Both production sharing contracts (PSCs) and modern concession agreements share many similarities in their development and fiscal aspects, according to the document. Some key points of similarity include:
1) Both contract types involve an international oil company (IOC) entering into an agreement with a national oil company (NOC) representing the government.
2) Under both, the IOC must provide a performance guarantee and assets will revert to the government upon contract expiration.
3) Fiscal aspects like bonus payments, royalties, and minimum work obligations are common to both.
However, there are also some differences. Ownership of oil resources remains with the government under a PSC but transfers to the IOC under
Production sharing agreements vs service contracts from the view of an iocValentine Ataka
This document compares Production Sharing Agreements (PSAs) and Service Contracts (SCs) from the perspective of an International Oil Company (IOC).
PSAs and SCs both aim to balance the interests of host governments and IOCs. Key differences are that under a PSA, an IOC shares production with the government in return for recovering costs and earning a profit, while under an SC, an IOC is paid fees for services and has no claim on production.
The document analyzes features of each like contract terms, relinquishment obligations, and joint management bodies. It notes advantages of PSAs for IOCs include ability to recover costs and earn profit from production. Advantages of SCs are that
The document discusses production sharing contracts (PSCs), which are agreements between contractors and governments for oil and gas exploration. Under a PSC, the contractor bears all costs and risks of exploration in exchange for a share of production if commercial discoveries are made. The main elements of PSCs discussed are management committees, minimum work programs, and provisions for cost recovery and profit sharing between contractors and governments. Recent disputes between contractors and governments around cost recovery and royalty payments are also summarized.
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
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.
This document discusses oil and gas exploration and production contracts between national oil companies (NOCs) and private international oil companies (IOCs). It provides an overview of different types of contracts including concessions, production sharing contracts, joint ventures, and service contracts. It also gives examples of how these contract types have been implemented in specific countries, comparing the experiences of Indonesia, Venezuela, Nigeria, and Canada.
Fiscal Risk Advancements in Petroleum ContractsYasir Karam
Study analysis of determination of fiscal risk implemented in several models of petroleum contracts, a study within licensing bid rounds contracting system of Iraq
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 Agreements, Oil Service Contracts & Joint VenturesElijah Ezendu
The document discusses different types of agreements for oil production and exploration between oil companies and governments. It describes production sharing agreements where the oil company bears costs of exploration and production in exchange for a share of output. It also discusses joint ventures where governments and oil companies jointly operate projects and share outputs. Service contracts are mentioned where the government maintains greater control and the oil company is compensated for services. The pros and cons of these different models are compared from the perspectives of both the host government and international oil companies.
Production sharing agreements vs service contracts from the view of an iocValentine Ataka
This document compares Production Sharing Agreements (PSAs) and Service Contracts (SCs) from the perspective of an International Oil Company (IOC).
PSAs and SCs both aim to balance the interests of host governments and IOCs. Key differences are that under a PSA, an IOC shares production with the government in return for recovering costs and earning a profit, while under an SC, an IOC is paid fees for services and has no claim on production.
The document analyzes features of each like contract terms, relinquishment obligations, and joint management bodies. It notes advantages of PSAs for IOCs include ability to recover costs and earn profit from production. Advantages of SCs are that
The document discusses production sharing contracts (PSCs), which are agreements between contractors and governments for oil and gas exploration. Under a PSC, the contractor bears all costs and risks of exploration in exchange for a share of production if commercial discoveries are made. The main elements of PSCs discussed are management committees, minimum work programs, and provisions for cost recovery and profit sharing between contractors and governments. Recent disputes between contractors and governments around cost recovery and royalty payments are also summarized.
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
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.
This document discusses oil and gas exploration and production contracts between national oil companies (NOCs) and private international oil companies (IOCs). It provides an overview of different types of contracts including concessions, production sharing contracts, joint ventures, and service contracts. It also gives examples of how these contract types have been implemented in specific countries, comparing the experiences of Indonesia, Venezuela, Nigeria, and Canada.
Fiscal Risk Advancements in Petroleum ContractsYasir Karam
Study analysis of determination of fiscal risk implemented in several models of petroleum contracts, a study within licensing bid rounds contracting system of Iraq
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 Agreements, Oil Service Contracts & Joint VenturesElijah Ezendu
The document discusses different types of agreements for oil production and exploration between oil companies and governments. It describes production sharing agreements where the oil company bears costs of exploration and production in exchange for a share of output. It also discusses joint ventures where governments and oil companies jointly operate projects and share outputs. Service contracts are mentioned where the government maintains greater control and the oil company is compensated for services. The pros and cons of these different models are compared from the perspectives of both the host government and international oil companies.
This document provides an overview of production sharing contracts (PSCs) and fiscal regimes for oil and gas exploration. It discusses the international scenario for PSCs, concessions, and service contracts. The key benefits of PSCs are that they encourage private investment, provide a revenue stream for investors, return asset ownership to the government, and provide a reasonable rate of return. PSCs also serve national interests, reduce government budget and administrative burdens, and generate new tax revenue. The document then examines international fiscal regimes and tools like rentals, bonuses, royalties, corporate income tax, and profit petroleum sharing. It analyzes the commodity price, regulatory, technical, and cost risks faced by contractors under India's PSC model.
Oil and Gas Contract Law_Contratual Risks Operators and Contrators_Dez. 2014 Pedro N
1. The document discusses contractual risk in the oil and gas industry, specifically examining the Deepwater Horizon incident where issues of liability and indemnity led to disputes between the operator, BP, and contractor, Transocean.
2. It provides background on the oil and gas industry and common contract types. Dayrate contracts are most common, such as the one between BP and Transocean for the Deepwater Horizon rig.
3. Contracts address technical specifications, payments, warranties, remedies for breach, and risk allocation. However, warranties often do not cover fitness for purpose or third party damages. The Macondo incident involved failures of well integrity, pressure control, and the blowout preventer. BP
This document discusses choosing between a service contract and joint venture for an oil and gas transaction worth $50-250 million in Africa or Asia. It outlines the key elements of each type of agreement, including their advantages and disadvantages for governments and international oil companies. Examples of past service contracts in Asia include those in Malaysia and Iran, while examples in Africa include contracts in Nigeria. For a transaction of this size, a service contract may be more appropriate than a joint venture due to lower costs.
The document discusses various fiscal systems for oil extraction between governments and oil companies. It covers concepts like royalties, cost recovery limits, profit oil splits, and government vs company take. Different systems like concession agreements, production sharing contracts, and R factor systems are examined in terms of how they divide revenues and allocate rents between landlord governments and tenant oil companies operating under contract.
This document provides an overview of different types of oil and gas contracts: joint ventures, production sharing contracts, and service contracts. It discusses key characteristics of each type, including ownership, control, risk allocation, and common clauses. Joint ventures involve capital-intensive partnerships between states and international oil companies. Production sharing contracts give states ownership and control while contractors bear exploration risks. Service contracts come in two varieties - risk service contracts where contractors bear risk, and pure service contracts where states hold all risk. The document aims to facilitate understanding of intellectual and legal challenges in choosing between these contractual frameworks.
Production Sharing Agreements (PSAs) are contracts between governments and private companies that allow companies to explore, develop, and produce petroleum found within the nation's borders. PSAs stipulate how costs, production, royalties, taxes, and profits will be allocated. Under a PSA, the private company funds all exploration and development costs. If oil is discovered, the company recovers its costs from a portion of the total oil produced before profits are shared, according to a predetermined ratio, between the company and government. PSAs aim to maximize government revenue while still incentivizing private investment through cost recovery and profit sharing.
Unitization refers to the combining of multiple oil and gas wells within a reservoir so that they can be operated as a single unit. It allows for more efficient development and production from the reservoir. An example is provided of a field that is unitized, with different ownership tracts receiving a percentage of overall production based on their size. Unitization helps maximize recovery, allows more flexible well placement, and keeps leases in effect across the unit even if individual tracts are not directly producing. While it consolidates control, unitization lowers costs and provides economic and recovery benefits over independent operations.
Former IDS Fellow, Philip Daniel, will explore design principles for taxing extractive industries and touch briefly on renewed challenges from the commodity price outlook, international tax problems and environmental imperatives.
Philip is co-editor and contributor for International Taxation and the Extractive Industries (Routledge, 2017) and for The Taxation of Petroleum and Minerals: Principles, Problems and Practice (Routledge, 2010). Philip worked at the Fiscal Affairs Department of the IMF in Washington DC, 2006-2015.
Phillip's recent advisory work has covered Nigeria, Trinidad and Tobago, South Africa and Uganda. He is now Honorary Professor, School of Social Sciences, University of Dundee in the Centre for Energy, Petroleum and Minerals Law and Policy. Philip was a Fellow of IDS from 1981 to 1994.
The document discusses regional comparisons of fiscal terms for petroleum production sharing contracts (PSCs) in Asia Pacific countries. It provides an overview of key fiscal elements such as royalty rates, cost recovery limits, profit oil splits between governments and contractors, state participation requirements, and domestic market obligations. Tables compare these fiscal terms across countries and note differences in elements like tax rates, incentives provided, and average estimated government take for each country.
1) AWSA won the concession to build and operate 254km of the A2 motorway in Poland, the country's first private toll road.
2) The project's total cost was €934 million and Gebicki was hired to secure €242 million in bank financing by July 29, 2000 or the concession would expire.
3) Major risks included political risk from potential changes in government, market risk from uncertainty in estimating traffic, and currency risk from fluctuations in the zloty/euro exchange rate.
The document provides an overview of national oil companies (NOCs) and hybrid NOCs like Petronas, Petrobras, and Statoil. It discusses the reasons for establishing NOCs, common stereotypes of NOCs, different types of NOCs, and factors driving commercialization. The document also summarizes the important events, government relationships, global investments, and strengths/weaknesses of Petronas, Petrobras, and Statoil. It concludes by considering the future outlook for NOCs and some specific hybrid companies.
The document summarizes the Chad-Cameroon pipeline project led by ExxonMobil that was intended to transport crude oil from Chad's oil fields through Cameroon. Key details include:
- Exxon formed a consortium in 1988 that signed agreements with Chad and Cameroon to build a $3.7 billion pipeline project.
- Geological studies in 1999 estimated the oil fields in Chad contained over 900 million barrels of oil that could produce up to 250,000 barrels per day.
- The World Bank was involved to help Chad and Cameroon develop their economies and reduce poverty through revenue from the project over its projected 30-year lifespan.
India imports 79% of its crude oil demand and oil subsidies place a large burden on the government and oil companies. While subsidies are intended to help the poor, most benefits go to wealthier households. Recommendations include reducing subsidies gradually, targeting subsidies to the poor, increasing fuel efficiency, and establishing an independent pricing body to reduce political influence. In the long run, fully liberalizing diesel and LPG pricing could significantly reduce under-recovery costs.
The document discusses delays that can occur in the offshore oil and gas decommissioning process. It notes that decommissioning involves numerous complex phases that require coordination between many parties. Estimating costs and timelines for each phase is difficult, and past projects have experienced significant delays and cost overruns linked to activities like dredging and cutting. The document also explains that decommissioning contracts may allocate risk for delays through clauses addressing permissible delays, notification requirements, and force majeure events. However, outcomes will depend on the specific contract language and facts of each case. Liquidated damages provisions are one potential remedy for delays but need to reflect genuine pre-estimates of loss to be enforceable.
The document discusses lessons learned from Myanmar's model production sharing contract (PSC) for offshore oil and gas blocks. It provides an overview of key terms of Myanmar's model PSC including the exploration and production periods, royalty rates, bonuses, domestic market obligations, and training funds. It also compares Myanmar's model to those of other countries and identifies areas of concern for foreign investors, such as governing law, dispute resolution mechanisms, and undefined terms. Finally, it shares Vietnam's experience negotiating its PSC terms.
This document summarizes key legislation, regulations, and processes relevant to the offshore oil and gas industry in Myanmar. It outlines laws governing foreign investment, labor, environment, and international treaties. It also describes Myanmar Oil and Gas Enterprise's role in controlling the industry, the production sharing contract process, and concerns for foreign investors around political stability and contract enforcement. MOGE plans to tender new offshore blocks in 2015 after delays due to recent elections.
This document discusses Iraq's oil reserves, production, and administration. It provides statistics on Iraq's oil reserves and fields. It also compares different drafts of Iraq's oil law and discusses the Kurdistan Regional Government's oil law. The document analyzes objectives to increase Iraq's oil production and exports. It notes challenges around Iraq passing a national oil law and contrasts contracts in the Kurdistan region versus those administered by Baghdad.
PEMEX is pursuing a strategy to maximize value from Mexico's oil and gas resources through partnerships and contract migrations following energy reforms. This includes (1) migrating existing service contracts to new exploration and extraction contracts that provide improved fiscal terms, (2) pursuing farm-outs for fields requiring high investment, and (3) positioning PEMEX to compete for partnerships in future bidding rounds to develop heavy oil, unconventional, and deepwater resources and increase production to 2.6-3.0 million barrels per day.
The talking points stressed that upstream oil and gas business in Indonesia already have some set of robust management and reporting mechanism, including within PSC alone. Yet, what EITI should focus, is on related party transaction among the HQ and subsidiaries - and let it be available to public
This document discusses various types of oil and gas contracts: concession contracts, joint venture contracts, service contracts, production sharing contracts, and hybrid contracts. It provides details on the key aspects and advantages and disadvantages of each type. Concession contracts and production sharing contracts are the most commonly used models. An ideal contract aims to balance the interests of both the investor and the country where the resources are located.
The document provides an overview of contract law in India according to the Indian Contract Act of 1872. It defines key terms like contract, agreement, and promise. A contract is an agreement that is enforceable by law, containing an offer, acceptance, and consideration. The document outlines the essential elements of a valid contract and classifications of contracts based on enforceability, formation, performance, and obligations. It provides examples to illustrate different types of contracts.
This document provides an overview of production sharing contracts (PSCs) and fiscal regimes for oil and gas exploration. It discusses the international scenario for PSCs, concessions, and service contracts. The key benefits of PSCs are that they encourage private investment, provide a revenue stream for investors, return asset ownership to the government, and provide a reasonable rate of return. PSCs also serve national interests, reduce government budget and administrative burdens, and generate new tax revenue. The document then examines international fiscal regimes and tools like rentals, bonuses, royalties, corporate income tax, and profit petroleum sharing. It analyzes the commodity price, regulatory, technical, and cost risks faced by contractors under India's PSC model.
Oil and Gas Contract Law_Contratual Risks Operators and Contrators_Dez. 2014 Pedro N
1. The document discusses contractual risk in the oil and gas industry, specifically examining the Deepwater Horizon incident where issues of liability and indemnity led to disputes between the operator, BP, and contractor, Transocean.
2. It provides background on the oil and gas industry and common contract types. Dayrate contracts are most common, such as the one between BP and Transocean for the Deepwater Horizon rig.
3. Contracts address technical specifications, payments, warranties, remedies for breach, and risk allocation. However, warranties often do not cover fitness for purpose or third party damages. The Macondo incident involved failures of well integrity, pressure control, and the blowout preventer. BP
This document discusses choosing between a service contract and joint venture for an oil and gas transaction worth $50-250 million in Africa or Asia. It outlines the key elements of each type of agreement, including their advantages and disadvantages for governments and international oil companies. Examples of past service contracts in Asia include those in Malaysia and Iran, while examples in Africa include contracts in Nigeria. For a transaction of this size, a service contract may be more appropriate than a joint venture due to lower costs.
The document discusses various fiscal systems for oil extraction between governments and oil companies. It covers concepts like royalties, cost recovery limits, profit oil splits, and government vs company take. Different systems like concession agreements, production sharing contracts, and R factor systems are examined in terms of how they divide revenues and allocate rents between landlord governments and tenant oil companies operating under contract.
This document provides an overview of different types of oil and gas contracts: joint ventures, production sharing contracts, and service contracts. It discusses key characteristics of each type, including ownership, control, risk allocation, and common clauses. Joint ventures involve capital-intensive partnerships between states and international oil companies. Production sharing contracts give states ownership and control while contractors bear exploration risks. Service contracts come in two varieties - risk service contracts where contractors bear risk, and pure service contracts where states hold all risk. The document aims to facilitate understanding of intellectual and legal challenges in choosing between these contractual frameworks.
Production Sharing Agreements (PSAs) are contracts between governments and private companies that allow companies to explore, develop, and produce petroleum found within the nation's borders. PSAs stipulate how costs, production, royalties, taxes, and profits will be allocated. Under a PSA, the private company funds all exploration and development costs. If oil is discovered, the company recovers its costs from a portion of the total oil produced before profits are shared, according to a predetermined ratio, between the company and government. PSAs aim to maximize government revenue while still incentivizing private investment through cost recovery and profit sharing.
Unitization refers to the combining of multiple oil and gas wells within a reservoir so that they can be operated as a single unit. It allows for more efficient development and production from the reservoir. An example is provided of a field that is unitized, with different ownership tracts receiving a percentage of overall production based on their size. Unitization helps maximize recovery, allows more flexible well placement, and keeps leases in effect across the unit even if individual tracts are not directly producing. While it consolidates control, unitization lowers costs and provides economic and recovery benefits over independent operations.
Former IDS Fellow, Philip Daniel, will explore design principles for taxing extractive industries and touch briefly on renewed challenges from the commodity price outlook, international tax problems and environmental imperatives.
Philip is co-editor and contributor for International Taxation and the Extractive Industries (Routledge, 2017) and for The Taxation of Petroleum and Minerals: Principles, Problems and Practice (Routledge, 2010). Philip worked at the Fiscal Affairs Department of the IMF in Washington DC, 2006-2015.
Phillip's recent advisory work has covered Nigeria, Trinidad and Tobago, South Africa and Uganda. He is now Honorary Professor, School of Social Sciences, University of Dundee in the Centre for Energy, Petroleum and Minerals Law and Policy. Philip was a Fellow of IDS from 1981 to 1994.
The document discusses regional comparisons of fiscal terms for petroleum production sharing contracts (PSCs) in Asia Pacific countries. It provides an overview of key fiscal elements such as royalty rates, cost recovery limits, profit oil splits between governments and contractors, state participation requirements, and domestic market obligations. Tables compare these fiscal terms across countries and note differences in elements like tax rates, incentives provided, and average estimated government take for each country.
1) AWSA won the concession to build and operate 254km of the A2 motorway in Poland, the country's first private toll road.
2) The project's total cost was €934 million and Gebicki was hired to secure €242 million in bank financing by July 29, 2000 or the concession would expire.
3) Major risks included political risk from potential changes in government, market risk from uncertainty in estimating traffic, and currency risk from fluctuations in the zloty/euro exchange rate.
The document provides an overview of national oil companies (NOCs) and hybrid NOCs like Petronas, Petrobras, and Statoil. It discusses the reasons for establishing NOCs, common stereotypes of NOCs, different types of NOCs, and factors driving commercialization. The document also summarizes the important events, government relationships, global investments, and strengths/weaknesses of Petronas, Petrobras, and Statoil. It concludes by considering the future outlook for NOCs and some specific hybrid companies.
The document summarizes the Chad-Cameroon pipeline project led by ExxonMobil that was intended to transport crude oil from Chad's oil fields through Cameroon. Key details include:
- Exxon formed a consortium in 1988 that signed agreements with Chad and Cameroon to build a $3.7 billion pipeline project.
- Geological studies in 1999 estimated the oil fields in Chad contained over 900 million barrels of oil that could produce up to 250,000 barrels per day.
- The World Bank was involved to help Chad and Cameroon develop their economies and reduce poverty through revenue from the project over its projected 30-year lifespan.
India imports 79% of its crude oil demand and oil subsidies place a large burden on the government and oil companies. While subsidies are intended to help the poor, most benefits go to wealthier households. Recommendations include reducing subsidies gradually, targeting subsidies to the poor, increasing fuel efficiency, and establishing an independent pricing body to reduce political influence. In the long run, fully liberalizing diesel and LPG pricing could significantly reduce under-recovery costs.
The document discusses delays that can occur in the offshore oil and gas decommissioning process. It notes that decommissioning involves numerous complex phases that require coordination between many parties. Estimating costs and timelines for each phase is difficult, and past projects have experienced significant delays and cost overruns linked to activities like dredging and cutting. The document also explains that decommissioning contracts may allocate risk for delays through clauses addressing permissible delays, notification requirements, and force majeure events. However, outcomes will depend on the specific contract language and facts of each case. Liquidated damages provisions are one potential remedy for delays but need to reflect genuine pre-estimates of loss to be enforceable.
The document discusses lessons learned from Myanmar's model production sharing contract (PSC) for offshore oil and gas blocks. It provides an overview of key terms of Myanmar's model PSC including the exploration and production periods, royalty rates, bonuses, domestic market obligations, and training funds. It also compares Myanmar's model to those of other countries and identifies areas of concern for foreign investors, such as governing law, dispute resolution mechanisms, and undefined terms. Finally, it shares Vietnam's experience negotiating its PSC terms.
This document summarizes key legislation, regulations, and processes relevant to the offshore oil and gas industry in Myanmar. It outlines laws governing foreign investment, labor, environment, and international treaties. It also describes Myanmar Oil and Gas Enterprise's role in controlling the industry, the production sharing contract process, and concerns for foreign investors around political stability and contract enforcement. MOGE plans to tender new offshore blocks in 2015 after delays due to recent elections.
This document discusses Iraq's oil reserves, production, and administration. It provides statistics on Iraq's oil reserves and fields. It also compares different drafts of Iraq's oil law and discusses the Kurdistan Regional Government's oil law. The document analyzes objectives to increase Iraq's oil production and exports. It notes challenges around Iraq passing a national oil law and contrasts contracts in the Kurdistan region versus those administered by Baghdad.
PEMEX is pursuing a strategy to maximize value from Mexico's oil and gas resources through partnerships and contract migrations following energy reforms. This includes (1) migrating existing service contracts to new exploration and extraction contracts that provide improved fiscal terms, (2) pursuing farm-outs for fields requiring high investment, and (3) positioning PEMEX to compete for partnerships in future bidding rounds to develop heavy oil, unconventional, and deepwater resources and increase production to 2.6-3.0 million barrels per day.
The talking points stressed that upstream oil and gas business in Indonesia already have some set of robust management and reporting mechanism, including within PSC alone. Yet, what EITI should focus, is on related party transaction among the HQ and subsidiaries - and let it be available to public
This document discusses various types of oil and gas contracts: concession contracts, joint venture contracts, service contracts, production sharing contracts, and hybrid contracts. It provides details on the key aspects and advantages and disadvantages of each type. Concession contracts and production sharing contracts are the most commonly used models. An ideal contract aims to balance the interests of both the investor and the country where the resources are located.
The document provides an overview of contract law in India according to the Indian Contract Act of 1872. It defines key terms like contract, agreement, and promise. A contract is an agreement that is enforceable by law, containing an offer, acceptance, and consideration. The document outlines the essential elements of a valid contract and classifications of contracts based on enforceability, formation, performance, and obligations. It provides examples to illustrate different types of contracts.
Types of Contract in Construction ManagementShahin MB
This document describes several types of construction contracts: lump-sum, cost plus fixed fee, cost plus bid fee, guaranteed maximum, negotiated, unit-price, design-build, and turn-key. Lump-sum contracts establish a fixed total price upfront, while cost plus contracts reimburse the contractor's costs plus a fixed or percentage-based fee. Guaranteed maximum contracts set a ceiling on costs. Negotiated, unit-price, design-build, and turn-key contracts vary in responsibilities and payment structures.
Types of contract in Project managementAli Heydari
The document discusses different types of contracts that may be used in project management. It describes fixed price/lump sum contracts where a specific deliverable is agreed to for a set price, carrying more risk for the seller. Cost-reimbursable contracts reimburse the seller for all allowable costs and come in forms like cost plus fee or cost plus fixed fee. Time and materials contracts bill the buyer based on hours worked and materials used by the seller.
Management services contracts involve one company providing managerial expertise to another for a specific period of time. They allow a company to exploit an international business opportunity without placing all its physical assets at risk. There are two main types of knowledge transferred - specialized technical management knowledge and general business management skills. While they provide opportunities to develop local skills, they also carry risks like nurturing new competitors or endangering managers in unstable locations. An example given is Heathrow Airport Holdings operating airports in the US under long-term contracts.
There are several types of construction contracts. Price-based contracts include lump sum contracts, where the contractor is paid a fixed price for the entire project, and unit price contracts, where payment is made based on rates for individual work units. Cost-based contracts include cost plus contracts, where the contractor is reimbursed for costs plus a fee or percentage, and guaranteed maximum price contracts, where the owner's liability is capped but the contractor can retain savings if the project costs less than estimated. The appropriate contract type depends on factors like project scope definition and risk allocation between owner and contractor.
The document compares Production Sharing Contracts (PSCs) and modern concession agreements used in oil and gas contracting. It finds that while PSCs and modern concessions differ in some details, they are largely similar in terms of government control, obligations of international oil companies (IOCs), and how benefits are divided. Both include requirements for performance guarantees, relinquishment of fields over time, oversight committees, and payment of bonuses and royalties. However, they differ in that under concessions, extracted oil belongs to IOCs while under PSCs it always belongs to the government. PSCs also include provisions for cost recovery and sharing of post-cost "profit oil" not present in concessions. Overall, the document argues that while PSCs
This document provides an overview of contractual frameworks for petroleum exploration and production in India, including Production Sharing Contracts (PSCs) and Revenue Sharing Contracts (RSCs). PSCs were first introduced in Indonesia in 1966 and later spread globally. Under PSCs in India, the contractor bears all exploration risk and shares profits with the government according to bid terms if oil or gas is discovered. RSCs were introduced in 2015, under which the contractor shares a stipulated portion of revenue with the government in exchange for bearing costs and risks, without cost recovery. The document outlines key features and differences between PSCs and RSCs used in India's exploration licensing rounds.
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.
Economic balance in oil and gas contractsMaría Serna
Mexican new government has emphasized its concerns regarding the government take in the awarded oil contracts. It is not clear if these worries will lead to an audit or some type of “adjustment” for the government take via legislation. In these times, understanding the risks and protection mechanisms available is of paramount importance to oil companies.
An Appraisal of the Fiscal Implication of Oil & Gas Asset Disposal in NigeriaDonald Ibebuike
1. There has been an increase in oil and gas asset divestments and acquisitions in Nigeria, with traditional multinational companies selling assets to new entrants like local and smaller companies. This creates opportunities but also warrants examining the fiscal and regulatory treatment of such transactions.
2. Asset purchases can take several forms with different types of consideration: monetary payments, farm-ins requiring field work by the buyer, earn-ins for work obligations, asset swaps, and farm-outs allowing third parties to explore and produce petroleum.
3. The fiscal implications depend on whether a transaction is considered an asset alienation or license assignment. Capital gains tax and stamp duties typically apply, but share sales do not
Objectives of study:1. Concept of carbon credit2. Transactional or Settlement methods of Carbon credit3. Role of India in Carbon credit4. Method of Carbon Credit Accounting 5. Issues in carbon credit accounting
This document provides an overview of an Oil and Gas Law course for the 2020-2021 academic year. It includes details about the course code, credit hours, meeting times, evaluation criteria, references, and an introduction to the topics that will be covered related to oil and gas law including national security and wealth considerations, the lifecycle of a petroleum project, components of a petroleum regime like constitutions, laws, regulations and contracts, types of contracts, and main parties involved.
- The Hydrocarbon Exploration and Licensing Policy (HELP) was approved in 2016 and replaces India's previous New Exploration Licensing Policy (NELP) which had been in place for 18 years.
- HELP aims to increase domestic oil and gas production, attract substantial investment, and generate jobs in the oil and gas sector by enhancing transparency and reducing administrative discretion.
- The document provides background on India's previous exploration and production regimes including Nomination Era, Pre-NELP Era, and NELP Era, and discusses issues with NELP such as delays caused by government approval requirements.
No dia 15 de março de 2012 , Dra. Vera H. de Moraes Dantas, sócia do escritório da Noronha Advogados em Londres, apresentou o Seminário “Opportunities in the Oil & Gas Market In Brazil – Some Legal Aspects”, em Aberdeen, Escócia.
On 15 March 2012, Dra. Vera H. de Moraes Dantas, Noronha Advogados´s partner in London’s office, presented the Seminar “Opportunities in the Oil & Gas Market In Brazil – Some Legal Aspects”, in Aberdeen, Scotland.
The document summarizes key provisions of Nigeria's Petroleum Industry Act of 2021. It establishes two new regulatory authorities - the Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority. It also establishes the Nigerian National Petroleum Company Limited to replace the Nigerian National Petroleum Corporation, as well as funds like the Frontier Exploration Fund and Midstream and Downstream Gas Infrastructure Fund. The Act aims to reform governance, improve transparency, and establish a commercially oriented national petroleum company in Nigeria's oil and gas industry.
TransPrice Times - Summarising Multilateral InstrumentsAkshay KENKRE
Dear Members,
We are pleased to present TransPrice Times - Summarising Multialteral Instruments (MLI) for June 2017.
June 7 2017 was no ordinary day for the tax world. OECD initiated the historic signing process of the multilateral instrument agreement which involved the participation of 68 countries including India.
The MLI Special Edition urges our members to traverse the multilateral wave, and understand the implications of MLI on the tax front. This edition covers a simplified analysis of India's position on MLI, FAQs & tool-kits released by OECD.
We would be happy to know your suggestions. You can write to us at akshaykenkre@transprice.in
Thank You and Happy Reading!!
Union Cabinet on 17th July 2019 approved the proposal to carry out eight amendments to the Insolvency and Bankruptcy Code, 2016. The Insolvency and Bankruptcy Code Amendment Bill, 2019 requires the approval of both the houses of Parliament. It aims to fill in the crucial gaps in the framework of CIRP to provide clarity in its implementation.
Important considerations regarding the amendments of IBC (Insolvency and Bankruptcy Code Amendment Bill, 2019)
Petrobras is investing heavily in oil and gas infrastructure in Brazil through 2022. The legal framework for oil and gas exploration has changed with the discovery of large pre-salt reserves, moving to a production sharing agreement model. Local content requirements mandate that a certain percentage of goods and services used in exploration and production must come from Brazilian suppliers. Foreign companies can establish a presence through forming a Brazilian subsidiary or joint venture. Petrobras, as the national oil company, uses an electronic bidding system for procurement.
This presentation is about Revenue Sharing Contract for Hydrocarbon Industry in India. This Revenue Sharing Regime is an evolution of Production Sharing Contracts. Indian Hydrocarbon contract policy is called NELP- New Exploration & Licencing Policy that was followed till 2016 but now new HELP- Hydrocarbon Exploration & Licencing policy is in place.
Oil and Gas Asset Trading in Nigeria and Practical Issues for ConsiderationDonald Ibebuike
The document discusses several practical issues related to oil and gas assets trading in Nigeria, including regulatory issues, time scale, decommissioning liability, and employment issues. Regulatory issues center around the need for ministerial consent for asset assignments and changes in company control. The time required to obtain consent and waive rights of first refusal can delay deals. Decommissioning liability is a major concern, as the legal framework is inadequate and new entrants may bear full responsibility. Employment issues also lack clear regulation and could lead to labor unrest if not properly addressed during acquisitions.
The document discusses different types of contractual arrangements for exploration and production of petroleum. It describes concession arrangements, service contracts, production sharing contracts, and joint venture arrangements. It also discusses key fiscal terms including royalties, bonuses, cost recovery limits, and profit sharing. Production sharing contracts are outlined as contracts where ownership of hydrocarbons remains with the state, but the contractor receives a share of production to recover costs and earn a target rate of return.
This document is a legal guide to doing business in Colombia that was prepared in March 2019. It provides an overview of Colombia's economy and legal system. The guide covers 12 chapters on key business and legal topics in Colombia such as foreign investment, trade, taxes, intellectual property, and labor laws. Each chapter explains the relevant laws, regulations, and considerations for foreign investors on that topic. The guide aims to inform foreign investors and help them understand Colombia's legal framework for investing and operating a business.
1. The Bombay High Court clarified that the CCI must determine its own jurisdiction before investigating allegations of cartelization among debenture trustees.
2. The Supreme Court admitted appeals by United Breweries and others challenging penalties imposed by CCI, and stayed recovery of the penalties subject to further deposits.
3. Key developments included the Competition (Amendment) Act being notified, constituting a committee on digital competition law, and CCI beginning examining anti-profiteering matters under GST.
Mergers & Acquisitions Under The Investments & Securities Act 2007Deoye
The document summarizes key changes to merger provisions in the Nigerian Investments and Securities Act of 2007 compared to the previous 1999 act. Some major changes include:
1) Establishing thresholds for small, intermediate, and large mergers based on combined annual turnover or assets.
2) Requiring the Securities and Exchange Commission to consider additional factors for mergers such as competitive effects and public interest impacts.
3) Specifying different procedures for small, intermediate, and large mergers regarding notification requirements and approval timelines.
4) Granting new powers to the SEC to order the breakup of companies found to substantially lessen competition.
Navigating the world of forex trading can be challenging, especially for beginners. To help you make an informed decision, we have comprehensively compared the best forex brokers in India for 2024. This article, reviewed by Top Forex Brokers Review, will cover featured award winners, the best forex brokers, featured offers, the best copy trading platforms, the best forex brokers for beginners, the best MetaTrader brokers, and recently updated reviews. We will focus on FP Markets, Black Bull, EightCap, IC Markets, and Octa.
Building Your Employer Brand with Social MediaLuanWise
Presented at The Global HR Summit, 6th June 2024
In this keynote, Luan Wise will provide invaluable insights to elevate your employer brand on social media platforms including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok. You'll learn how compelling content can authentically showcase your company culture, values, and employee experiences to support your talent acquisition and retention objectives. Additionally, you'll understand the power of employee advocacy to amplify reach and engagement – helping to position your organization as an employer of choice in today's competitive talent landscape.
Zodiac Signs and Food Preferences_ What Your Sign Says About Your Tastemy Pandit
Know what your zodiac sign says about your taste in food! Explore how the 12 zodiac signs influence your culinary preferences with insights from MyPandit. Dive into astrology and flavors!
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
Event Report - SAP Sapphire 2024 Orlando - lots of innovation and old challengesHolger Mueller
Holger Mueller of Constellation Research shares his key takeaways from SAP's Sapphire confernece, held in Orlando, June 3rd till 5th 2024, in the Orange Convention Center.
[To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
This PowerPoint compilation offers a comprehensive overview of 20 leading innovation management frameworks and methodologies, selected for their broad applicability across various industries and organizational contexts. These frameworks are valuable resources for a wide range of users, including business professionals, educators, and consultants.
Each framework is presented with visually engaging diagrams and templates, ensuring the content is both informative and appealing. While this compilation is thorough, please note that the slides are intended as supplementary resources and may not be sufficient for standalone instructional purposes.
This compilation is ideal for anyone looking to enhance their understanding of innovation management and drive meaningful change within their organization. Whether you aim to improve product development processes, enhance customer experiences, or drive digital transformation, these frameworks offer valuable insights and tools to help you achieve your goals.
INCLUDED FRAMEWORKS/MODELS:
1. Stanford’s Design Thinking
2. IDEO’s Human-Centered Design
3. Strategyzer’s Business Model Innovation
4. Lean Startup Methodology
5. Agile Innovation Framework
6. Doblin’s Ten Types of Innovation
7. McKinsey’s Three Horizons of Growth
8. Customer Journey Map
9. Christensen’s Disruptive Innovation Theory
10. Blue Ocean Strategy
11. Strategyn’s Jobs-To-Be-Done (JTBD) Framework with Job Map
12. Design Sprint Framework
13. The Double Diamond
14. Lean Six Sigma DMAIC
15. TRIZ Problem-Solving Framework
16. Edward de Bono’s Six Thinking Hats
17. Stage-Gate Model
18. Toyota’s Six Steps of Kaizen
19. Microsoft’s Digital Transformation Framework
20. Design for Six Sigma (DFSS)
To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations
Easily Verify Compliance and Security with Binance KYCAny kyc Account
Use our simple KYC verification guide to make sure your Binance account is safe and compliant. Discover the fundamentals, appreciate the significance of KYC, and trade on one of the biggest cryptocurrency exchanges with confidence.
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Final ank Satta Matka Dpbos Final ank Satta Matta Matka 143 Kalyan Matka Guessing Final Matka Final ank Today Matka 420 Satta Batta Satta 143 Kalyan Chart Main Bazar Chart vip Matka Guessing Dpboss 143 Guessing Kalyan night
Unveiling the Dynamic Personalities, Key Dates, and Horoscope Insights: Gemin...my Pandit
Explore the fascinating world of the Gemini Zodiac Sign. Discover the unique personality traits, key dates, and horoscope insights of Gemini individuals. Learn how their sociable, communicative nature and boundless curiosity make them the dynamic explorers of the zodiac. Dive into the duality of the Gemini sign and understand their intellectual and adventurous spirit.
Understanding User Needs and Satisfying ThemAggregage
https://www.productmanagementtoday.com/frs/26903918/understanding-user-needs-and-satisfying-them
We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
In this webinar, we won't focus on the research methods for discovering user-needs. We will focus on synthesis of the needs we discover, communication and alignment tools, and how we operationalize addressing those needs.
Industry expert Scott Sehlhorst will:
• Introduce a taxonomy for user goals with real world examples
• Present the Onion Diagram, a tool for contextualizing task-level goals
• Illustrate how customer journey maps capture activity-level and task-level goals
• Demonstrate the best approach to selection and prioritization of user-goals to address
• Highlight the crucial benchmarks, observable changes, in ensuring fulfillment of customer needs
The 10 Most Influential Leaders Guiding Corporate Evolution, 2024.pdfthesiliconleaders
In the recent edition, The 10 Most Influential Leaders Guiding Corporate Evolution, 2024, The Silicon Leaders magazine gladly features Dejan Štancer, President of the Global Chamber of Business Leaders (GCBL), along with other leaders.
Discover timeless style with the 2022 Vintage Roman Numerals Men's Ring. Crafted from premium stainless steel, this 6mm wide ring embodies elegance and durability. Perfect as a gift, it seamlessly blends classic Roman numeral detailing with modern sophistication, making it an ideal accessory for any occasion.
https://rb.gy/usj1a2
1. 1
Are Production Sharing Contracts Modern Concession Agreements by
Another Name? Valentine Ataka*
*Valentine Ataka is an Advocate of the High Court of Kenya, a commentator on Law and Policy
on Energy. He is an LLM Candidate in Oil and Gas Law (RGU-2013)
2. 2
Are Production Sharing Contracts Modern Concession Agreements by
Another Name?
Introduction
Production Sharing Contracts (PSCs) have become more of a fad in Oil and Gas
contracting since their emergence in the late 1960s1
. They have gradually replaced
the classical Concessions which were seen to be unduly skewed in favour of IOCs.
On the other hand there are a number of countries that have continued to use
Concession Agreements albeit in a modified form- what I describe here as Modern
Concessions.
As it turns out, on a measure of government control, benefit drawn by the IOC and
division of obligations, modern Concessions are very similar to PSCs. There are
however some menial differences which are discussed below. The discussion relies
on available models from Brazil2
, Angola3
, Kenya4
, Kurdistan5
and Egypt6
.
1
First recorded use was in Indonesia in 1966
2
Brazilian Ministry of Mines and Energy ‘Model Concession Agreement for Exploration,
Development and Production of Oil and Natural (Clause 2.4)’
http://www.eisourcebook.org/cms/Brazil,%20Model%20Concession%20Agreement,%20ANP
%2010th%20Rnd,%202008.pdf accessed 12th
April 2013
3
EI Source Book ‘Model Angolan Production Sharing Contract’
http://www.eisourcebook.org/cms//files/attachments/policy-legal-contractual-
regulatory/Angola%20-%20Model%20of%20PSA%202008.pdf accessed 12th
April 2013
4
EI Source Book ‘Republic of Kenya Model production Sharing Contract’
http://www.eisourcebook.org/cms/Kenya%20Model%20Production%20Sharing%20Contract
.pdf accessed 12th
April 2013
5
EI source Book ‘Model Production Sharing Contract for Exploration and Production in
Kurdistan’
‘http://www.eisourcebook.org/cms/Iraqi%20Kurdistan%20draft%20Model%20Production%
20Sharing%20Contract.pdf accessed 12th
April 2013
6
Egyptian Gas Holding Company ‘Concession Agreement FOR Gas and Crude Oil Exploration
and Exploitation’ (2005 Model)
http://www.egas.com.eg/BidRound2012/MODEL_AGREEMENT_2012_new.pdf accessed 23rd
March 2013
3. 3
Similarities in the Development aspects of the Concession and the PSA
Parties
In a concession as well as a PSC, the IOC enters into the contract with an NOC
acting on behalf of the government. For example in Brazillian Concessions, the ANP
is the opposite party while in the Angola PSCs the government is represented in the
contract by SONANGOL. An interesting variation is the Kenyan PSC where the
Ministry in charge of energy signs the Contract and the National Oil Corporation has
no role defined under the contract.
Security for performance
In both forms of contracting the concessionaire or the contractor is required to
provide some form of security to guarantee the performance of the development
work under the contract. The Angolan model PSA requires the IOC to provide a
financial guarantee not later than 30 days before execution of the agreement.
Clause 15 of the Brazilian Concession requires the lodging of security in the form of
irrevocable letters of credit, guarantee insurance or Oil pledge Agreement.
Reversal of ownership of installations
Under both regimes, once the contract expires, the ownership of the installation
(i.e. infrastructures, equipment and all wells) reverts freely to the HG. However
the Concessionaire/contractor may also be required to decommission the
installations at its own costs. Under the Norwegian Concession regime, installations
are to revert only if they are in good and safe working condition, failing which the
IOC would be liable to pay compensation to the state. Similarly under the Angolan
PSC, within 60 days of expiry of the contract the contractor is to hand over to the
NOC all the installations
4. 4
Relinquishment
In both systems the IOC is obliged to progressively either relinquish or reduce
the contract area held by it for purposes of exploration. This is a government
mechanism used to ensure progressive and optimal development of the granted
fields. Article 3 of the Kenyan Model PSC provides for progressive surrender of the
contract area. A similarly progressive relinquishment model is in the Egyptian
Concession (Article V).
Oversight over Development Process
Under both regimes, the government is usually not directly involved in the
development processes. The NOC and the IOC usually constitute an E&P oversight
body to report to the respective parties. For instance under Article IV of the
Egyptian Concession, a Joint Exploration Advisory Committee is to be established to
review and give such advice as it deems appropriate with respect to the proposed
Exploration work program and budget while under Article 31 of the Angolan PSC, a
Joint Operating Committee is established.
Differences in Development aspects
Ownership of Oil resources
Under Concession agreements the resources belong to the government only to the
extent that it is still in the reservoir. Once oil is extracted, for example under the
Brazilian concession, the title transfers wholly to the concessionaire7
. On the
other hand under a PSC the ownership of the resources at all times remains
with the government. Article 2.1 of the Kurdistan Model PSC is categorical that
the government is the sole owner of the petroleum.
7
See Clause 2.4 of the Brazilian Concession model
5. 5
Similarities in the fiscal aspects
Bonuses
In both cases, the contractor/concessionaire is expected to pay a signature bonus
and/or a production bonus. The signature bonus is paid o the government
before the contract is signed. The production bonus kicks in when a predetermined
threshold in production is met. The nature of the bonus and its status for the
purposes of tax or costs deductions may vary.
For example Article XI of the Egyptian Model Concession provides for development
lease, development lease extension, training and assignment bonuses in addition to
signature and production bonuses. The Kurdistan Region Model PSA provides for
both signature and production bonuses at Article 6 and 32 respectively.
Under the Egyptian concession model the bonuses are not deductible for tax
purposes. Similarly under the Angolan PSC the contractor cannot recover bonuses
paid as costs.
Royalties
The concept of royalty payment was originally intended under concessions to
deliver compensation in kind to the ultimate owner of the resources i.e. the
state8
. This is why it is predominantly used in Concessions. However some PSCs,
for example Article 24 of the Kurdistan Model, require the payment of Royalties.
The Royalty is usually worked out on the basis of a percentage of the oil and gas
produced. For example, under Annex V of the Brazilian Model Concession the IOC is
to pay in the amount of 10% of Oil and Natural Gas produced in each Field within
the Concession Area from the respective Production Start-up dates.
8
M.R Oliveira, ‘The Overhaul of the Brazilian Oil and Gas Regime: Does the Adoption of a
Production Sharing Agreement Bring Any Advantage Over the Current Modern Concession
System’ (OGEL, Vol 8 issue 3, 2010)
6. 6
Since royalties are by nature payments irrespective of tax, they are generally not
deductible for the purposes of tax or calculation of recoverable costs in either form
of contracting.
Minimum Work Obligation
Both under a Concession and a PSC, the IOC is expected to submit and comply with
a program indicating work to be accomplished under each phase. The Kurdistan
PSC for instance provides for the obligation under Clause 9.2 of while the Brazillian
Concession Agreement provides for the same at Clause 15.
Differences in Fiscal aspects
Cost Recovery
This is only known to the PSC regime whereby the contractor has the right to
recover its costs by taking a proportion (known as cost oil), not exceeding a certain
percentage (cost recovery limit), of the annual production within the contract area.
The limit is fixed at a minimum of 55% and a maximum of 70% in the Kurdistan
Model PSC depending on the quality (gravity) of oil produced.
Concessions regimes have their own systems of cost relief. For instance the cost
recovery mechanism under the Brazilian concession regime is represented by
depreciation, amortisation and deduction of capital and operating cost against
taxable income and special participation fee.9
Sharing of Profit Oil
This is only found in PSCs. It is the portion of the production that is left once the
cost oil has been deducted and is shared between the government and the IOC on
the basis of a predetermined formula. A number of countries now have production
sharing mechanisms, based on the rate of return (or other assessment of
9
Oliveira Ibid
7. 7
profitability) to the contractor on a given date. Examples of such countries are
Liberia, Libya, Equatorial Guinea Tunisia, India, and Azerbaijan.
Income Generally
Under the PSC the government draws financial benefit mainly through a share in
the production and not profits as the case is with the Concession. Under a
Concession regime the host government seeks its share of the rent through
taxation, bonuses and royalties only.
Income tax is chargeable in both regimes. However as pointed out by Oliveira, its
weight in a Concession regime is much greater than in the PSA regime as it is the
main source of revenues to the government. On the other hand, in a PSA the role of
income tax is outweighed by the government profit oil.
Venn diagram comparison of Concessions and PSCs (by Author)
CONCESSION PSC
Exploitation of Early Concessions by Oil Companies
Concessions in their classical form have in the past dues to their lopsided nature
used by IOCs to great advantage especially in the Middle East.
-HG share in profit
-IOC owns oil
HG share in production-
-HG owns oil
-cost oil
-profit oil
- Similar parties
- Bonus& Royalty
payment
- Relinquishment
of fields
-Minimum work
Obligation
-Income tax
- Performance
guarantee
-Assets revert to
HG
8. 8
An example is the 1901 D'Arcy Concession obtained by William D’Arcy from the
Shah of Persia to explore 500,000 sqm of land for duration of 60 years10
. In return
the company had to pay a US$ 100,000 bonus, a 16 percent royalty, and give the
government a share worth US$ l00, 000 in the company. Similarly, the 1933
contract between the King of Saudi Arabia and Standard Oil of California specified
that the foreign contractor had to pay 50,000 pounds of gold to the King in return
for a concession covering 500,000 sqm for a 66 year period. The Abu Dhabi
concession of 1939 granted a consortium of five major oil companies the right to
explore the entire country for 75 years.
However beginning 1950s onwards the classical Concessions have either been
renegotiated or abandoned altogether with governments realizing their lopsided
nature. For example under an original concession between Saudi Arabia and
ARAMCO the HG was to receive 21% per barrel at a time when the barrel sold for
over US$2. The Saudi government forced a renegotiation requiring profits to be
shared fifty-fifty, and requiring payment of royalty. The Iran and Iraq concessions
underwent similar changes. Also introduced were changes in taxation. In addition
OPEC, after its foundation in 1960, sought to readdress control over production and
prices by changing the balance of bargaining power in favour of the producing
countries and away from the majors11
.
Which of the two offers Economic leverage to an IOC?
The modern Concession has evolved to such nature that beyond the ownership and
level of control, it is no better or worse than a PSC. Both regimes contemplate
royalties, taxes, bonuses, etc. and some form of cost recovery. Even though in a
10
Paul Lunde, A king and a Concession, Saudi ARAMCO World, Vol 35 No 3 1984
http://www.saudiaramcoworld.com/issue/198403/a.king.and.a.concession.htm accessed
15th April 2013
11
Daniel Yergin, The Prize: The Quest for Oil, Money & Power (Simon& Schurster, 2008)
p126
9. 9
concession the IOC has exclusive rights to develop and owns the extracted oil, the
payment of royalty, bonuses and taxes the rates of which the government may
adjust at will negates the chance of any economic advantage to the IOC. Therefore
from an IOCs point of view, whichever system is used, it should decide to make
investment only if at the negotiation it foresees a profitable outcome taking into
account its own particular economic standards and methods of calculation of
payments which are specific to contracts and cannot be generalised as a matter of
form12
.
12
Johnston, Daniel, International Petroleum Fiscal Systems And Production Sharing
Contracts (Tulsa, Okla. : PennWell Books, 1994), pp. 39.