Exploration opportunities production sharing contract overview. Laws of guyana petroleum e xploration and production 3. Production sharing contract psc agreement with petronas. Production licence granted to licensee pursuant to article 7. Fiscal systems for hydrocarbons design issues 40902 public disclosure authorized. 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 and and each a contractor and collectively, the contractors. The fundamental distinction between psc and rt regimes lies in the.
It could in rare cases retroactively pay their share of the exploration costs. Contrary to concessionary systems of granting exploration and development rights in gas and oil, under psas the. If no commercial discovery during the 10year exploration period, the contract shall be terminated. 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. Contract and, in the event of withdrawal by contractor, to make payment as specified in subarticle 5. Production sharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. Ey global oil and gas tax guide is part of a suite of tax guides.
Production sharing contracts have been employed mainly in the oil industry but also in uranium exploration, and were the predominant contract in the 1960s and 1970s. In the event contractor terminates the contract before completing the committed work programs, the. 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. In the bidding process, the judging criteria is the percentage of excess oil called profit oil, i. Maximum efficient production rate university of dundee. Model production sharing contract under the petroleum act. During the first 3 years of exploration period, contractor shall perform committed work programs at the estimated amount as set out in the contract. Production sharing contract pscproduction sharing agreement psa. The company or the consortium carrying out the activities takes on the exploratory risks. Production sharing contract psc production sharing agreement psa under a pscpsa, a national oil company noc or a host government enters into a contract directly with an oil and gas company. Concessions, production sharing agreements and service contracts in geoffrey pictonturbervill ed, oil and gas. 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. Together with partners in lower and middleincome countries, iied has been working to strengthen local and national capacity to examine contractual issues with a sustainable development lens.
These have been signed within the framework of new exploration licensing policy nelp and exploration policy adopted prior to nelp. It was first used in 1966 by the indonesias national oil company known as pertamina. 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. International petroleum fiscal systems and production. Platinum mpm exploration opportunities production sharing contract overview production sharing contract overview production sharing contractsthrough pscs, our partner bear exploration, development and production costs in return for an agreed share of production. Prenelp production sharing contracts the government of india has signed over 100 production sharing contracts pscs, which are currently valid and are at various stages of exploration. Whereas, the constitution further provides that the state may directly undertake such activities, or it may enter into a co production, joint venture, or mineral production sharing agreement with filipino citizens, or cooperatives, partnerships. Introduction i equity and production sharing 1 preconditions for investment 2 minimum conditions for investment 3 establishing petroleum rights 3. 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. Force majeure means the concept defined in article 42 of this agreement. International petroleum fiscal systems and production sharing. A variety of psc terms are designed to encourage an optimal level of investment based on the complexity of petroleum resources. Production sharing contracts and international petroleum.
Whereas, the constitution further provides that the state may directly undertake such activities, or it may enter into a coproduction, joint venture, or mineral production sharing agreement with filipino citizens, or cooperatives, partnerships. At the same time managing the upstream activities through production sharing contract psc 1 april 1975. Production sharing agreements production sharing agreements psa are among the most common contractual arrangements for petroleum exploration and development. The psc usually has a limited duration, which is generally in the range of 20 to 40 years, with possible extensions of 5. Laws of guyana petroleum e xploration and production cap. 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. Production sharing agreements psas or production sharing contracts pscs are a common type of contract signed between a government and a resource extraction company or group of companies concerning how much of the resource usually oil extracted from the country each will receive. Complexity and commercial disputes in production sharing.
Production sharing agreements and allocation wells update greg mathews, senior counsel chevron north america exploration and. Under these agreements, the developer bears all exploration and appraisal costs. Contract area means the area specified in article 3 hereof and delineated on the map set out in annex a, as modified and reconfigured from time to time in accordance with the stipulations of this contract. Psc is the acronym of production sharing contract psa may also be used to refer to production sharing agreement. Production sharing contract will be brought into discussion. 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.
During the first 3 years of exploration period, contractor shall. Production sharing contract for petroleum exploration. Through pscs, our partner bear exploration, development and production costs in return for an agreed share of production. However, considering the inherent difficulties associated with joint venture agreements, developing countries gave emphasis to production sharing contract. Under a psa the state as the owner of mineral resources engages a foreign oil company foc as a contractor to provide technical and.
The topics that johnston covers are petroleum fiscal systems, concessionary systems, production sharing contracts, risk service contracts, threshold field size analysis, global market for exploration acreage, production sharing contract outline accounting principles, and. The production sharing contracts have been defined as a contractual relationship. Joint venture agreement jva and production sharing contract psc. 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. Nonetheless, the exploration and production of the hydrocarbon resources often is not straightforward due to enormous challenges which many subsaharan african countries faced included but not the limited poor governance, poor socioeconomic conditions, corruption, misuse of resources, violent conflict, lack of transparency and accountability. Licenseconcession agreements, joint ventures, and productionsharing agreements jenik radon it is in the interest of natural resourcerich countries to use their resources to obtain funds for social and economic development. Model mining development agreementtransparency template. Subsequently, it will look at the main features of concessions by analyzing the brazilian regulatory framework for oil activities. This mineral production sharing agreement the republic of the. 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. 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.
No ideal or model regime is available for policy makers to adopt. However, in contrast to production sharing contracts, in a service contract the iocs. Contract years after the initial exploration phase pursuant to article 6. The contractor undertakes the exploration and production activities at its own expense and risk. Exploration perimeter, within the framework of this production sharing contract. The preamble expresses a set of general statements and its aim is to arrange the specific provisions of the contract in their broader framework, both legal for instance. A psa is an agreement between the parties to a well and a host country regarding the percentage of production each party will receive after the participating parties have recovered a specified amount of costs and expenses. A comparative analysis of production sharing contracts of.
Production sharing contract financial aspects introduction basic principles. Arb0611, involved the cancellation or caducidad of a participation contract, a form of. Production sharing contract overview production sharing contracts. International exploration economics, risk and contract analysis pennwell book.
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. Petronas has exclusive rights to exploit nations petroleum resources. Productionsharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. Production sharing contracts production sharing contracts or agreements psc hereafter are ubiquitous. Exploration, development and production of liquid and gaseous hydrocarbons in the contract area. The corporation or the holder, as the case may be, receipts. Tirana, 20 december 2019 in the presence of the albanian prime minister, edi rama, enis ceo claudio descalzi, signed with the ministry of infrastructure and energy belinda balluku, the. The preamble, the main text and appendices which are an integral part of the contract.
A practical handbook, first edn globe business publishing, london 2009, pp. Fifth offer of blocks home ministry of petroleum and. Islamic republic of mauritania honour fraternity justice. The development plan outlines the activities to be conducted during the phases of development and exploration within development lease blocks. Theory of economic rent starting with david ricardo and adam smith efficiency vs. Revenuesharing arrangements in production sharing agreements illustrate this point vividly. The topics that johnston covers are petroleum fiscal systems, concessionary systems, production sharing contracts, risk service contracts, threshold field size analysis, global market for exploration acreage, production sharing contract outline accounting principles, and double taxation. An oil exploration and production contract commonly contains three main sections. A few cases on production sharing agreements with foreign governments concessions, but those na. Production sharing agreements psas are a common type of contract signed between a government and a resource extraction company or group of companies concerning how much of the resource. Revenue sharing arrangements in production sharing agreements illustrate this point vividly. Under epsaiv, the noc normally takes around 8090% of the oil and gas production, while the foreign company must recover capital and operating costs and eventually make a profit from the remaining share in production. Petronas, as a custodian, manages the petroleum resources of the nation.
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