Petroleum contract evaluation in the Pacific Rim: A comparative analysis

Abstract

Scope and Method of Study: This study analyzes contract terms for oil exploration in five Pacific Rim countries: Australia, China, Indonesia, Brunei, and Malaysia and then develops probable cash flows based on varying oil prices. The cash flow amounts are evaluated using the tools of financial analysis and then compared to determine which contract terms provide the investor with the most attractive financial returns.

Findings and Conclusions: Discounted cash flow amounts and internal rates of return differed widely among the countries analyzed. Australia and China provide the investor with the best probable financial results. Varying oil prices show a linear relationship with anticipated financial results and demonstrate the effect of volatile world oil prices on decision making.