[PPT] - Regime for Exploration in India Anupama Sen Senior Research Fellow, PowerPoint Presentation

SLIDE 1

Out of Gas: An Empirical Analysis of the Fiscal Regime for Exploration in India

Anupama Sen

JUNE 2014 IAEE INTERNATIONAL CONFERENCE, NYC

Senior Research Fellow, Oxford Institute for Energy Studies, United Kingdom

SLIDE 2

1. Natural Gas in India
2. Conceptual Literature on Resource Taxation
3. Empirical Literature
4. Method
5. Analysis
6. Results
7. Observations & Conclusions

IAEE INTERNATIONAL CONFERENCE, NYC

Outline

SLIDE 3

Gas forms 11% of India’s primary energy consumption
Relatively ‘young’ but growing sector
India’s gas reserves

– 0.7% of world reserves – Range of estimates – Mostly offshore

Consumption
60 Bcma (20-30% LNG)
70% used in power generation, fertiliser industry, household use, transportation
Policy on gas
Substitute for coal, naphtha, fuel oil
Security of supply / mitigating energy shortages
Environment

IAEE INTERNATIONAL CONFERENCE, NYC

1. Natural Gas in India

SLIDE 4

IAEE INTERNATIONAL CONFERENCE, NYC

Electricity Other Energy Industry Own Use Manufacturing Industries and Construction Transport Residential Other Total CO2 Emissions from Fuel Combustion OECD 4,007 558 1,423 2,699 797 1,408 10,096 UK 2,873 519 822 1,919 1,325 1,643 7,776 USA 7,448 845 1,893 5,229 1,038 1,897 17,312 India 748 52 342 138 64 108 1,388 China 2,659 205 1,734 382 225 416 5,395 Brazil 230 129 585 852 87 194 1,989 Africa 414 39 138 215 56 104 910 Middle East 2,715 786 1,577 1,651 623 829 7,559

Per Capita Emissions by Sector, 2010 (kg of CO2 per capita)

Source: IEA (2008)

Potential for gas in electricity and transportation

SLIDE 5

Prices for domestically produced gas are controlled
To keep prices to consuming sectors low
Prices are set according to the fiscal regime governing a producing field
The fiscal regime has evolved over time; thus multiple pricing mechanisms
India’s 1999 liberalised upstream fiscal regime
Prices based on an ‘S curve’ formula with a cap and ceiling
SP = $2.5 + (CP – 25) 0.15+ C
Five year reviews
Formula rendered redundant by high oil price

– Ceiling of $60/bbl breached very early on – Review of pricing currently underway; proposals to link it to Henry Hub, NBP and Japan LNG

IAEE INTERNATIONAL CONFERENCE, NYC

Pricing

SLIDE 6

IAEE INTERNATIONAL CONFERENCE, NYC

India Gas Price vs International Benchmarks

Source: BP Statistical Review; Govt of India Henry Hub India LNG Imports

SLIDE 7

Liberalised regime launched in 1999
New Exploration Licensing Policy
Based on a Production Sharing Contract (PSC)
Hybrid system (royalty + taxes on ‘rent’)
Main features

1. Royalty

10%, 5% for first 7 years

2. Cost recovery

Opex, capex & royalty up to 100% pa

3. Profit Sharing

Based on a R-factor, or the ratio of cumulative income to cumulative capital

expenditure.

Two tranches, 1.5 and 3.5. Shares in-between worked out using an

extrapolation formula Z = a + [(b-a)*(X-1.5)/2]

4. Corporate Income Tax

30-40%

5. Minimum Alternate Tax

18.5% of ‘book profits’ if IT payable is < 18.5% of ‘book profits’

IAEE INTERNATIONAL CONFERENCE, NYC

Fiscal Regime for Gas

SLIDE 8

IAEE INTERNATIONAL CONFERENCE, NYC

Gross Production Total Profit Oil Cost Recovery Taxable Income Contractor Take Royalty Government Share Government Take Tax (+) (+) (-) (-) (+) (+) (-) Contractor Share

Graphical Illustration of PSC Regime

SLIDE 9

Production
Large initial increase (2009) followed by dramatic decline in production; currently a

third of original targets

Driven by private sector
NOC production has remained stagnant
No significant new discoveries since 2004
Investments
Down from $4.7Bn in 2007 to $1.6 Bn in 2013
Arbitration & delays
Companies accused of gold plating in the R Factor
Alleged loss of revenues to exchequer
Proposed Policy Solution
Replace the PSC regime with a simple Revenue Sharing Contract (RSC) Regime
Eliminate royalty, cost recovery and profit sharing (R Factor)
Companies simply share a percentage of their revenues from day 1 of production
Production slabs pre-specified by the government. Percentage revenue shares

biddable by companies at the time of the auction rounds

IAEE INTERNATIONAL CONFERENCE, NYC

Performance of India’s Fiscal Regime

SLIDE 10

IAEE INTERNATIONAL CONFERENCE, NYC

Drop in Production Increase in Consumption & Imports

Source: BP Statistical Review, PPAC India (2013/14)

Performance …(contd)

SLIDE 11

What to Tax - The Base

Net income / rent / liberal regimes

– Pure rent = surplus or financial return not required to motivate economic behaviour – Supply price of investment = costs of capital and operation plus risk premium. Lower supply price, higher rent. Risk premium affected by policy – Zero marginal fiscal take – Requires information on production volumes, costs, prices, investments

Gross income / proprietorial

regimes

– Positive marginal rent, reservation ground rent, and excess profits – Information on prices and volumes only

Mommer (1999), Baunsgaard

(2001), Hotelling (1931) How to Tax - The Instruments

Net Income /rent

– Resource Rent Taxes (R Factor, Rate-

f-Return), Progressive Profits Taxes,

Corporate Income Tax, VAT

Gross Income

– Royalties, Bonuses, Fixed Fees, Minimum Work Programs

Other

– Government equal partner Government/NOC equity participation, Brown Tax ( – Most systems use a ‘hybrid’ or combinations of both elements

2. Conceptual Literature on Resource Taxation

SLIDE 12

Royalties Corporate Income Tax Resource Rent Tax Brown Tax Production Sharing Royalty rate = cost oil cap Tax rate = government profit share Paid Equity Tax rate = equity share Carried Interest Tax rate = equity share Target real rate

f return =

interest rate Concessional Equity Tax rate = share

f initial

concessional investment Tax rate = equity share Target rate of return = interest rate

IAEE INTERNATIONAL CONFERENCE, NYC

Source: Baunsgaard (2001)

Equivalencies in Fiscal System Design

SLIDE 13

Desirable features of a fiscal system (Nakhle, 2008)

– Efficiency – Neutrality – Equity – Sharing of fiscal risk – Simplicity – Stability of fiscal terms and of revenues

Trade-offs between features

– Neutrality trades off with efficiency and with revenue generation – Neutrality trades off with simplicity – Equity trades off with simplicity and efficiency – Stability trades off with fiscal risk sharing

Selection of instruments is contingent upon the government’s objectives

in fiscal system design

IAEE INTERNATIONAL CONFERENCE, NYC

Desirable Features & Tradeoffs

SLIDE 14

PSC regime analogous to rate-of-return system; RSC regime to price cap

system

– PSC (RoR) necessitates information on volumes, costs, prices and investment – RSC (Price Cap) necessitates information only on volumes and prices

Under a price cap type system, the government will most likely need to

accept a lower overall expected level of taxation and lower take but stable (yet lower) revenues

– Conversely, investors face greater risks in sinking investments into difficult (offshore) areas

In utilities and resource taxation price cap systems almost always revert

towards rate-of-return (Tapia, 2012; Helm, 2010; Liston, 1993)

– The setting of appropriate caps ultimately necessitates information on cost functions – Governments may therefore be compelled to intervene ex post – There is a case for incorporating RoR elements into fiscal design ex ante

IAEE INTERNATIONAL CONFERENCE, NYC

Analogies with Price Cap versus RoR Regulation

SLIDE 15

IAEE INTERNATIONAL CONFERENCE, NYC

Static Models:

Discounted cash flow models using data on production, costs & prices under a high, medium and low case scenario. Fiscal terms used to compute economic measures. One or more of these are held constant to

bserve the effect of changes in the
thers. Results anchored to initial

conditions employed. Restrictions on graphical representation

f

multidimensional data.

Key Studies:

Goldworthy and Zakharova (2010)
Johnston (2003)
Dongkun and Yan (2010)
Daniel and McPherson (2010)
Nakhle (2008)
Tordo (2007)
Al-Attair and Alomair (2005)
Dharmadji and Parlindungan

(2002)

Iledare (2001)

System Measures:

AETR, IRR, sensitivity analysis
AGR/ERR, savings index, take stat
Government take, front loading

index

METR, AETR, NPV
NPV, IRR, take
NPV, IRR, take
E&P costs
Contractor take, IRR, NPV
Prices, production, NPV, take

Meta Models:

A cash flow model of the system constructed and parameters of the system are defined and bound through design intervals based on historical data

r

reasonable assumptions combined with the given parameters in the fiscal system. Parameters of the system sampled from the design space and evaluated in the cash flow model. The results of the model and system parameters are then analysed and a linear model is constructed from the generated data.

Kemp and Stephen (2011)
Hong and Kaiser(2010)
Adenikinju and Oderinde (2009)
Iledare and Kaiser (2006)
Kaiser and Pulsipher (2004)
Prod, costs, invest., tax revenues
NPV, IRR, GT, CT
NPC, IRR GT CT
NPV, IRR, GT CT
NPV, IRR, GT, CT
3. Empirical Literature

SLIDE 16

IAEE INTERNATIONAL CONFERENCE, NYC
4. Method

Static Analysis

SLIDE 17

IAEE INTERNATIONAL CONFERENCE, NYC

Meta Modelling

SLIDE 18

Static DCF model constructed for India’s PSC regime
Inputs

– Price – Fiscal terms: royalty, cost recovery ceiling, corporate income tax, minimum alternate tax, share of profits from production to the government at the lower and upper tranches of the R-Factor investment multiple, and the contractor and government discount rates

Inputs are applied to a real (representative) offshore gas field in India
We obtain a set of economic measures

– Present value of cash flows to the contractor and government (NPGc, NPVg), the internal rate of return (IRR) and the discounted contractor and government take (NPVct, NPVgt)

IAEE INTERNATIONAL CONFERENCE, NYC

5. Analysis

SLIDE 19

Parameter Name Measures Recoverable Reserves 11 tcf Field Life 33 years Total Capex $14.78 bn Full Cycle Opex $0.76 /Bcf

DCF Model Inputs and Project Parameters

Key Project Parameters Inputs (Fiscal Terms) Inputs Units Varnames Numbers Price $/MMBtu P 4.20 Royalty Rate % Roy 5, 10 Cost Recovery Ceiling % CR 80 Corporate Income Tax % CIT 34 Minimum Alternate Tax % MAT 18.5 Government Profit Share at Lower R Factor (<1.5) % IM1 0.3 Government Profit Share at Higher R Factor (>3.5) % IM2 0.8 Contractor Discount Rate % Dc 15 Government Discount Rate % Dg 12

SLIDE 20

IAEE INTERNATIONAL CONFERENCE, NYC

Set of Economic Measures

Economic Measures Results NPVc $ 1,213 Mn NPVg $ 3,298 Mn IRR 22% NPVct 27% NPVgt 73%

DCF Model Results

SLIDE 21

Assumption variables
P, Roy, CR, CIT, IM1, IM2, Dc, Dg.
Forecast variables
NPVc, NPVg, IRR, NPVct, NPVgt.
A design space is constructed for each assumption variable
Based on reasonable assumptions or historical data (fit to

distribution)

100, 500 and 1000 trial simulations of the assumption

variables

Obtain corresponding forecast variables

IAEE INTERNATIONAL CONFERENCE, NYC

The Meta Model – (1)

SLIDE 22

IAEE INTERNATIONAL CONFERENCE, NYC

Parameter Design Space Price LN (3.05, 16.75) Royalty Rate U (0.05, 0.20) Cost Recovery Ceiling U (0.10, 1.00) Corporate Income Tax U (0.30, 0.40) Government Profit Share at Lower R Factor (<1.5) U (0.10, 0.90) Government Profit Share at Higher R Factor (>3.5) U (0.10, 0.90) Contractor Discount Rate U (0.12, 0.40) Government Discount Rate U (0.07, 0.12)

Design Space for Meta Model

SLIDE 23

Dependent variables:
NPVc, NPVg, IRR, NPVct, NPVgt
Independent variables:
P, Roy, CR, CIT, IM1, IM2, Dc, Dg
The dataset generated mimics time-series data. We test for

stationarity

We are interested in the relative influence (elasticity relationships) of

indepvars upon the depvar.

We estimate the following equation for depvars NPVc, NPVg, IRR, NPVct,

NPVgt:

L.φ (f, F) = k+ βL.P+ βL.Roy+ βL.CR+ βL.CIT+ βL.IM1+ βL.IM2+βL.Dc+ βL.Dg +ε
We test for serial correlation and use robust standard errors.
The coefficients stabilise at around 500 trials

IAEE INTERNATIONAL CONFERENCE, NYC

The Meta Model – (2)

SLIDE 24

IAEE INTERNATIONAL CONFERENCE, NYC

Same procedure for Revenue Sharing Contract (RSC)

Inputs Units Varnames Numbers Price $/MMBtu P 4.20 Corporate Income Tax % CIT 34 Minimum Alternate Tax % MAT 18.5 Revenue Share at Tranche ‘A’ % RA 9 Revenue Share at Tranche ‘B’ % RB 13 Revenue Share at Tranche ‘C’ % RC 16 Revenue Share at Tranche ‘D’ % RD 25 Contractor Discount Rate % Dc 15 Government Discount Rate % Dg 12

Inputs (Fiscal Terms)

Parameter Name Measures Recoverable Reserves 11 tcf Field Life 33 years Total Capex $14.78 bn Total Opex $8.8 bn Production Slabs (Bcf) Govt Revenue Share A 0 - 73 9% B 74 - 1,825 13% C 1,826 - 2,920 6% D > 2,921 25%

Key Project Parameters Production Slabs

Source: Kelkar Committee Report, 2013

SLIDE 25

IAEE INTERNATIONAL CONFERENCE, NYC

Economic Measures Results NPVc $ 5,047 Mn NPVg $ 6,053 Mn IRR 91% dCT 54.53% dGT 45.47% Set of Economic Measures Parameter Design Space Price LN (3.05, 16.75) Corporate Income Tax U (0.30, 0.40) Revenue Share at Tranche ‘A’ U (0.01, 0.50) Revenue Share at Tranche ‘B’ U (0.01, 0.50) Revenue Share at Tranche ‘C’ U (0.01, 0.50) Revenue Share at Tranche ‘D’ U (0.01, 0.50) Contractor Discount Rate U (0.12, 0.40) Government Discount Rate U (0.07, 0.12) Design Space for Meta Model

SLIDE 26

IAEE INTERNATIONAL CONFERENCE, NYC

φ (f, F) = k+ βL.P+ βL.Roy+ βL.CR+ βL.CIT+ βL.IM1+ βL.IM2+ βL.Dc+ βL.Dg +ε Trials k βL.P βL.Roy βL.CR βL.CIT βL.IM1 βL.IM2 βL.Dc βL.Dg R2 Adj R2 F Stat DW L.NPVC 100 500 1000 2.21(4.73) 0.52(1.42) 2.31(1.0) 0.15(0.03)+ 0.14(0.01) + 0.10(0.01) +

0.03(0.52)
0.20(0.18)
0.27(0.11) *

0.25(0.37) 0.01(0.13) 0.33(0.09) +

2.51(2.22)

0.34(0.87)

0.35(0.57)
0.67(0.35)
0.68(0.13) +
0.48(0.08) +

0.51(0.37) 0.04(0.13)

0.11(0.08)
2.43(0.62)+
2.88(0.20) +
2.37(0.14) +

0.77(1.46)#

0.63(0.44)
0.05(0.29)

0.53 0.58 0.53 0.43 0.57 0.53 6.15+ 45.17+ 75.86 + 2.5 1.9 2.0 L.NPVG 100 500 1000 6.51(0.96) 6.36(0.38) 7.24(0.34) 0.13(0.01) + 0.12(0.003) + 0.10(0.002) + 0.08(0.11) 0.15(0.05)* 0.07(0.04) #

0.13(0.07) *
0.15(0.03) +
0.05(0.03) #

0.27(0.49) 0.61(0.22) + 0.59(0.18) + 0.38(0.08) + 0.27(0.03) +

0.31(0.01) +

0.01(0.07)
0.001(0.03)

0.0001(0.03)

0.15(0.14)
0.03(0.05)

0.004(0.05)

1.85(0.29) +
2.17(0.12) +
1.85(0.10) +

0.83 0.78 0.73 0.82 0.77 0.73 55.44+ 214.02+ 333.58+ 2.0 1.9 2.0 L.IRR 100 500 1000

3.51(5.24)
4.50(1.61)
2.50(1.19)

0.20(0.10) + 0.19(0.01) + 0.13(0.01) +

0.12(0.57)
0.10(0.21)
0.32(0.14) *

0.54(0.41) 0.20(0.14) 0.63(0.11) +

2.53(2.46)

0.84(0.94)

0.11(0.68)
0.22(0.38)
0.32(0.15)*
0.07(0.10)

0.45(0.41) 0.04(0.15)

0.14(0.10)

0.15(0.69)

0.28(0.23)

0.26(0.17) 0.59(1.62)

0.83(0.51)
0.08(0.35)

0.59 0.52 0.50 0.52 0.51 0.49 8.21+ 35.41+ 66.39 + 2.4 1.8 2.0 L.NPVGT 100 500 1000 0.05(0.14) 0.20(0.06) 0.12(0.04)

0.001(0.001) +
0.004(0.0005) +
0.002(0.002) +

0.03(0.02) 0.01(0.01) 0.02(0.01) +

0.01(0.01)
0.02(0.01) +
0.02(0.003) +
0.03(0.07)

0.01(0.03) 0.03(0.02) 0.03(0.01) # 0.05(0.01) + 0.04(0.003) +

0.001(0.01)
0.003(0.01)
0.002(0.003)

0.09(0.02) + 0.08(0.01) + 0.07(0.01) +

0.05(0.04)

0.01(0.02)

0.02(0.01)*

0.33 0.38 0.31 0.28 0.37 0.30 5.69+ 37.02+ 55.65+ 2.4 2.0 1.9 L.NPVCT 100 500 1000

6.55(3.85)
6.90(1.08)
5.58(0.71)

0.05(0.02)* 0.05(0.01) + 0.03(0.004) +

0.14(0.42)
0.32(0.14)*
0.34(0.08) +

0.32(0.30) 0.15(0.10) 0.39(0.06) +

2.89(1.81)
0.45(0.66)
0.73(0.40) #
1.15(0.28) +
0.99(0.10) +
0.90(0.06) +

0.48(0.30) 0.05(0.10)

0.002(0.003)
2.59(0.51) +
2.86(0.15) +

0.07(0.01) + 2.18(1.19) # 1.43(0.34) +

0.02(0.01) #

0.51 0.65 0.31 0.42 0.64 0.30 5.94+ 61.08+ 55.65+ 2.5 2.0 1.9

Results from all simulations-PSC Regime

+Significant at 1%, *Significant at 5%, # Significant at 10%, Standard errors in parentheses

6. Results

SLIDE 27

IAEE INTERNATIONAL CONFERENCE, NYC

L. φ (f, F) = k+ βL.P+ βL.Roy+ βL.CR+ βL.CIT+ βL.IM1+ βL.IM2+ βL.Dc+

βL.Dg+ε L.NPVC L.NPVG L.IRR L.NPVGT L.NPVCT k

0.52 (1.42) 6.36 (0.38)

4.50

(1.61) 0.20 (0.06)

6.90

(1.08)

βL.P

0.14** (0.01) 0.12** (0.003) 0.19** (0.01)

0.004**

(0.0005) 0.05** (0.01)

βL.Roy

0.20

(0.18) 0.15* (0.05)

0.10

(0.21) 0.01 (0.01)

0.32*

(0.14)

βL.CR

0.01 (0.13)

0.15**

(0.03) 0.20 (0.14)

0.02**

(0.01) 0.15 (0.10)

βL.CIT

0.34 (0.87) 0.61** (0.22) 0.84 (0.94) 0.01 (0.03)

0.45

(0.66)

βL.IM1

0.68**

(0.13) 0.27 ** (0.03)

0.32*

(0.15) 0.05 ** (0.01)

0.99**

(0.10)

βL.IM2

0.04 (0.13)

0.001

(0.03) 0.04 (0.15)

0.003

(0.01) 0.05 (0.10)

βL.Dc

2.88**

(0.20)

0.03

(0.05)

0.28

(0.23) 0.08** (0.01)

2.86**

(0.15)

βL.Dg

0.63

(0.44)

2.17**

(0.12)

0.83

(0.51) 0.01 (0.02) 1.43** (0.34)

R2

0.58 0.78 0.52 0.38 0.65

Adj R2

0.57 0.77 0.51 0.37 0.64

F Stat

45.17** 214.02** 35.41** 37.02** 61.08**

Durbin Watson

1.9 1.9 1.8 2.0 2.0

Trials

500 500 500 500 500

**Significant at 1%, *Significant at 5%, Standard errors in parentheses

Results – PSC Regime

SLIDE 28

IAEE INTERNATIONAL CONFERENCE, NYC

Results – RSC Regime

φ (f, F) = k+ βL.P+ βL.RA+ βL.RB + βL.RC + βL.RD+ βL.CIT+ βL.Dc+ βL.Dg +ε L.NPVC L.NPVG L.NPVGT L.NPVCT k 3.55 (0.14) 7.24 (0.05) 0.23 (0.06)

3.46

(0.19) βL.P

0.014

(0.01) 0.01 (0.01) 4.42E-05 (0.01)

0.02

(0.02) βL.RA 0.011 (0.01)

0.003

(0.004)

0.003

(0.004) 0.01 (0.01) βL.RB

0.25**

(0.01) 0.27** (0.004) 0.10** (0.0040

0.42**

(0.01) βL.RC

0.01

(0.01) 0.003 (0.001)

0.0004

(0.006)

0.01

(0.01) βL.RD

0.001

(0.01)

0.004

(0.004)

0.003

(0.004) 0.001 (0.01) βL.CIT

0.30**

(0.08) 0.45** (0.04) 0.16** (0.04)

0.60**

(0.12) βL.Dc

2.32**

(0.02) 0.01 (0.01) 0.44** (0.01)

1.88**

(0.03) βL.Dg

2.32**

(0.02)

1.15**

(0.02)

0.20**

(0.02) 0.97** (0.06) R2 0.97 0.94 0.87 0.93 Adj R2 0.97 0.94 0.97 0.93 F Stat 1816.7** 1015.650** 414.46** 776.67** Durbin Watson 2.0 2.0 1.93 2.0 Trials 500 500 500 500

**Significant at 1%, *Significant at 5%, Standard errors in parentheses

SLIDE 29

Variables that have significant effects across all economic indicators:

PSC Regime

– Price – Share of profits to the government at the lower tranche of the R factor (‘trigger tranche’)

Coefficients larger than price
Variables that have significant effects across all economic indicators:

RSC Regime

– Share of revenues to the government at the first production slab (‘trigger slab’) – Corporate income tax – Government discount rate

‘Trigger tranche’/ ‘trigger slab’ reflect rate-of-return characteristics

IAEE INTERNATIONAL CONFERENCE, NYC

7. Observation & Conclusions

SLIDE 30

The results for trigger tranche/trigger slabs in the PSC/RSC system

are indicative of rate-of-return influences on the fiscal system

– With a RSC, it could deter investment in difficult (offshore) areas as there is less traction in the system to offset investor risk

The government’s objective in fiscal design appears contrary in the

RSC: it desires higher production and higher (and earlier) revenues, but there is not enough traction to offset the higher risks that come with it

Alternatively, it could explicitly incorporate the rate-of-return element

into fiscal system design

– This could be done through retaining the PSC, but adding an element of cost uplift, for instance – It could also be done through designing a rate-of-return based tax combined with corporate income tax and/or royalties, instead of a RSC

Areas for further work; RoR systems; testing functional relationships

further

IAEE INTERNATIONAL CONFERENCE, NYC

Observations & Conclusions (2)

SLIDE 31

IAEE INTERNATIONAL CONFERENCE, NYC

anupama.sen@oxfordenergy.org

End

SLIDE 32

IAEE INTERNATIONAL CONFERENCE, NYC

NPVc NPVg IRR NPVct NPVgt PSC Regime

Price Trigger tranche (large) Discount rate (c) Price Trigger tranche Royalty Cost recovery Corporate income tax Discount rate (g) Price Trigger tranche Price (negligible) Trigger tranche (large) Royalty Discount rates Price Trigger tranche Cost recovery Discount rate (g) (all negligible)

RSC Regime

Trigger slab Corporate income tax Discount rates Trigger slab Corporate income tax Discount rate (g) No significant results Trigger slab Corporate income tax Discount rates Trigger slab Corporate income tax Discount rates

Significant Variables Compared

SLIDE 33

Variable ADF Stats (at levels) Order of Integration NPVC

22.50+

I(0) NPVG

23.36+

I(0) NPVGT

22.47+

I(0) NPVCT

22.47+

I(0) P

23.25+

I(0) Roy

20.92+

I(0) CR

22.02+

I(0) CIT

23.28+

I(0) IM1

20.82+

I(0) IM2

22.76+

I(0) Dc

22.64+

I(0) Dg

21.97+

I(0) Critical Value at 1%

3.443228

Critical Value at 5%

2.867112

Critical Value at 10%

2.569800

IAEE INTERNATIONAL CONFERENCE, NYC

Stationarity Tests

+Significant at 1%

PSC Regime

SLIDE 34

IAEE INTERNATIONAL CONFERENCE, NYC

Variable ADF Stats (at levels) Order of Integration NPVC

24.37+

I(0) NPVG

22.13+

I(0) NPVGT

23.45+

I(0) NPVCT

23.45+

I(0) P

23.25+

I(0) RA

19.50+

I(0) RB

22.29+

I(0) RC

21.20+

I(0) RD

23.56+

I(0) CIT

21.65+

I(0) Dc

24.63+

I(0) Dg

22.85+

I(0) Critical Value at 1%

3.443228

Critical Value at 5%

2.867112

Critical Value at 10%

2.569800

RSC Regime

+Significant at 1%