Libra Model and Narrative Report
Libra project fiscal model and the accompanying narrative report
Brazil’s Libra project is an offshore oilfield that could produce 1.3 million BOPD. But the consortium signed the PSC expecting higher oil prices. With current oil prices ($50 a barrel in Oct. 2016), Libra is unviable unless costs can be reduced significantly, and/or the fiscal regime is renegotiated – particularly the royalty. The project schedule has already slipped – which we think reflects theses challenges – and it may slip further.
● In middle scenario pre-tax IRR is 18.4%, after-tax IRR is 7.0%, and NPV8 is negative at current oil prices ($50 per barrel, October 2016)
● Breakeven is at around $54 a barrel for the middle scenario (production of 10 billion barrels)
● At low oil prices the royalty is highly regressive
● Capex would need to be cut to achieve profitability
● Given all of the above, the project will likely need to have terms and schedule revised
● In middle scenario pre-tax IRR is 18.4%, after-tax IRR is 7.0%, and NPV8 is negative at current oil prices ($50 per barrel, October 2016)
● Breakeven is at around $54 a barrel for the middle scenario (production of 10 billion barrels)
● At low oil prices the royalty is highly regressive
● Capex would need to be cut to achieve profitability
● Given all of the above, the project will likely need to have terms and schedule revised
- OpenOil
- 2017
