The early concession system gave the host government no say in the exploration and production program. Merger, pursuant to the terms and conditions provided in an agreement and plan of merger merger agreement. Production sharing contracts or agreements psc hereafter are ubiquitous in much of asia, africa and the middle east, with only a handful of countries. 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%. 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. Components of production sharing contract in kenya. In 200102, reliance petroleum was merged with reliance industries. Production sharing contracts and variants such as service contracts with host governments are the most widely used form of arrangement with private petroleum companies. When it involves the period of gas sales agreement which is beyond the efective date of the contract, the extension may be. Type two pscs history of the psc example states introduction to the key components of the psc day 4. Strengths and limitations, their analysis demonstrates that revenue sharing allows a supplier and a single retailer to coordinate their supply chain effectively. An agreement to share the production or extraction costs between two governments, a government and a corporation, or a corporation and an individual.
The actual agreed profit gas sharing terms are quite different, as seen in table 2. Agreement or the agreement means this production sharing agreement executed between sonangol and contractor group, including its annexes. Through pscs, our partner bear exploration, development and production costs in return for an agreed share of production. Year that saw oil, gas production switch to revenuesharing mode published on december 30. 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. Production sharing contracts through pscs, our partner bear exploration, development and production costs in return for an agreed share of production. Bp took a 30 per cent stake in 23 oil and gas production sharing contracts that reliance operates in india. The psc usually has a limited duration, which is generally in the range of 20 to 40 years, with possible extensions of 5. April 2002 presentation by ceo mulva on merger pdf. Bbm oilbased fuel bps badan pusat statistic national statistical bureau bcf billion cubic feet bd barrels per day. Production sharing contract will be brought into discussion. A production sharing contract in short psc has been entered into between the government of india and the contractor on 12. Through the merger both parties hope to, among other things. Financial reporting in the oil and gas industry pwc.
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. Productionsharing agreements psas are among the most common types of contractual arrangements. 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. Aa exploration and drilling work should last for 3 years for an investment cost. Apr 16, 2016 5profit petroleum sharing relatively a newer fiscal device. 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. Production sharing contract royalty payment petroleum. Reliance petroleum limited is a company owned by reliance industries limited ril, one of indias largest private sector companies. Revenue recognition in productionsharing agreements psas is discussed. For the purpose of this definition it is understood that control means. 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. Exploration opportunities production sharing contract overview. Production sharing contract overview production sharing contracts. Modeling chinas offshore production sharing contracts using.
The profit petroleum sharing ratio may be determined either by. Model production sharing contract under the petroleum act. 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. 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. Productionsharing agreements psas are among the most common types of contractual arrangements for petroleum exploration and development. Supply chain coordination with revenuesharing contracts. Reliance natural resources ltd vs reliance industries ltd on 7 may, 2010. 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. Reliance industries limited ril, today signed a production sharing contract for the offshore contract area k in dili, capital of timor leste.
Profit petroleum sharing by state means a portion of oil, which is left after meeting all costs, operating exploration and development, and therefore called profit petroleum, is directly shared by state with contractor. 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. Modeling chinas offshore production sharing contracts. Reliance industries limited ril is an indian multinational conglomerate company. It is based in ahmedabad, gujarat, india and has interests in the downstream oil business.
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. However, in contrast to production sharing contracts, in a service contract the iocs agree to a predetermined return in lieu for sharing profit oil. 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. Production sharing contracts production sharing contract was pioneered in indonesia and was first used in agriculture which was later adopted for the petroleum sector. Chapter 14 complexity and commercial disputes in production sharing contracts james lloyd loftis, robert reyes landicho and francesca fraser i.
Reliance natural resources ltd vs reliance industries ltd on 7 may. Public notice and production sharing contract 06105 replaced interim psc jpda 0301, july 2006. Production sharing contracts have been used in the development of chinas offshore petroleum resources since 1982, but the mechanism in which the fiscal terms impact project economics is complicated and not well understood. The fundamental distinction between psc and rt regimes lies in the. Effective date means the first day of the month next following the month in which this agreement is signed by sonangol and contractor group. 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 opportunity to examine whether our country will adequately benefit from our. Implementing production sharing contracts natural resources. 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.
The signed production sharing contracts have the following key component. 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. 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. Psc is the acronym of production sharing contract psa may also be used to refer to production sharing agreement. 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 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. 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 sharing in production sharing contracts extends beyond oil and gas. Introduction the governments of hydrocarbonproducing countries have utilized a variety of different forms of contracts in their arrangements with domestic and foreign investors in the exploration and. F insert name is hereby designated as the operator under clause 28 of this contract. Contracts for large natural resource investments are usually very complex, raising challenges for negotiators, implementers, and scrutinisers. 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.
Reliance natural resources ltd vs reliance industries ltd. All contracts are based on a model production sharing contract psc issued as a schedule to the regulations issued under section 6 of the act. Bp and reliance industries announce transformational partnership. Abbreviations 4 preamble 5 article 1 definitions 6 article 2 scope 12 article 3 contract area article 4 contract term 14. Production sharing contract free download as powerpoint presentation. Together with partners in lower and middleincome countries, iied has. 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. Petroleum fiscal systems and production sharing contracts pennwell publishing company, tulsa, oklahoma, 1994. Rpl was merged with reliance industries limited on september 29, 2009. In their 2005 management science article supply chain coordination with revenuesharing contracts. 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. S embassy jakarta iv glossary adb asian development bank ado automotive diesel oil avgas aviation gasoline avtur aviation turbine fuel used by turboprops and jet aircraft.
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. Aa extending over the governorates of sousse and kairouan, the permit covers an area of 2428 square kilometers. Contract in accordance with modern oilfield and petroleum industry practices and will provide guarantees as required in article 29 for the due performance of its obligations hereunder. Perusahaan pertambangan minyak dan gas bumi negara pertamina and. The first production sharing contract was signed by iiapco in august 1966, with permina the national oil company of indonesia. 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. Italys eni signed 2 production sharing contract with ministry of energy august 4, 2014 by thiha italian energy firm eni, following its participation in the heavilycontested international bidding for myanmars onshore blocks, signed two production sharing contracts psc with the ministry of energy for rsf5 and psck onshore blocks in nay. Fields already in production may be handed to the state. One of the main purposes of the production sharing contract system is to exert state control over the. This is a oneoff fee payable to the government by the company upon signing of an oil exploration contract. Productionsharing contract how is productionsharing. Productionsharing agreements oxford institute for energy. A variety of psc terms are designed to encourage an optimal level of investment based on the complexity of petroleum resources.
Delhi high court asks reliance industries, british gas to disclose assets on centre plea 21 dec, 2019, 01. Chapter 14 complexity and commercial disputes in production. 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. Jul 01, 2007 in their 2005 management science article supply chain coordination with revenuesharing contracts. Subject to the provisions of this agreement, prior to the closing, the buyer shall prepare, and on the closing date the buyer shall cause to be filed with the secretary of state of the state of delaware, a certificate of merger the certificate of merger in such form as is required by, and. The purpose of this paper is to model chinas offshore production sharing contracts using a probabilistic approach. Production sharing contract production sharing agreement. The demerged companyreliance industries limited ril is to. Contract extension proposed to the minister through bpmigas within 10 to 2 years prior to the original contract expiry date. As a performancebased agreement, it is developed in malaysia for the malaysian people and private partners to.