Production sharing agreement (PSA) is a type of general contract signed between the government and the resource extraction company (or group of companies) on how much resources (usually oil) taken from each country will receive. - The production sharing agreement was first used in Bolivia in the early 1950s, although their first implementation was similar to today in Indonesia in the 1960s. Today they are often used in the Middle East and Central Asia. In the production sharing agreement, the government of the country presents the implementation of exploration and production activities to an oil company. Oil companies bear the mineral and financial risks of the initiative and explore, develop and ultimately produce the necessary fields. When successful, companies are allowed to use money from oil produced to recover capital and operational expenses, known as "oil costs". The remaining money is known as "profit oil", and is shared between the government and the company. In most production sharing agreements, changes in international oil prices or levels of production affect the company's production. Production sharing agreements can be useful for governments of countries with no expertise and/or capital to develop their resources and want to attract foreign companies to do so. They can be a very lucrative deal for the oil companies involved, but often involve substantial risks.
Video Production sharing agreement
Termination of costs and excess oil
The amount of recoverable costs is often limited to the amount called "termination of fees". If the cost incurred by the company is greater than the costs stalled, the company reserves the right to recover only a limited fee on termination of costs. When the costs incurred are less than the stop costs, the difference between the costs and the stop costs is called "excess oil". Typically, but not necessarily, the excess oil is shared between the government and the company according to the same rules of profit oil. If the recoverable cost is higher than the cost, terminate the contract defined as saturated . Cessation of costs gives the government to ensure a recovered portion of production (as long as crude oil prices are produced higher than the cost of stopping), especially during the first years of production when costs are higher. Since the early 80s all major contracts include a stop fee clause. Termination costs can be a fixed amount, but in many cases a percentage of the cost of crude oil.
Maps Production sharing agreement
Risk sharing contract
First implemented in Malaysia, the risk-sharing contract (RSC) departs from the production sharing contract (PSC), which was first introduced in 1976 and most recently revised last year as an enhanced oil recovery (EOR) PSC which increased the recovery rate from 26% to 40% As a performance-based agreement, it was developed in Malaysia for Malaysians and private partners to benefit successfully and easily monetize these marginal areas. At the Center for Energy Sustainability and Asia Economic Production Optimization Week Forum in Malaysia on July 27, 2011, Deputy Finance Minister YB. Senator Dato 'Ir. Donald Lim Siang Chai explained that RSC is pushing for the delivery of optimal production targets and enabling knowledge transfer from joint ventures between foreign and local players in the development of Malaysia's 106 marginal fields, which cumulatively contain 580 million barrels of oil equivalent (BOE) in the energy market with demand high and low current resources.
Framework for Marginal Fields of Risk Services Contract
Performance-based agreements such as RSC Chain have a more rigorous focus on production and recovery levels compared to the preferred profit-sharing contracts by oil companies. This emphasis on optimizing production capacity in the marginal field can be extended to contracts that regulate the recovery of major oil fields in the rapidly depleting resource industry. At present, the Petronas recovery factor is about 26 percent for major oil fields, which can be further enhanced by optimized production techniques and knowledge exchange.
- Marginal Fields is located within the producing block and the main product is oil;
- The IOC provides technical, financial, managerial, or commercial services to the country from exploration to production;
- Risk-service contracts - the IOC assumes all exploration costs;
- Petronas retains oil ownership;
- Internal Return Rate (IRR) is estimated at between 7% - 20% depending on terms and conditions - ROI is more interesting than the PSC regime;
- The contractor receives payment of fees starting from the first production and throughout the duration of the contract
- Fees are taxable - but to provide investment incentives in the marginal sector Malaysia has reduced taxes from 38% to 25%, to improve the commercial sustainability of investment projects;
According to the think tank, Arc Media Global, although efficient, RSC is basically a contract that significantly increases the risk of exposure to operators.
Further reading
- OGEL 1 (2005) - Production Sharing Contract, special edition Oil, Gas & amp; Energy Law Intelligence
- OGEL 4 (2010) - Government Giving and Development Instrument, special edition Oil, Gas & amp; Energy Law Intelligence
See also
- Oil and gas agreement
References
Source of the article : Wikipedia
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