Production Sharing Contracts

Advanced Fiscal Course

CWC School for Energy Training Courses

Course leader: Pedro van Meurs

3-day computer inter-active training coursebased on an advanced software package which simulates PSCs of 35 countries

April 16-18, 2012.

London, UK

The course provides participants with an advanced knowledge of Production Sharing Contracts. The aim of the course is to teach participants:

  • The basics of production sharing contracts as well as advanced analysis
  • The role of PSCs in the sharing of resource wealth between nations and investors
  • The analysis of the 12 main types of fiscal systems based on PSCs
  • Advanced economic analysis based on Excel Spreadsheets
  • Analysis of design flaws in some PSCs
  • Worldwide rating of investor attractiveness of PSCs
  • Time distribution of government income from PSCs
  • The sharing of geological risk between governments and investors
  • PSC Accounting Procedures
  • Analysis of strengths and weaknesses of PSCs for investors and governments

The course is structured to be useful to a wide range of professions: geologists,petroleum engineers, bankers, accountants, negotiators, economists and lawyers.

The Advanced PSC course is an excellent follow up on the CWC courses World Fiscal Systems for Oil and Gas, offered by Pedro van Meurs and World Legal Systems for Oil and Gas, offered by Jay Park and Bill Onorato, as well as the PSC courses offered by Daniel Johnston.

COURSE LEADER

The course leader, Dr. Pedro van Meurs, received his Ph.D. in economic geology (cum laude) in the University of Utrecht in the Netherlands in 1970. During the last 38 years he has worked on fiscal oil and gas issues in more than 70 countries in the world. He was lead consultant in:

-Opening of the Newfoundland offshore for exploration and production

-Alaska Petroleum Profits Tax and the proposed gas pipeline contract

-Development of the first model contract for offshore China

-Production-sharing, SPT and tax terms in Trinidad and Tobago

-Capitalization of YPFB and 1996 petroleum law in Bolivia

-PSC’s in Gabon and Bangladesh

-Creation of fiscal terms in Thailand, Pakistan and Nigeria

-Development of service contracts in Mexico and Kuwait

COURSE PROGRAM

DAY 1 – MORNING

Discussion of outline of the course

  • Discussion of the program for the three days

Introduction to the PSC student model

  • Main Input and Output features
  • Discussion of PSC Input features

Basic Production Sharing Features

  • Original Indonesian Model
  • Profit Oil options: Fixed profit oil/gas, sliding scales
  • Profit Oil volume based sliding scales: scales based on daily production, scales based on cumulative production
  • Cost Oil Limit options: Fixed limits, sliding scale limits, no limits
  • Cost Oil options: Costs expensed, costs based on depreciation
  • Oil versus Gas
  • Special features: Excess cost oil, First Tranche Petroleum, Local market obligation
  • Signature bonuses and production bonuses
  • Analysis of traditional PSC: Egypt (analysis)

DAY 1 - AFTERNOON

Sharing of Resource Wealth: An analysis of basic PSC features

  • Government Take analysis: Progressive, Neutral and Regressive systems.
  • Volume progressive sliding scales: Analysis of scales based on cumulative and daily production: Nigeria, Liberia (analysis)
  • Price progressive sliding scales: Analysis of features which create price progressivity: Malaysia (analysis), Trinidad and Tobago
  • Cost progressive sliding scales: Analysis of features which create cost progressivity: Cote d’ Ivoire, China (analysis)
  • Profit progressive sliding scales – Cost Oil Payout: Ukraine
  • Profit progressive sliding scales – IRR: Angola (analysis), Russia – Sakhalin
  • Profit progressive sliding scales – R-factors: India (analysis), Iraq-Kurdistan.

DAY 2 - MORNING

Production Sharing and Royalties

  • Royalties included in profit oil: Congo-Brazzaville
  • Fixed royalties: Syria (analysis),Russia-Sakhalin, Malaysia, Myanmar
  • Royalties with volume based sliding scales: Vietnam, Equatorial Guinea (analysis)
  • Royalty sliding scales based on other concepts: Pakistan, Guatemala, Nigeria
  • Royalties recoverable or not-recoverable (but deductible) for PSC purposes: Malaysia, Gabon (analysis), Pakistan

Production Sharing and Corporate Income Tax

  • Corporate Income Tax included in profit oil: Egypt, Philippines, Gabon, Yemen
  • Corporate Income Tax is share of contractors share of profit oil: Indonesia (analysis), Angola (analysis)
  • Corporate Income Tax calculated separately after or before the production sharing calculations: China (analysis), Nigeria (analysis)

DAY 2 - AFTERNOON

Production Sharing and Joint Ventures

  • Joint Ventures, Incorporated and Unincorporated. Participation from day 1 through joint operating agreements: Azerbaijan (analysis)
  • Carried Interests through exploration with repayment in cash: Indonesia, Vietnam (analysis)
  • Carried Interest with repayment from production, profit oil or cost oil: Congo-Brazzaville, Gabon (analysis)
  • Special EPSA: Libya (analysis)

Production Sharing and Windfall Profit Features, Resource taxes and Export Duties

  • Windfall Profit Features: Kenya (analysis)
  • Resource Taxes: Timor Leste, Tanzania
  • Export duties: Vietnam, Malaysia

Sharing of Resource Wealth: A comparative analysis of deep water PSCs from 16 countries

  • Government Take analysis
  • Volume progressive and regressive systems
  • Price progressive and regressive systems
  • Cost progressive and regressive systems

DAY 3 - MORNING

World distribution of PSCs

  • Analysis of where PSC exploration and production takes place

Fiscal health: A comparative analysis of design flaws in deep water PSCs from 16 countries

  • Excessive volume progressivity: Marginal Net Present Value analysis: Malaysia (analysis)
  • Excessive cost and profit progressivity: Gold plating and Cost Savings Index analysis: India (analysis), Angola (analysis).
  • Excessive price progressivity: Price Incentive Index analysis: Pakistan (analysis)

Attractiveness to Investors: World-wide rating of 47 different deep water PSCs

  • Internal Rate of Return, Net Present Value, Profit to Investment Ratio, Undiscounted Government Take, Discounted Government Take, Net Present Value per barrel equivalent, Net Cash Flow per barrel equivalent

Frond End Loading vs Back End Loading in PSCs

  • Comparative analysis of time sequence of government take: India (analysis) versus Egypt (analysis)

Sharing of Geological Risk and Ringfencing in PSCs

  • Comparative analysis of impact of PSC structures on geological risk taking during exploration: Pakistan (analysis) versus Egypt (analysis)

DAY 3 - AFTERNOON

PSC Accounting Procedures

  • Cost classification
  • Non recoverable costs
  • Credits against recoverable costs

Detailed discussion of strengths and weaknesses of 10 recent production sharing contracts

  • Detailed discussion of 10 selected production sharing contracts which illustrate the wide variety of options and possibilities and discussion of their strengths and weaknesses

COURSE SOFTWARE

Participants will receive an Excel based student model and input information related to a wide variety of PSCs. The price for this Excel based spreadsheet is included in the course fee. In the course program, countries for which special analysis will be done with the spreadsheet are indicated with “(analysis)”. The spreadsheet and information will enable participants to simulate and do economic analysis on the PSCs from the following 35 countries and jurisdictions:

COURSE PARTICIPANTS AND FEES

REGISTRATION FEE:

2,599 British Pounds

Your fee for the full three days includes documentation, morning coffees, lunches,and refreshments. Each delegate will also receive the PSC fiscal software used during the course to take back to their offices, this provides a “starter-kit” tosolve fiscal issues after completing the course.

Maximum number of course participants: 40

BOOKING:

Book with Van Meurs Corporation.

Phone: + 1 242 324 4438

Fax: + 1 242 324 4439

Email:

Website:

DISCOUNT

Following the Advanced Fiscal Course on Production Sharing Contracts is an:

Advanced Legal Course on Production Sharing Contracts, on April 19-20, 2012 in the same venue in London, UK, with a registration fee of 1,799 British Pounds.

Participants booking for the two courses jointly will be able to book for a discounted price of 3,399 British Pounds.