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Comparative analysis of the relative attractiveness of the current fiscal terms in the South East Asia region

This paper aims to assess the relative competitiveness of the current fiscal terms in South East Asia in the context of changes proposed and implemented across the region. A discounted cash flow (DCF) analysis was carried out based on the generic fiscal terms of Brunei, Indonesia, Malaysia, Thailand, and Vietnam based on an offshore, shallow water development. Where applicable, a comparison will be made against the previous fiscal terms of the country. Analysis will focus on investor returns and from the host government perspective evaluating net present value (NPV), internal rate of return (IRR), and government take. The fiscal terms were also assessed on whether they are progressive or regressive and provide an equitable return to both investors and host governments. Indonesia, Thailand, and Malaysia have seen recent shifts in their fiscal terms with new terms introduced in 2017, 2018, and 2021, respectively. Indonesia saw the introduction of the Gross Split Production Sharing Contract (GS PSC), which based on this analysis does not appear to be an improvement on the previous Cost Recovery Production Sharing Contract (CR PSC). Thailand saw the introduction of a CR PSC which was applied to the two expired offshore, producing, blocks. Based on our analysis, the newly introduced fiscal terms for Malaysia appears to provide a significant improvement to the previous terms and is likely to encourage further investment. Governments and regulators will face greater pressure to provide further incentives and greater flexibility to attract investments in the face of maturing fields, marginal fields, challenging sour gas resources, and capital constraints resulting from and Environmental, Social, and Corporate Governance (ESG) pressures on oil and gas companies.