella de Paliza, Dominican republic

ernesto Zedillo, mexico

michael shifter

President

the Inter-american Dialogue is the leading u.s. center for policy analysis, exchange, and communication on issues in Western Hemisphere affairs. the Dialogue brings together public and private leaders from across the americas to address hemispheric problems and opportunities. together they seek to build cooperation among Western Hemisphere nations and advance a regional agenda of democratic governance, social equity, and economic growth. the Dialogue’s select membership of 100 distinguished citizens from throughout the americas includes political, business, academic, media, and other nongovernmental leaders. twelve Dialogue members served as presidents of their countries and more than two dozen have served at the cabinet level.

the Inter-american Development bank (IDb) was established in 1959 to support the process of economic and social development in Latin america and the caribbean, and is the main source of multilateral financing to the region with a total capital of more than $170 billion. current lending priorities include initiatives on sustainable energy and climate change, Water and sanitation, and education. the IDb Group, comprising IDb, the Inter-american Investment corporation (IIc) and the multilateral Investment fund (mIf), provides solutions to development challenges by partnering with governments, companies, and civil society organizations, thus reaching its clients ranging from central governments to city authorities and businesses.

Inter-American Dialogue

1211 Connecticut Avenue, NW, Suite 510

Washington, DC 20036

PHONE: 202-822-9002 n FAX: 202-822-9553

EMAIL: [email protected] n WEB SITE: www.thedialogue.org

Documents

Challenges of Designing an Optimal Petroleum Fiscal … · Challenges of Designing an Optimal Petroleum Fiscal Model in Latin America Roger Tissot I n recent years, a number of LatIn