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The Scenario

The long lost continent of Atlantis has risen from the sea. Immigrants from around the world have taken to this new land as a means of opportunity that has not been seen in centuries. Politically, the new Atlantians have established their capital in the center of the continent, but most of the governance is done in the nine provinces. Each province has made its own business laws as it struggles to develop this new society.

Image coming soon.

Underneath Atlantis is a vast sedimentary basin, just full of oil. The new provincial jurisdictions quickly see that developing their societies can accelerate with oil production. Revenue from oil wells can help build schools, hospitals, and roads. And each province uses a different combination of royalties and corporate taxes to attract investors yet and keep as much of the economic profit for itself.

The national government in Atlantis City has decided on a new approach for oil exploration and development. The provinces themselves do all the preproduction tasks: geophysics, geology, drilling, completion, tying in, facilities construction, and testing. When the well is ready for production, the province auctions the completed oil well to the highest bidder. The winner of this auction need only turn on the newly acquired well to start making money.

Although the petroleum extraction of Atlantis is both simplified and unrealistic, this scenario isolates the petroleum economics practice to just three parameters: royalties, corporate taxes, and environmental liabilities. Some very elaborate spreadsheets can be constructed around this simplified scenario. In a competitive seminar, such spreadsheets may be needed just for survival, let alone financial success.

© 2014 Dave Volek. All Rights Reserved.