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Evolution of Production Sharing Contracts in Oil Industry: Ensuring Fair Returns

Explore the evolution of Production Sharing Contracts (PSC) in the oil industry, emphasizing the importance of a firm commitment backed by a bank guarantee, no front-end costs, royalty distribution, and more. Understand the impact of various clauses like export tax, excess profit, and research cess. Delve into PSC durations from 1976 to 1985, highlighting the total durations for deepwater "R/C," exploration, gas holding, development, and production phases. Analyze how changes in PSC terms have influenced contractors' take, ultimately leading to a fair return on investment.

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Evolution of Production Sharing Contracts in Oil Industry: Ensuring Fair Returns

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  1. PSC Contracts • Firm commitment should be back-up by bank guarantee (BG) • No Signature/production bonus, equipment and training fund (no front end costs) • 10% Royalty will go to Govt and States (Pemda) • Export tax - 10% of Profit Oil • Excess Profit - 70% of profit price in excess of $25/bbls • Research Cess - 0.5% of revenue • Min 15% Carigali participation (pay cash call) • Interests are not cost recoverable • Cost/revenue audited by Petronas Internal Audit only

  2. Different PSC duration for different environment to ensure fair return on investment PSC Duration (In Years) 1976 1985 DEEPWATER "R/C" Total Duration 24 38 24 24 Exploration 3+2 Gas Holding - 5 5 Gas Holding - 5 7 Gas Holding - 5 5 Gas Holding - 5 Development 2+2 4 6 4 Production 15 15 25 15

  3. Evolution of PSC terms has led to better Contractors’ take EVOLUTION OF PSC - COMPARISON OF CONTRACTORS TAKE

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