However, considering the inherent difficulties associated with joint. Year that saw oil, gas production switch to revenuesharing. 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 covers 662 square km of relinquished acreage from jpda 06105, near the kitan field, and is expected to tie into kitan if a commercial discovery is made.
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. Aa extending over the governorates of sousse and kairouan, the permit covers an area of 2428 square kilometers. Production sharing contract royalty payment petroleum. One of the main purposes of the production sharing contract system is to exert state control over the. Contract signed in 20 in the joint petroleum development area jpda 11106 with eni 40. Oil and gas business 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. 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. Best available techniques guidance document on upstream. F insert name is hereby designated as the operator under clause 28 of this contract. 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. In january 2006, the government of timor leste had invited bids for 11 offshore exploration blocks in shallow to ultra deep waters in their country. 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.
Psc is the acronym of production sharing contract psa may also be used to refer to production sharing agreement. Oil and gas exploration requires substantial investment and the chances of not hitting the reserves are always there. Type two pscs history of the psc example states introduction to the key components of the psc day 4. A detailed examination of the issues the sharing of production cost oil and the recovery of petroleum costs profit oil and the sharing of petroleum. Effective date means the first day of the month next following the month in which this agreement is signed by sonangol and contractor group. 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. The production sharing contracts have been defined as a contractual relationship. 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. The psc usually has a limited duration, which is generally in the range of 20 to 40 years, with possible extensions of 5. 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. Each exploration and production sharing agreement epsa is based on a. The psc usually has a limited duration, which is generally in the range of 20 to 40 years, with possible extensions of 5 to 10 years thereafter.
Tranches of daily total production rates in each of the contract areas mmscf per day tpdc share of profit gas contractor share of profit gas 0 299. Governmentpsus cannot always put in such investments and sometimes also lack the technology and expertise to tap into the reser. Petroleum fiscal systems and production sharing contracts pennwell publishing company, tulsa, oklahoma, 1994. Production sharing contract overview production sharing contracts. Reliance industries, the largest listed conglomerate, is planning to revoke the arbitration clause in the production sharing contract psc with the indian government, sources told ndtv profit. Contract extension proposed to the minister through bpmigas within 10 to 2 years prior to the original contract expiry date. 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. 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. E pursuant to and in accordance with the petroleum law, this contract has been entered into by and between the state and the contractor for the purpose of petroleum operations in the contract area. Appendix a description of the contract area 79 appendix b map of the contract area 80 appendix c accounting procedure to the contract 81104 appendix d calculation of the investment multiple for production sharing purposes 105106 appendix e1 form of parent company financial and performance guarantee 107108.
Revenuesharing arrangements in production sharing agreements illustrate this point vividly. The sharing in production sharing contracts extends beyond oil and gas. 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. As part of a productionsharing contract with the tunisian enterprise of petrol related activities etap, an oil permit dubbed chorbane was awarded to the austrian energy firm alpine oil and gas.
Pdf indonesia is the pioneer of the production sharing contract psc,the irst contract was signed in 1960. Together with partners in lower and middleincome countries, iied has. Model production sharing contract under the petroleum act. 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. Productionsharing contract how is productionsharing. 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. Reliance industries limited ril, today signed a production sharing contract for the offshore contract area k in dili, capital of timor leste. A contractual agreement between a contractor and a host government whereby the contractor bears all of the exploration costs and risks and the. This 3 day course will cover and compare legal and fiscal systems, commercial issues, various psc and related agreements, the governance and management of pscs, audits, as well. Supply chain coordination with revenuesharing contracts. When it involves the period of gas sales agreement which is beyond the efective date of the contract, the extension may be. Any physical assets constructed for the production of the resource has its ownership transferred to the state.
Production sharing contract free download as powerpoint presentation. Contracts for large natural resource investments are usually very complex, raising challenges for negotiators, implementers, and scrutinisers. The first production sharing contract was signed by iiapco in august 1966, with permina the national oil company of indonesia. Production sharing contract will be brought into discussion. Reliance and contract breach plaintiffs rights on the contract. Production sharing contract production sharing agreement.
What is the difference between a production sharing. 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. The early concession system gave the host government no say in the exploration and production program. Delhi high court asks reliance industries, british gas to disclose assets on centre plea 21 dec, 2019, 01. Maximization of returns and benefits are the major determinants state considers for adopting particular petroleum fiscal regime in the course of exploiting its petroleum resources. Pdf the effectiveness of revenuesharing contract to. Implementing production sharing contracts natural resources. It was first used in 1966 by the indonesias national oil company known as pertamina. Production contracts are important documents needed in a retail, agricultural or production company. Pscpsa product sharing contractagreement concession taxandroyalty participationjoint ventureassociation service contract what is a psca. The parties may place reliance on the actions of socar taken on. 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. Economic descriptions in contrast to the legal analysis of contract law, economic analysis generally discusses reliance directly and the reliance interest only implicitly. Revenue sharing contract rsc is a term used in the hydro carbon industry and refers to an agreement between contractor and government whereby contractor bears all exploration risks, production and development costs in return for its stipulated share of revenue resulting from this effort.
Nigeria, indonesia, malaysia and equatorial guinea. For the purpose of this definition it is understood that control means. Joint venture agreement jva and production sharing contract psc. Jul 01, 2007 in their 2005 management science article supply chain coordination with revenuesharing contracts. Production sharing contracts production sharing contract was pioneered in indonesia and was first used in agriculture which was later adopted for the petroleum sector. 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.
Aa exploration and drilling work should last for 3 years for an investment cost. Pdf the net cash flow measurement of the conventional oil. In their 2005 management science article supply chain coordination with revenuesharing contracts. Fields already in production may be handed to the state. 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. A variety of psc terms are designed to encourage an optimal level of investment based on the complexity of petroleum resources. Productionsharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. Production sharing contracts through pscs, our partner bear exploration, development and production costs in return for an agreed share of production. Strengths and limitations, their analysis demonstrates that revenue sharing allows a supplier and a single retailer to coordinate their supply chain effectively.
What is the difference between a production sharing contract. 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. The fundamental distinction between psc and rt regimes lies in the. The actual agreed profit gas sharing terms are quite different, as seen in table 2. Petroleum production sharing contracts lao hamutuk. Psc production sharing contract cooperation contract for oil and gas exploration and exploitation between bpmigas and private investors which can include private foreign and domestic companies as well as.
Production sharing contracts and variants such as service contracts with host governments are the most widely used form of arrangement with private petroleum companies. Jul 20, 2014 oil and gas exploration requires substantial investment and the chances of not hitting the reserves are always there. 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. Bp and reliance industries announce transformational partnership. The plan is aimed at reducing the countrys reliance on oil and gas production by. Perusahaan pertambangan minyak dan gas bumi negara pertamina and. Renegotiation of nigerias production sharing contracts. Agreement or the agreement means this production sharing agreement executed between sonangol and contractor group, including its annexes.
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. 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 selected developing countries. Through pscs, our partner bear exploration, development and production costs in return for an agreed share of production. Revenue sharing arrangements in production sharing agreements illustrate this point vividly. The effectiveness of revenuesharing contract to coordinate the pricesetting newsvendor products supply chain article pdf available in supply chain management 4. First implemented in malaysia, the risk sharing contracts rsc departs from the production sharing contract psc first introduced in 1976 and most recently revised last year as the enhanced oil recovery eor psc which ramps up recovery rate from 26% to 40%. Bapex means bangladesh petroleum exploration and production co. While investment flows to the petroleum sector are determined to a large extent by geological prospects, attractive petroleum legislation also has a positive. Those who are not familiar with the document can make us of these templates as their reference.
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