Please do not hesitate to contact us if you want to discuss production sharing contract audits. Oct 21, 2016 production sharing agreement wells and allocation wells present workable alternatives to pooling the tracts needed to drill a horizontal well, but are not without risk, and will often create. Tender protocol and model of the production sharing agreement. It explores the reasons behind azerbaijans preference of this type of contractual arrangement.
A production sharing contract psc is a contract between either a hc or its state oil. Production sharing offers benefits, opportunities and. Future add to from email folder and red notebook and all scraps. It also increased the amounts capped for cost recovery in production sharing agreements to 40%, instead of 35%. Production sharing agreement psa is a contract between one or more investors and the government in which rights to prospection, exploration and extraction of mineral resources from a specific area over a specified period of time are determined. Concession contracts cc and production sharing contracts psc have quite different implications.
Production sharing contracts production sharing contracts or agreements psc hereafter are ubiquitous in much of asia, africa and the middle east, with only a handful of countries in these regions adopting a royaltytax or concession rt regime or some hybrid. Application for production sharing agreement to allow horizontal wells to cross lease lines page 1 as of oct 5, 2018. An analysis based on an oil price stochastic process assuming that oil price follows the stochastic. According to a psa, the state grants an investor an exclusive right to develop a mineral depositoil and gas field and an investor undertakes to develop such fielddeposit using its own resources and at its own risk. Under a psa the state as the owner of mineral resources engages a foreign oil company foc as a contractor to provide technical and financial services for exploration and development operations. It was first used in 1966 by the indonesias national oil company known as pertamina. Fiscal challenges of tanzanias production sharing agreements psas zitto kabwe, mp and chairman pac dar es salaam, september 2014 introduction the recent leak of the natural gas terms agreed with statoil exxonmobil is an. This contract, made and entered on this 4th day of december 1997, by and between perusahaan pertambangan minyak dan gas bumi negara, a state enterprise, established on the basis of law no. A production sharing agreement is a commercial contract between an investor and the state. Introduction the production sharing agreement is a contractual agreement made between a foreign oil company contractor and a designated state enterprise state party, authorizing the contractor to conduct petroleum exploration and exploitation within a certain area contract area in. Revenue sharing arrangements in production sharing agreements illustrate. Origin and features of the two types of contracts production sharing contracts pscs the pscs are more common in the present day oil and gas contracts, and are being used by at least 60 per cent of oil producing countries. Lii,no 10, 9mar2009jenik radon, the abcs of petroleum contracts.
Production sharing contracts or agreements psc hereafter are ubiquitous in much of asia, africa and the middle east, with only a handful of countries in these regions adopting a royaltytax or concession rt regime or some hybrid. Explain the function of stabilisation and renegotiation clauses in production sharing. They can be very profitable agreements for the oil companies involved, but often involve considerable risk. Production sharing agreement wells and allocation wells present workable alternatives to pooling the tracts needed to drill a horizontal well, but. Production sharing agreements were first used in bolivia in the early 1950s, although their first implementation similar to todays was in indonesia in the 1960s. All sales of petroleum products by the contractors are made at arms length prices in accordance with sales agreements and that all amounts are brought to account. However, considering the inherent difficulties associated with joint venture agreements, develo ping countries gave emphasis to production sharing contract.
Licenseconcession agreements,joint ventures, and productionsharing agreements. Under a psa the state as the owner of mineral resources engages a foreign oil company foc as a contractor to provide technical and financial services for exploration and. The oil production sharing agreements are here for you to browse in full. Joint venture agreement jva and production sharing contract psc. Oil contracts, progressive taxation and government. From the competition policy point of view, the literature of production agreements is relevant production joint ventures jv included and also the competition investigations can serve as a baseline. Production sharing agreements vs service contracts from the. As a general rule, production sharing agreements are on the progressive side of the risk continuum, as opposed to the generally regressive concession agreements.
The fundamental distinction between psc and rt regimes lies in the. Production sharing agreements can be beneficial to governments of countries that lack the expertise andor capital to develop their resources and wish to attract foreign companies to do so. Uganda oil uganda production sharing agreements oil. Scope this contract is a production sharing contract, the scope of which is the exploration, appraisal, development and production of hydrocarbons in the contract area and the supply of required infrastructure within and outside of the contract area up to the delivery point, all at the contractors sole risk and expense. Merger is the combination of two or more municipalities that results in the termination. By greg muttitt paper presented to the general union of oil employees conference on privatisation basrah, iraq, 26 may 2005 platform is a british charity, addressing the impacts of british oil corporations on environment, workers rights, development and human rights. Legal status of production sharing agreements in turkmenistan by kevin l.
Psc is an agreement between the parties to a well and a host country regarding the percentage of oil and gas production each party will receive after the participating parties have recovered a specified amount of costs and expenses. Production sharing agreements concession and contract fiscal systems elements of production sharing contracts pscs, including cost oil and profit oil financial accounting for pscs nonrisked and risked service contracts group case studies for production sharing contracts register for this course now. This study aims to compare expected returns from exploiting petroleum resources of. Psc is the acronym of production sharing contract psa may also be used to refer to production sharing agreement. To provide participants with an indepth understanding of the concepts, mechanisms and articles of production sharing and joint operating agreement. Contracts for large natural resource investments are usually very complex, raising challenges for negotiators, implementers, and scrutinisers. Although it is not clear how the particular type of contract is selected for a particular project, it follows from other provisions of the petroleum law that such a. Productionsharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. By permitting the investor to recover his expenses first, production sharing agreements have become popular with the highrisk oil industry, since they carry lowest risks for the investor. Revenuesharing arrangements in production sharing agreements illustrate. The function of stabilisation and renegotiation clauses in. By fatma babayeva this article discusses the main concepts of azerbaijans production sharing agreements psas, which regulate the legal, commercial, and fiscal relationships between the government of azerbaijan and international oil companies iocs.
Before issuance of an agreement, the following must be received by university lands. Egpc has announced amendments to its production sharing agreements with foreign partners, according to al borsa. At the end, this dissertation will compare both regimes from a contractual perspective in order to answer whether it is really necessary to adopt a new regulatory framework based on a production sharing contract for the subsalt area in brazil. The understatement of the states share of profit hydrocarbon production the inclusion of jvoa determined overheads, rather than the overhead provisions, as stipulated in the psc please do not hesitate to contact us if you want to discuss production sharing contract audits. Direct care services means any eligible service that is provided directly by thp at. Model psc under the petroleum act page 2 production sharing contract dated this agreement is a production sharing contract made under the petroleum act between the, acting on behalf of the democratic republic of timorleste the ministry. Egpc cancelled a provision requiring iocs to give up part of the exploration zone within a concession every two years. Production sharing offers benefits, opportunities and challenges. The psas have been a matter of public concern with many people calling upon the government to make them public.
The government of uganda has signed production sharing agreements with oil companies prospecting and showing interest in production of oil in uganda. Apr 16, 20 lii,no 10, 9mar2009jenik radon, the abcs of petroleum contracts. However, in contrast to production sharing contracts, in a service contract the iocs. In a service contract, similar to a production sharing agreement, the closest legal framework, the international oil company brings the technology and makes the upfront capital investment. Introduction the production sharing agreement is a contractual agreement made between a foreign oil company contractor and a designated state enterprise state party, authorizing the contractor to conduct petroleum exploration and exploitation within a certain area contract area in accordance with. Perusahaan pertambangan minyak dan gas bumi negara pertamina and. Production sharing contract production sharing agreement. Now therefore, in consideration of the undertakings and mutual covenants contained herein, the parties agree as follows. Production sharing agreements vs service contracts from. Today they are often used in the middle east and central asia in production sharing agreements the countrys government awards the execution of exploration and production activities to an oil company. Also referred to as co production, crossborder manufacturing and outward processing, production sharing occurs when producers in different countries share in the manufacturing of a product.
Psa production sharing agreement soe state owned enterprise socar state oil company of azerbaijan republic tbr tax burden ratio tco tengizchevroil llp uas uzenatyrausamara uk united kingdom us united states usd united states dollar vat valueadded tax. The nature of product sharing agreements in azerbaijan. Please sign up in support of gigsfairtrade oil shareghana psa campaign. The survey was based on a questionnaire with over 200 senior executives in the oil. But an industry report said it could be the next decade by the time any new oil or gas is actually. Production sharing contract will be brought into discussion. Go for psa production sharing agreements, which is provided for by pndc laws 64 and 84 contained in ghanas statutory books since 1984. Royalty, therefore, becomes a part of total net revenue of the state from the 1 according to the federal law no. State and foreign investors in the form of a production sharing contract, through direct negotiation or by. Agreement or the agreement means this production sharing agreement executed between sonangol and contractor group, including its annexes. Production sharing agreements prepared by the central bank of russia.
By utilising a powerful economic model, participants will be able to carry out. Production sharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. However, considering the inherent difficulties associated with joint venture agreements, developing countries gave emphasis to production sharing contract. The principal objective of psc audit is to provide assurance to the minister that contractors are in compliance with the production sharing contracts. Production sharing agreements platform 5 options for oil policy there are essentially three models a country may choose from for the structure of its oil industry, plus a number of variations on these themes. Productionsharing agreements oxford institute for energy.
Productionsharing agreements psas are among the most common types of contractual. A comparative analysis of production sharing contracts of. Why governments have succeeded in exploring more money from iocs. Two major fiscal regimes are adopted for exploiting petroleum resources. The leak in july 2014 of an important addendum to a production sharing agreement psa between norwegian national oil company statoil and the government of tanzania has ignited a debate on whether tanzania got a good deal from granting these extraction rights for a block now expected to produce large amounts of commercial natural gas. Pdf production sharing contracts pscs and buyback contracts are two important contract modes in the upstream oil industry. Future add to from email folder and red notebook and all. Daysin this agreement refers to calendar days unless otherwise specified herein. Hydrocarbons law, which allows for agreements to be entered into between the state and foreign investors in the form of a production sharing contract, through direct negotiation or by international public tender. For example, a detroit auto parts manufacturer may team up with a mexican company to produce high quality and competitively priced products. Effective date means the first day of the month next following the month in which this agreement is signed by sonangol and contractor group. Model production sharing contract under the petroleum act. The production sharing agreements require foreign oil companies to pay the host country a signing bonus as soon as the contract gets put in action, by kaufmann, 2011.