Study analysis of determination of fiscal risk implemented in several models of petroleum contracts, a study within licensing bid rounds contracting system of Iraq
INTERNATIONAL PETROLEUM CONTRACTS & PRACTICE IN NEGOTIATIONSpetroEDGE
This 5 days course (24-28 August 2015, Kuala Lumpur) will help you develop an in-depth understanding of the legal and contractual framework as applied in the upstream oil & gas industry. It opens with an explanation of the geopolitical forces which shape the modern oil industry and then covers the major technical, legal, financial, economic and fiscal issues that form current E&P agreements worldwide. You will learn the philosophy, evolution and fundamentals of international petroleum contracts.
The class include participants from both NOC’s, IOC’s contractors, which adds further realism to the exercises. The detailed training agenda can be downloaded here: http://bit.ly/1B2zMCL
For more information, email susy@asiaedge.net
TYPES OF PETROLEUM CONTRACTS AGREEMENT; Product Sharing Contract/Agreement (PSC/PSA); Concession (or Tax-and-Royalty) Contracts; STABILIZATION; EGYPTIAN HYDROCARBON FISCAL REGIME;; Main Differences Concessionary & Production Sharing Contracts (PSCs); Participation/Joint Venture/ Association (or Arrangements); Service Contracts; WHAT CHOICES OF LAW ARE POSSIBLE? Rule of Capture; Law of the Sea Act 77 & the Rule of Capture; KEY ISSUES IN UNITIZATION AGREEMENTS; UNITIZATION CLAUSES; Discretionary Unitization Clauses; Non-Discretionary Unitization Clauses; Cross-border or International Unitization; EGYPT PETROLEUM FUTURE; UNDERSTANDING EGYPT; PRODUCTION SHARING CONTRACTS AND TAX BARRELS; Egypt Production Sharing Contract (PSC); Typical Egypt Development Lease
INTERNATIONAL PETROLEUM CONTRACTS & PRACTICE IN NEGOTIATIONSpetroEDGE
This 5 days course (24-28 August 2015, Kuala Lumpur) will help you develop an in-depth understanding of the legal and contractual framework as applied in the upstream oil & gas industry. It opens with an explanation of the geopolitical forces which shape the modern oil industry and then covers the major technical, legal, financial, economic and fiscal issues that form current E&P agreements worldwide. You will learn the philosophy, evolution and fundamentals of international petroleum contracts.
The class include participants from both NOC’s, IOC’s contractors, which adds further realism to the exercises. The detailed training agenda can be downloaded here: http://bit.ly/1B2zMCL
For more information, email susy@asiaedge.net
TYPES OF PETROLEUM CONTRACTS AGREEMENT; Product Sharing Contract/Agreement (PSC/PSA); Concession (or Tax-and-Royalty) Contracts; STABILIZATION; EGYPTIAN HYDROCARBON FISCAL REGIME;; Main Differences Concessionary & Production Sharing Contracts (PSCs); Participation/Joint Venture/ Association (or Arrangements); Service Contracts; WHAT CHOICES OF LAW ARE POSSIBLE? Rule of Capture; Law of the Sea Act 77 & the Rule of Capture; KEY ISSUES IN UNITIZATION AGREEMENTS; UNITIZATION CLAUSES; Discretionary Unitization Clauses; Non-Discretionary Unitization Clauses; Cross-border or International Unitization; EGYPT PETROLEUM FUTURE; UNDERSTANDING EGYPT; PRODUCTION SHARING CONTRACTS AND TAX BARRELS; Egypt Production Sharing Contract (PSC); Typical Egypt Development Lease
PRODUCTION SHARING CONTRACTS (By Edwin Kimani & Kate Mavuti)Edwin Kimani
This slides, prepared together with Kate Mavuti (LLB, DipKSL, LLM Oil & Gas) analyses the complexity of production sharing contracts, typically used in the oil and gas industry in Kenya.
We are currently in the midst of one of the deepest downturns in the upstream industry in recent years. Challenging times are ahead for those looking to invest capital and grow their companies in this environment.
Petroleum Economics is all about the allocation of scarce resources. Investment capital is certainly that scarce resource at the moment. In this environment, companies are looking for people to develop highly advanced skills in upstream petroleum economic and financial analysis
GROWTH FACTORS AND CHALLENGES FOR OIL MARKET; GROWTH FACTORS FOR OIL MARKET; Demographic Factors, Oil Demand, Motorization in Asian Countries, Upstream Costs Increase, Principal CHALLENGES FOR OIL MARKET, US Shale Oil Production, US shale oil production potential for well drilling, Other constraints, Deepwater Production, Iraqi production growth prospects, GTL – challenge for the oil market after 2020
Investment and decision analysis for petroleum explorationHamdy Rashed
Investment and decision analysis for petroleum exploration is a subject that many explorationist, geologist, management accountant and finance manager likes to know about. This paper shows the major concepts of how investment, decision and project analysis is made for petroleum exploration in financial view that is based on cash-flow models and applying capital budgeting techniques per International Oil and Gas business, financial and contractual arrangement that impact on such analysis. This paper does not cover such analysis in technically view because it is out of specialization, but this analysis shall be made in conjunction with technical experienced staff.
Keywords: Investment and decision analysis for petroleum exploration, Project Analysis for Petroleum Exploration
Slide deck used during the SPE Live broadcast on 19 August 2020 with guest Doug Peacock, 2010-11 SPE Distinguished Lecturer and currently a Technical Director for GaffneyCline.
WATCH VIDEO: https://youtu.be/ykJhFkNUXqc
TRAINING COURSE: http://go.spe.org/peacockSPELIVE
The unitization process has evolved over the years and is now well established throughout the world with many countries having legislation for unitization.
Although there are generic agreements, each unitization agreement is unique and requires a wide range of issues to be considered.
Compared with other sources of energy, oil and gas continue to become primary sources of energy in Indonesia with the highest level of consumption. Apart from propping up almost one third of national revenue, oil and gas also significantly contribute to create job opportunities, supply the need of fuel, petrochemical industry which in turn effectively enhances investment and economy.
As a natural resource contained within the bowel of the earth, the constitution of the Republic of Indonesia asserts that the ownership and enterpreneurship of national oil and gas industry is controlled by the state and immensely benefitted to the welfare of people accordingly (constitution 1945, article 33). Furthermore, it is asserted through the law 22/2001 on oil and gas that the control by the state is administered by the government as the holder of mining right. It means, the government is entitled with authority to administer the exploration and exploitation of oil and gas throughout Indonesian territory.
Introduction to Project Economics in Oil and Gas Exploration and Production (Upstream) Industry, including basic project economics method and example of calculation.
Project Controls Expo 18th Nov 2014 - "PACING DELAY The Practical Effect on C...Project Controls Expo
This paper is focused on pacing delay, a controversial delay issue in the construction industry. Currently there is little literature on pacing delay and case law is a bit sparse. Thus, owners and contractors often find themselves at odds with one another over the practical effect of pacing delay in a delay claim situation. This paper defines the term; identifies what constitutes pacing delay; and sets forth the contractor’s legal right to pace an owner caused delay and addresses the practical impact of a pacing delay, both to the project as well as to a delay claim. This paper is intended to assist in a better understanding of pacing delay and how the issue may be dealt with by both owners and contractors.
PRODUCTION SHARING CONTRACTS (By Edwin Kimani & Kate Mavuti)Edwin Kimani
This slides, prepared together with Kate Mavuti (LLB, DipKSL, LLM Oil & Gas) analyses the complexity of production sharing contracts, typically used in the oil and gas industry in Kenya.
We are currently in the midst of one of the deepest downturns in the upstream industry in recent years. Challenging times are ahead for those looking to invest capital and grow their companies in this environment.
Petroleum Economics is all about the allocation of scarce resources. Investment capital is certainly that scarce resource at the moment. In this environment, companies are looking for people to develop highly advanced skills in upstream petroleum economic and financial analysis
GROWTH FACTORS AND CHALLENGES FOR OIL MARKET; GROWTH FACTORS FOR OIL MARKET; Demographic Factors, Oil Demand, Motorization in Asian Countries, Upstream Costs Increase, Principal CHALLENGES FOR OIL MARKET, US Shale Oil Production, US shale oil production potential for well drilling, Other constraints, Deepwater Production, Iraqi production growth prospects, GTL – challenge for the oil market after 2020
Investment and decision analysis for petroleum explorationHamdy Rashed
Investment and decision analysis for petroleum exploration is a subject that many explorationist, geologist, management accountant and finance manager likes to know about. This paper shows the major concepts of how investment, decision and project analysis is made for petroleum exploration in financial view that is based on cash-flow models and applying capital budgeting techniques per International Oil and Gas business, financial and contractual arrangement that impact on such analysis. This paper does not cover such analysis in technically view because it is out of specialization, but this analysis shall be made in conjunction with technical experienced staff.
Keywords: Investment and decision analysis for petroleum exploration, Project Analysis for Petroleum Exploration
Slide deck used during the SPE Live broadcast on 19 August 2020 with guest Doug Peacock, 2010-11 SPE Distinguished Lecturer and currently a Technical Director for GaffneyCline.
WATCH VIDEO: https://youtu.be/ykJhFkNUXqc
TRAINING COURSE: http://go.spe.org/peacockSPELIVE
The unitization process has evolved over the years and is now well established throughout the world with many countries having legislation for unitization.
Although there are generic agreements, each unitization agreement is unique and requires a wide range of issues to be considered.
Compared with other sources of energy, oil and gas continue to become primary sources of energy in Indonesia with the highest level of consumption. Apart from propping up almost one third of national revenue, oil and gas also significantly contribute to create job opportunities, supply the need of fuel, petrochemical industry which in turn effectively enhances investment and economy.
As a natural resource contained within the bowel of the earth, the constitution of the Republic of Indonesia asserts that the ownership and enterpreneurship of national oil and gas industry is controlled by the state and immensely benefitted to the welfare of people accordingly (constitution 1945, article 33). Furthermore, it is asserted through the law 22/2001 on oil and gas that the control by the state is administered by the government as the holder of mining right. It means, the government is entitled with authority to administer the exploration and exploitation of oil and gas throughout Indonesian territory.
Introduction to Project Economics in Oil and Gas Exploration and Production (Upstream) Industry, including basic project economics method and example of calculation.
Project Controls Expo 18th Nov 2014 - "PACING DELAY The Practical Effect on C...Project Controls Expo
This paper is focused on pacing delay, a controversial delay issue in the construction industry. Currently there is little literature on pacing delay and case law is a bit sparse. Thus, owners and contractors often find themselves at odds with one another over the practical effect of pacing delay in a delay claim situation. This paper defines the term; identifies what constitutes pacing delay; and sets forth the contractor’s legal right to pace an owner caused delay and addresses the practical impact of a pacing delay, both to the project as well as to a delay claim. This paper is intended to assist in a better understanding of pacing delay and how the issue may be dealt with by both owners and contractors.
Oil 101: Introduction to Oil and Gas - DownstreamEKT Interactive
Oil 101: Introduction to Oil and Gas
What is Downstream?
This Downstream module includes the following sections:
-Downstream Business Characteristics
-Refining – Products and Participants
-Consumption – The Final Step in Adding Value
-Marketing and Retail
Downstream
Processing, transporting and selling refined products made from crude oil is the business of the downstream segment of the oil and gas industry.
Key downstream business sectors include:
-Oil Refining
-Supply and Trading
-Product Marketing and Retail
The downstream industry provides thousands of products to end-user customers around the globe.
Many products are familiar such as gasoline, diesel, jet fuel, heating oil and asphalt for roads. Others are not as familiar such as lubricants, synthetic rubber, plastics, fertilizers and pesticides.
The downstream segment is a margin business. Margin is defined as the difference between the price realized for the products produced from the crude oil and the cost of the crude delivered to the refinery.
Although the price of crude sets the absolute level of product prices, it may or may not affect refining or marketing margins. Downstream margins tend to be reduced, or squeezed, when crude price increases often cannot be recovered in the marketplace. On the other hand, margins tend to hold, or even increase, when crude prices drop and the marketplace more slowly adjusts to these lower crude prices.
The downstream segment includes complex and diverse activities including manufacturing, petrochemical refining, distribution, and retail.
A global perspective is important because of the global nature of the energy supply chain as well as the impact of supply and demand on both feedstock and product prices.
Service Contract Analytics - Leverage analytics to improve revenue and profit...Genpact Ltd
Helping CFOs and Service leaders of Industrial OEMs improve revenue and profitability of after market service contracts, through application of analytics on prospect management, Terms & Conditions compliance, and contract margin review.
Management Of Contracts The D Os, Dontsutkarshjani
Most of the companies regulalry enter into complex contracts but seldom give due imporantance on effective management of the said contract. Here are some effective tools for the same
Le 02 natural gas exploration and productionNsulangi Paul
This presentation demonstrates activities concerning natural gas exploration and production. The contents point out activities associated with natural gas upstream such as searching and extracting natural gas either offshore or onshore fields.
Objective Capital's Africa Resources Investment Congress 2011
Ironmongers' Hall, City of London
14-15 June 2011
Day 1: Africa Resources
Speaker: Giulio Carini, Global WItness
Oil & Money 2014 hosts unique opportunity to meet top Mexican government officials to fully explain the country's historic forthcoming bidding round.
Videos of the full session will be available shortly on www.oilandmoney.com.
StrategicFit - French unconventionals regulationStrategicFit
StrategicFIt has written the following presentation in response to unconventional gas regulation in France. It provides insight into the recent fracking ban, the structure of relevant regulations and the process for engaging with regulators.
The presentation has been updated following Total's announcement on January 19th 2012 to appeal against the withdrawal of its permit to explore and excavate shale gas in France.
Intention-Oriented Modelling Support for Socio-Technical driven Elastic Cloud...Yasir Karam
Yasir A. Karam
PhD Student
School of Computing and Mathematical Sciences
Liverpool John Moores University
Liverpool, UK
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IIT’12 Conference – UAE University March 2012
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These slides exhibit a service oriented, autonomic (sensor, actuator) approach for modeling ITIL service management framework adopted by OGC, the approach claims more emphasis over computerizing based on autonomic computing certain processes of ITSM lifecycle
Quality defects in TMT Bars, Possible causes and Potential Solutions.PrashantGoswami42
Maintaining high-quality standards in the production of TMT bars is crucial for ensuring structural integrity in construction. Addressing common defects through careful monitoring, standardized processes, and advanced technology can significantly improve the quality of TMT bars. Continuous training and adherence to quality control measures will also play a pivotal role in minimizing these defects.
Overview of the fundamental roles in Hydropower generation and the components involved in wider Electrical Engineering.
This paper presents the design and construction of hydroelectric dams from the hydrologist’s survey of the valley before construction, all aspects and involved disciplines, fluid dynamics, structural engineering, generation and mains frequency regulation to the very transmission of power through the network in the United Kingdom.
Author: Robbie Edward Sayers
Collaborators and co editors: Charlie Sims and Connor Healey.
(C) 2024 Robbie E. Sayers
Cosmetic shop management system project report.pdfKamal Acharya
Buying new cosmetic products is difficult. It can even be scary for those who have sensitive skin and are prone to skin trouble. The information needed to alleviate this problem is on the back of each product, but it's thought to interpret those ingredient lists unless you have a background in chemistry.
Instead of buying and hoping for the best, we can use data science to help us predict which products may be good fits for us. It includes various function programs to do the above mentioned tasks.
Data file handling has been effectively used in the program.
The automated cosmetic shop management system should deal with the automation of general workflow and administration process of the shop. The main processes of the system focus on customer's request where the system is able to search the most appropriate products and deliver it to the customers. It should help the employees to quickly identify the list of cosmetic product that have reached the minimum quantity and also keep a track of expired date for each cosmetic product. It should help the employees to find the rack number in which the product is placed.It is also Faster and more efficient way.
TECHNICAL TRAINING MANUAL GENERAL FAMILIARIZATION COURSEDuvanRamosGarzon1
AIRCRAFT GENERAL
The Single Aisle is the most advanced family aircraft in service today, with fly-by-wire flight controls.
The A318, A319, A320 and A321 are twin-engine subsonic medium range aircraft.
The family offers a choice of engines
Industrial Training at Shahjalal Fertilizer Company Limited (SFCL)MdTanvirMahtab2
This presentation is about the working procedure of Shahjalal Fertilizer Company Limited (SFCL). A Govt. owned Company of Bangladesh Chemical Industries Corporation under Ministry of Industries.
Final project report on grocery store management system..pdfKamal Acharya
In today’s fast-changing business environment, it’s extremely important to be able to respond to client needs in the most effective and timely manner. If your customers wish to see your business online and have instant access to your products or services.
Online Grocery Store is an e-commerce website, which retails various grocery products. This project allows viewing various products available enables registered users to purchase desired products instantly using Paytm, UPI payment processor (Instant Pay) and also can place order by using Cash on Delivery (Pay Later) option. This project provides an easy access to Administrators and Managers to view orders placed using Pay Later and Instant Pay options.
In order to develop an e-commerce website, a number of Technologies must be studied and understood. These include multi-tiered architecture, server and client-side scripting techniques, implementation technologies, programming language (such as PHP, HTML, CSS, JavaScript) and MySQL relational databases. This is a project with the objective to develop a basic website where a consumer is provided with a shopping cart website and also to know about the technologies used to develop such a website.
This document will discuss each of the underlying technologies to create and implement an e- commerce website.
Courier management system project report.pdfKamal Acharya
It is now-a-days very important for the people to send or receive articles like imported furniture, electronic items, gifts, business goods and the like. People depend vastly on different transport systems which mostly use the manual way of receiving and delivering the articles. There is no way to track the articles till they are received and there is no way to let the customer know what happened in transit, once he booked some articles. In such a situation, we need a system which completely computerizes the cargo activities including time to time tracking of the articles sent. This need is fulfilled by Courier Management System software which is online software for the cargo management people that enables them to receive the goods from a source and send them to a required destination and track their status from time to time.
CFD Simulation of By-pass Flow in a HRSG module by R&R Consult.pptxR&R Consult
CFD analysis is incredibly effective at solving mysteries and improving the performance of complex systems!
Here's a great example: At a large natural gas-fired power plant, where they use waste heat to generate steam and energy, they were puzzled that their boiler wasn't producing as much steam as expected.
R&R and Tetra Engineering Group Inc. were asked to solve the issue with reduced steam production.
An inspection had shown that a significant amount of hot flue gas was bypassing the boiler tubes, where the heat was supposed to be transferred.
R&R Consult conducted a CFD analysis, which revealed that 6.3% of the flue gas was bypassing the boiler tubes without transferring heat. The analysis also showed that the flue gas was instead being directed along the sides of the boiler and between the modules that were supposed to capture the heat. This was the cause of the reduced performance.
Based on our results, Tetra Engineering installed covering plates to reduce the bypass flow. This improved the boiler's performance and increased electricity production.
It is always satisfying when we can help solve complex challenges like this. Do your systems also need a check-up or optimization? Give us a call!
Work done in cooperation with James Malloy and David Moelling from Tetra Engineering.
More examples of our work https://www.r-r-consult.dk/en/cases-en/
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This keynote talks about the democratization of fuzzing at scale, highlighting the collaboration between open source communities, academia, and industry to advance the field of fuzzing. It delves into the history of fuzzing, the development of scalable fuzzing platforms, and the empowerment of community-driven research. The talk will further discuss recent advancements leveraging AI/ML and offer insights into the future evolution of the fuzzing landscape.
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Discover the different forklift classes and their specific applications. Learn how to choose the right forklift for your needs to ensure safety, efficiency, and compliance in your operations.
For more technical information, visit our website https://intellaparts.com
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Learn about the cost savings, reduced environmental impact, and minimal disruption associated with trenchless technology. Discover detailed explanations of popular techniques such as pipe bursting, cured-in-place pipe (CIPP) lining, and directional drilling. Understand how these methods can be applied to various types of infrastructure, from residential plumbing to large-scale municipal systems.
Ideal for homeowners, contractors, engineers, and anyone interested in modern plumbing solutions, this guide provides valuable insights into why trenchless pipe repair is becoming the preferred choice for pipe rehabilitation. Stay informed about the latest advancements and best practices in the field.
Student information management system project report ii.pdfKamal Acharya
Our project explains about the student management. This project mainly explains the various actions related to student details. This project shows some ease in adding, editing and deleting the student details. It also provides a less time consuming process for viewing, adding, editing and deleting the marks of the students.
3. Introduction
Petroleum is strategic material so the
understanding of agreements/fiscal
systems for Int’l E&P is very important.
There is no consistent approach to the
establishment or implementation of
international agreements/fiscal systems.
Each country establishes the type of
agreements/fiscal systems those best
meet their sovereign need.
4. History of Contract
Concession is originated from the E&P of
petroleum in developing countries by
international oil companies, dated from
late of 19th century-under political control
of European power.
Production sharing contract was first
employed by Indonesian GOE and a
foreign oil company in 1966-under
antipathy of people for foreign company
and desire to control its national resources.
5. History of Contracts
Service Contract was first introduced by
Argentine government(YPF) between 1958
and 1961 in three types : drilling,
development, exploration/development-
financially unstable to obtain most
advanced technology.
Joint venture is introduced by Italian GOE,
ENI and Egyptian and Iranian GOE in
1957-to participate in managerial decision.
6. Concession Agreement
Concession Agreement(Royalty/Tax)
grants the ownership of petroleum.
Traditional concession is simple agreement
consisted of only royalty(12.5%) payment
based on the tonnage of crude oil
produced in very large area with
unreasonably long period.(50-60yrs)
7. Concession Agreement
Modern Concession grants a fixed
period(exploration:3-5yrs, exploitation
: 30-40yrs) and,
Government revenue is deprived mainly
from royalties (11.5-14.5%) and net income
or taxes.
8. Production Sharing Contract
PSC doesn’t grant ownership, only grant
right to receive a
Share of production or,
Revenues from the sale of oil and gas.
In PSC, government revenue is composed
of
Government profit oil and
Taxes.
9. Joint Venture
Joint venture involves joint ownership of:
assets and
concession rights,
a sharing of
certain costs of operation, and
net revenues.
In joint venture, the private company is
always designated as the operator, but
GOE usually participate in management
through a joint management committee,
approves work program and budget.
10. Joint Venture
Joint venture is not only contracted
between company and government but
also company to company.
Joint venture can be found in Concession
and PSC.
11. Service Contract
Service contract is one under which a private
company agrees to perform certain specified
services for the government or a GOE in return
for fixed payment(pure service, Technical Service
Agreement, which have money but lack of the
technical know-how) or probable profits(risk
service).
The difference between service and PSC is nature
of payment-Cash or Crude.
12. Conclusion
Concession agreement is generally used
by the
countries those are non producer and new
comer in oil industry and want to encourage
foreign investment in the development of their
oil resources. So government grant ownership
and make terms attractive to the investor.
13. Conclusion
PSC is generally used by the
countries whose people is very hostile to
foreign companies (formerly ruled by other
countries) and want to participate more
actively in E&P, refinery, marketing and
distribution.
Service contract is same as PSC except the
fee is paid by cash.
14. Conclusion
Joint Venture is used by who want spread
risk or short of capital and used in both
concession and PSC.
There is no superiority of contracts
actually.
The most important factor to determine
the economic success is the
structure of fiscal system(royalty, tax, cost
recovery, etc) and the
flexibility(ex. sliding scale, R factor) is
becoming standard and beneficial to the host
government and contractors.
16. • When the contractor is paid a fee for conducting explora
tion and production operations, then this system is a ris
k service contract.
• The difference between risk and pure services contracts
depends on whether there is a fee on the profits or not.
The pure service contract is without risk in exploration a
nd development.
• Consequently, this is usually used by conservative natio
nalized companies or by states that have capital but are
lacking in technology and management capability
• In addition to the concessionary and contractual system
s, which are the two most used systems, there are som
e further variations that could be considered as types of
fiscal system.
• The joint venture is a variant fiscal/contractual system. I
t is used where the national company and contractor co
mpany establish a working interest arrangement. This is
found in both concessionary and contractual systems.
17.
18.
19.
20. • It is important to note in such contracts both the level
of percentage of recovery of costs and also the way in
which the exploration or development costs may be rec
overed.
• If there is costs recovery before sharing of production,
the contractor is allowed to recover the costs out of ne
t revenues. The costs recovery limit is the only true dis
tinction between concessionary systems and PSCs.
• The amount of revenues remaining after royalty and co
st recovery, is termed profit oil or profit gas. This is the
equivalent of taxable income in a concessionary system
• Within the service agreement, it would be termed the s
ervice fee
21.
22.
23.
24. Profit oil Sharing Triggers
• Production
– Daily rate
– Absolute volume
• Rate of return (ROR)
• R-factors
27. Probabilities of severe weather events by month (column H)
Month Means
Coefficient
of variation
Random (normal)
seasonality index
Probability
of severe
weather
Seasonality
factor
Seasonally
adjusted
probability
1 0.485 20.52% 0.613 4.73% 0.568 4.18%
2 0.507 17.36% 0.620 4.79% 0.575 4.23%
3 0.712 10.77% 0.810 6.26% 0.751 5.53%
4 0.961 5.48% 1.028 7.95% 0.953 7.02%
5 1.201 4.60% 1.271 9.82% 1.179 8.68%
6 1.396 2.87% 1.448 11.19% 1.342 9.88%
7 1.501 2.33% 1.546 11.95% 1.434 10.56%
8 1.459 2.85% 1.512 11.69% 1.402 10.33%
9 1.303 3.27% 1.358 10.49% 1.259 9.27%
10 1.067 5.23% 1.139 8.80% 1.056 7.78%
11 0.829 7.11% 0.904 6.99% 0.838 6.17%
12 0.579 15.08% 0.691 5.34% 0.641 4.72%
Summary 1.000 12.940 1.000 1.000 7.36%
RiskGeneral distribution of length (days) of a given severe weather event
Min days 0
Max days 10
Historical data on 215 events in 8
years
Days 1 2 3 4 5 6
Frequency 48 86 58 15 6 2
Typical length 4
-2
0
2
4
6
8
10
12
28.
29.
30.
31. • Countries allocating exploration acreage around the worl
d:
• 1994 - 50 countries
• 1998 - 48 countries
• 2006 - 98 countries
• The new mix of acreage includes frontier acreage,
• marginal fields, enhanced oil recovery projects, heavy oi
l, oil sands, deep water, stranded gas, anything that will
burn.
Exploration acreage has become a commodity
32.
33. Fiscal System Design - and Host Government
concerns;
• Control over the countries natural resources.
• Attract exploration investment & the right investors.
• Receive a fair share of profits - large Take
• Keep costs down
• Guarantee revenue each accounting period (Effective
Royalty Rate)
• Maximum Efficient Production Rate (MEPR) or Maximum
Ultimate Recovery
34. Government Take is the common denominator -
division of profits is ‘a’ key concern.
Take Definitions
Government Take (%) =
Economic profit ($) =
• Government receipts from bonuses, royalties, taxes, pr
oduction or profit sharing, and Government participatio
n, divided by Economic profit.
• Gross revenue less gross costs.
• Also referred to as cash flow.
• Contractor Take ($) = 1 - Government Take.
37. • The sole risk of exploration is borne by the IOC, the HC ther
efore benefits when there is successful exploration
• The IOC (in most cases) is only entitled to recover costs und
er the PSC from a portion of production from the area subje
ct to the contract (ringfenced), this is of benefit to the HC in
that costs are not
• The cost ceiling is designed to ensure that the HC can have i
ts share of profit oil as soon as production commences. The
benefit if this is essential as a late return on revenues from
production would be politically difficult to justify.
• A limit to the recoverable costs shields the HG from having t
o pay for frivolous expenses by the IOC.
• Finally, the PSC has a relatively simpler fiscal regime compar
ed to the royalty/concession system, thus, the HG usually do
es not have to spend time and resources designing complex
taxation rules
Positive Aspects of Cost Recovery
38. Negative Impact of Cost Recovery
• The cost recovery is therefore designed to benefit the HC. However, even with cost reco
very, the potential for the IOC to be over compensated is real. Often times a badly stru
ctured fiscal regime can lead to abuse by the contractor.
• This has been the case for many developing nations whose petroleum industries have b
een of little benefit in terms of spurring economic growth. To couple this with an ineffici
ently run IOC, bad resource management and lack of social and environmental awarene
ss49, could spell more disaster for the HC. A recent report funded by the European Uni
on describes the extent to which a badly structured PSC in Kazakhstan‟s Kashagan field
proved more of a detriment to the government and the local communities.
• Greg Muttitt, who authored the report, commented that, the research reveals the exten
t to which oil companies took advantage of Kazakhstan‟s weakness in the 1990s (a tim
e of very low oil prices).50 The dispute arose after ENI the French IOC involved in the d
ispute, released a statement projecting costs to be higher than they had envisaged, the
ultimate costs (amounting to a projected loss of over $20 billion dollars) would thereby
be borne by the HC through cost recovery
• Furthermore, the design of the cost recovery structure can lead to huge contractor take
in times of high oil prices which could then lead to contract instability disputes with the
HG who is intent on finding ways to curtail the take by the IOC. For example in 2008, in
an effort to increase government revenues at a time of high public scrutiny, the Indone
sian Energy and Mineral Resources Ministry proposed a regulation to eliminate 17 expe
nses contractors could claim under the „cost recovery mechanism,‟52 the Energy Minist
ry later issued a press release amid dropping oil prices stating its intent on abandoning
the proposed caps on cost recovery. This decision was no less influenced by Indonesia‟
s inability to attract new investment to develop its oil fields