ABSTRACT

The economic viability of marginal and mature oil and gas fields presents unique challenges under Production Sharing Contract (PSC) frameworks, particularly in the context of cost recovery mechanisms. As fields age and production declines, contractors face increasing operational costs and reduced profitability, compounded by stringent fiscal terms. These challenges often deter investment in late-life fields, leaving substantial hydrocarbon reserves untapped.

This study examines the economic dynamics of PSC cost recovery in marginal and mature fields, focusing on strategies to balance investment risks and returns. It evaluates and prioritizes potential solutions by assessing economic changes influenced by operational, regulatory, and environmental factors after years of production, particularly in fields nearing the economic cutoff. Given these constraints, the study employs the Analytical Hierarchy Process (AHP) and Cost-Benefit Analysis (CBA) to support management-level decision making in optimizing mature asset performance. By analyzing operational data, fiscal policies, and stakeholder perspectives, the study identifies inefficiencies in the existing cost recovery framework and explores opportunities for improvement.

Key solutions include optimizing cost recovery mechanisms, introducing targeted fiscal incentives such as tax relief and enhanced cost recovery ceilings, and fostering contractual flexibility to encourage investment in enhanced recovery techniques. The findings demonstrate that tailored fiscal policies and efficient cost recovery structures, combined with decision-making frameworks like AHP and CBA, can significantly improve the economic appeal of marginal and mature fields. By aligning operational realities with financial incentives, stakeholders can maximize hydrocarbon recovery while maintaining profitability. This research provides actionable insights for policymakers and industry stakeholders to address the growing challenge of sustaining energy production from aging assets under PSC frameworks.