1 Petroleum Fiscal Regimes Basic Concepts Dr. Alfred Kjemperud Dr. Alfred Kjemperud 2 CCOP, Pattaya, September 2003 Opening Statements • The fiscal arrangement is the Government’s most important tool for managing petroleum resources • It is mandatory for all managers and technical personnel in the Government and industry to understand the basics of fiscal arrangements
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Petroleum Fiscal RegimesBasic Concepts
Dr. Alfred Kjemperud
Dr. Alfred Kjemperud 2CCOP, Pattaya, September 2003
Opening Statements
• The fiscal arrangement is the Government’s most important tool for managing petroleum resources
• It is mandatory for all managers and technical personnel in the Government and industry to understand the basics of fiscal arrangements
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Dr. Alfred Kjemperud 3CCOP, Pattaya, September 2003
Government Options
• Value of National Resources -Determining Factors
The resource baseThe market – oil priceTerms and regulations
Dr. Alfred Kjemperud 4CCOP, Pattaya, September 2003
Costs
Income
Time
Pre-license Exploration Development Production AbandonmentProduction
Rehab.
Government
Activities and cash flow
Con
trac
t sig
ning
PDO
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Dr. Alfred Kjemperud 5CCOP, Pattaya, September 2003
General Objective
The objective of petroleum resource management is:
To maximise the valueof the petroleum resource
Dr. Alfred Kjemperud 6CCOP, Pattaya, September 2003
Company objective
To attain maximum net present value of the petroleum resources
Build equity
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Dr. Alfred Kjemperud 7CCOP, Pattaya, September 2003
Government Objectives
• Provide a fair return to the state and the industry
• Avoid undue speculation• Limit undue administration• Provide flexibility• Create healthy competition• Create a market efficiency
Dr. Alfred Kjemperud 8CCOP, Pattaya, September 2003
The role of the authorities
Definition of policySetting of termsPromotionLicensingMonitoring and supervisionAdjustment of terms as requiredManaging the impact
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Dr. Alfred Kjemperud 9CCOP, Pattaya, September 2003
Production Sharing ContractsProduction Sharing Contracts
Pure Service ContractsPure Service Contracts
Risk Service ContractsRisk Service Contracts
Limited usageLimited usage
MexicoMexico
ArgentinaArgentina
BrazilBrazil
VenezuelaVenezuela
The PhilippinesThe Philippines
Indonesian (profit) Peruvian (gross)
Indonesia
Angola
Yemen
Albania
Nicaragua
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Dr. Alfred Kjemperud 23CCOP, Pattaya, September 2003
Systems around the World
Australia Pakistan (On) Bangladesh Mongolia PhilippinesBrunei PNG Cambodia MyanmarKorea, South Thailand China Pakistan (Off)New Zealand Timor Gap B India Timor Gap A
Indonesia VietnamLaos NepalMalaysia Sri LankaAzerbaijan RussiaGeorgia TurkmenistanKazakstan UzbekistanKyrghystan
Argentina Falkland Is. Belize Nicaragua Brazil HondurasBolivia Paraguay Cuba Panama Chile PanamaColombia T&T (On) Guatemala T&T (Off) Ecuador PeruCosta Rica Guyana Uruguay Haiti
Jamaica VenezuelaAbu Dhabi Neutral Zone Bahrain Oman IranAjman Sharjah Iraq Qatar Kuwait (OSA)Dubai Turkey Joran Syria Saudi ArabiaFujairah Libya YemenCanadaUnited States
Concessions (R/T System) PSC SC
North America
Far East
Former Soviet Union
Latin America
Middle East
Dr. Alfred Kjemperud 24CCOP, Pattaya, September 2003
Systems around the World
C. Afracan Rep. Namibia Algeria Liberia Chad Niger Angola LibyaCongo (K.) Senegal Benin MadagascarGhana Seychelles Cameroon MozambiqueMadagascar Somalia Congo (Br.) NigeriaMalawi South Africa Cote D'Ivoire SudanMali Tunisia (Old) Egypt TanzaniaMorocco Eq. Guinea Togo
Dr. Alfred Kjemperud 43CCOP, Pattaya, September 2003
Peruvian onshore
R-Factor ************ROYALTY RATE ************* ≤ $15/bbl $25/bbl ≥ $35/bbl 0.0 < R < 1.0 19% 23% 27% 1.0 ≥ R < 1.5 24% 29% 32% 1.5 ≥ R < 2.0 30% 35% 37% 2.0 ≥ R 36% 39% 42%
Dr. Alfred Kjemperud 44CCOP, Pattaya, September 2003
Domestic Market Obligations (DMO)• A certain volume of oil to be sold to the Government• Discounted Price• Local Currency. Predetermined exchange rate
• Example - Indonesian DMO Production: 1 MMBBLOil price: 20 USD/BBLDiscount: 2 USD/BBLContractor’s profit oil: 28.8462% of total productionDMO: 25% of Contractors profit oil
• 1MMBBL*(20USD/BBL-2USD/BBL)*25%*28.8462%= 1,298 MMUSD• 1,298MMUSD/20USD/BBL=0.0649 MMBBL= 6.49% of total production ( Pure
volume calculation: 28.8462%*25%=7.21%)
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Dr. Alfred Kjemperud 45CCOP, Pattaya, September 2003