How can Government Best Achieve its Objectives for Petroleum Development: Taxation and Regulation or State Participation?
19 Pages Posted: 14 Aug 2010
Date Written: May 4, 2010
Oil is of tremendous importance to the economy of countries that are endowed with the resource. The government in such countries would usually have ambitious aspirations to maximize their gains from the exploitation of this finite resource whilst sustaining present investments and stimulating more investments for the future.
How well these aspirations materialize into reality depends on the application of appropriate framework for petroleum development. Over the years, petroleum resource endowed countries have been torn between the options of using tax instruments or direct state equity participation as a vehicle to achieve its goals for petroleum development. As different countries have differing peculiarities, capabilities and priorities, there may be no one size fits all. This paper undertakes a discourse on government’s multifarious objectives for petroleum exploitation; the options of taxation & regulation and state participation, its basic elements and its pros and cons. By a comparative analysis of its arguments, it seeks to answer the germane questions: Is there a single most suitable option for government to actualize its aspirations for petroleum development or could there be an appropriate interplay of these options?
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