Nigeria, indonesia, malaysia and equatorial guinea. August 2014 david manley and thomas lassourd executive summary 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. The early concession system gave the host government no say in the exploration and production program. The federal military government hereby decrees as follows. Production sharing agreements vs service contracts from the view of an ioc 9,932 views. Deep offshore and inland basin production sharing contracts. The second type of arrangement, which requires payment in cash, is usually referred to as either a pure service contract or a risk sharing contract, depending on the basis of the payment. Together with partners in lower and middleincome countries, iied has. State and foreign investors in the form of a production sharing contract, through.
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. If you continue browsing the site, you agree to the use of cookies on this website. The production sharing contracts have been defined as a contractual relationship. Under a psc the contractor group bears the mineral and financial risk of exploration, and the state is permitted an ownership participation interest, when and if, it has been agreed, that any hydrocarbon discoveries within the psc acreage are to be developed and produced. Contractors maintain adequate accounting records in accordance with generally accepted accounting practices in the international petroleum industry. An economic analysis productionsharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. The production sharing contract psc was widely introduced in 1993 to address some of the issues faced by the joint operating agreement joa and also to provide a suitable agreement structure for encouraging foreign investment in offshore acreage. Under the bangladesh petroleum act 1974, the government owns all mineral resources including petroleum within the territory, continental shelf and economic zone of the country and has the exclusive right and. Lao hamutuk and others have repeatedly asked the oil companies and relevant authorities to give permission for them to be made available. Application for production sharing agreement to allow horizontal wells to cross lease lines page 1 as of oct 5, 2018. The contractor shall a be responsible to the government for the execution of the petroleum operations contemplated hereunder in accordance with the provisions of this. The profit sharing agreement is a mutual agreement between the partners or team members to share the profit of the business in a justifiable as well as reliable manner. From the fgns perspective, given that some of these pscs were negotiated and entered into over 20 years ago, there is a need to update them to reflect current realities and also to ensure that they produce a lot.
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. Petroleum production sharing contracts lao hamutuk. A profile was created for each country, summarizing the provisions in the legal instruments dealing with local content and. In this chapter we will also address the opening of the new company petrosal. 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. A comparative analysis of production sharing contracts of selected developing countries. Renegotiation of nigerias production sharing contracts. Pdf interest in the lebanese offshore hydrocarbon potentials has recently increased. It is a contract that specifies who supplies the production inputs, the quantity of the commodity to be produced and its quality, as well as the producers compensation. Effective date means the first day of the month next following the month in which this agreement is signed by sonangol and contractor group. Production sharing contracts production sharing contract was pioneered in indonesia and was first used in agriculture which was later adopted for the petroleum sector.
Each involves sharing of proceeds, but by different methods. Production sharing contracts through pscs, our partner bear exploration, development and production costs in return for an agreed share of production. Chapter 4 presents the comparative analysis of both regulatory systems and presents the main differences between the concession. Claimed costs are not disqualified for cost recovery and the claimed amounts are supported by adequate audit evidence and are properly classified. Furthermore, under the new agreement the country was allowed to appoint two members to the board of directors. Revenuesharing arrangements in production sharing agreements illustrate this point vividly.
Part vi cost recovery, petroleum sharing marketing and participation 27 cost recovery, production sharing and income tax. Commercial production means production of crude oil or condensate or. Production sharing agreements international monetary fund. Under a psc the contractor group bears the mineral and financial risk of exploration, and the state is permitted an ownership participation interest, when and if, it has been agreed, that any hydrocarbon discoveries within the. Production sharing agreements vs service contracts from the. Ogel 1 2005 browse issues journal ogel journal oil. 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. One of the main purposes of the production sharing contract system is to exert state control over the. Sharing contract 20 deep water psc model contracts for each level of depth. Hydrocarbons law, which allows for agreements to be entered into between the. Production sharing contracts production sharing contracts advanced master class dr pedro van meurs is a really excellent instructor having detailed knowledge about the.
The principal objective of psc audit is to provide assurance to the minister that contractors are in compliance with the production sharing contracts. The investors are to implement all specified works at their own account and risk. Doc production sharing contracts vs service contracts from the. Productionsharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. Sharing contract 20 deep water psc model contracts for each level of depth of offshore field and for onshore fields include detailed local content provisions in line with the framework. Model production sharing contract mpsc200s has been formulaled with a view to meeting. Production operations shall further include the acquisition of assets and facilities required for the production of petroleum hereunder and oil and gas field. The owner of hydrocarbons can either explore for and develop the hydrocarbons himself or he can grant that right to a third party under specific conditions.
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. Productionsharing agreements oxford institute for energy. This production sharing contract the contract is entered into in beijing on. Pdf the main difference between product sharing contracts and. Psc is the acronym of production sharing contract psa may also be used to refer to production sharing agreement. Under a psa the state as the owner of mineral resources engages a foreign oil company foc as a contractor to provide technical and. 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. And whereas, the commissioner of state lands has the. 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. Production sharing agreements vs service contracts from the view of an ioc. Pdf on structuring offshore hydrocarbon production sharing. Production sharing contracts service contracts pure service risk service tax and royalty government usually owns minerals in the ground in both types. A comparative analysis of production sharing contracts of.
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. Contractors have satisfied their financial obligations, to the minister, under the contracts. Model production sharing contract under the petroleum act. Pdf this paper discusses the main differences between production sharing contracts pscs and risk service contracts rscs, and aims. This guide discusses the provisions of a particular type of oil and gas contract, the. Natural gas or any combination of these from the contract area excluding. Production sharing contract slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising.
Production contracts are important documents needed in a retail, agricultural or production company. 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. Through pscs, our partner bear exploration, development and production costs in return for an agreed share of production. Fiscal regimes, petroleum contracts, and natural gas.
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. Petronas, as a custodian, manages the petroleum resources of the nation. 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. Strategy of oil contract negotiation mohsin shareef salih rdhwan shareef salih assistant lecturers faculty of law. This can be accomplished when two countries agree to allow certain raw materials to be shipped tariff free from the first country to the second country where the materials are.
Under these arrangements, the nnpc is the holder of the concession while the ioc is the contractor. Brazilian government decided to introduce the production sharing contracts psc in. It was first used in 1966 by the indonesias national oil company known as pertamina. N pongsiri, partnerships in oil and gas productionsharing contracts. Agreement or the agreement means this production sharing agreement executed between sonangol and contractor group, including its annexes. Minister is authorized to enter into production sharing contracts for the carrying out of petroleum operations upon such terms and conditions as the cabinet may approve. 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. From the fgns perspective, given that some of these pscs were negotiated and entered into over 20 years ago, there is a need to update them to reflect current realities and also to.
The sharing in production sharing contracts extends beyond oil and gas. Petroleum fiscal systems and production sharing contracts pennwell publishing company, tulsa, oklahoma, 1994. Failing such agreement, the contractor and the national petroleum agency shall each submit a proposal to an expert appointed by the world bank and such. Production sharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. Production sharing agreements vs service contracts from. A contractual agreement between a contractor and a host government whereby the contractor bears all of the exploration costs and risks and the development and production costs in return for a stip. A variety of psc terms are designed to encourage an optimal level of investment based on the complexity of petroleum resources.
This decree has been amended by deep offshore and inland basin production sharing contracts amendment decree no 26 of 1999. Petronas has exclusive rights to exploit nations petroleum resources. Production sharing contract production sharing agreement. Production sharing contract legal agreements, contracts. Regulation 63 of the regulations is amended by deleting the words reduce the rate of. The fundamental distinction between psc and rt regimes lies in the. Production sharing contract psc a special agreement between the government of bangladesh and foreign contractors signed mainly for petroleum exploration and development in the country. Production sharing agreement psa is a contract between one or more investors and the government in which rights to prospection. 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. Contract or if the production achieved from this contract is not enough to recover all the hydrocarbons costs incurred by the contractor, the contractor shall bear its own losses. A production sharing contract psc is a contract between either a hc or its state oil. Revenue sharing arrangements in production sharing agreements illustrate this point vividly.
Contracts signed before the 2005 laws went into effect are not legally obligated to be published. While investment flows to the petroleum sector are determined to a large extent by geological prospects, attractive petroleum legislation also has a positive. In addition aramco agreed to pay the local sovereign tax. Pscpsa product sharing contractagreement concession taxandroyalty participationjoint ventureassociation service contract what is a psca. Contract means this production sharing contract, including its recitals and. Dissatisfied with the royalty arrangements the saudis finally achieved a 50b50 profit sharing in 1950. An agreement to share the production or extraction costs between two governments, a government and a corporation, or a corporation and an individual. State and foreign investors in the form of a production sharing contract, through direct negotiation or by international public tender.
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. This template avoids the element of distrust, dissatisfaction among the partners. During the term of this contract the total production achieved from this contract shall be shared between the parties in accordance with the provisions of article 8. The first production sharing contract was signed by iiapco in august 1966, with permina the national oil company of indonesia. Structure of production sharing contracts the legislative framework is a key component for exploration and development of petroleum reserves through which a government policy with respect to petroleum sector are normally reflected. Rights licensee or contractor under a production sharing contract shall pay a royalty at a rate of 12. Concept of production sharing contract psc government petronas contractors pda psc entire ownership of nations petroleum resources is vested to petronas. 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. Contracts for large natural resource investments are usually very complex, raising challenges for negotiators, implementers, and scrutinisers. Deep offshore and inland basin production sharing contracts decree.
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