Comparative Analysis of Nigeria and Malaysia’s Production Sharing Contract (PSC) (original) (raw)
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Nigeria Deep Offshore Inland Basin Production Sharing Contract Acts: Evaluating Contractor’s Take
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Value-focused thinking is often designed to focus decisions on the essential activities that must occur prior to solving a decision problem. This approach was adopted by the Nigerian government in the fiscal legislation for Deep Offshore and Inland Basin Production Sharing Contract (DOIBPSC) Act enacted in 1999 and the subsequent amendment of 2020 version. One major item of interest in the amended Act is the introduction of royalty by price to enable the government to capture windfall in high oil price spike. This study evaluates the new fiscal regime to ascertain its attractiveness and impact on contractor take. Four features (royalty, cost recovery, tax oil, and profit oil) of the PSC contract terms were used to determine contractor and government takes from the transactions. This study adopted the full range of oil prices captured in the amended DOIBPSC Act in addition to the current market price of oil estimation. Six ranges of oil price ($20/bbl, $ 0/bbl, 0/bbl,0/bbl, 0/bbl,0/bbl, $20/bb...
PETROLEUM CONTRACT TAKING INTO CONSIDERATION NIGERIAN COMMUNITIES
Nigeria is a country whose economy now depends or revolves around its petroleum resources. These natural endowments which had placed its name in a conspicuous place of pride among the world community have been the major sources its foreign exchange earning and the engine room that drives its train of development. The abundance of such natural resources has been the ground for conflicts in its Niger Delta region . These conflicts have resulted to a lot of insecurity in this region and a gradual crippling of economic activities in the oil industry in this region as well as other economic activities. A passing look at the reasons for these agitations usually will raise questions concerning the basis for the participation of the oil companies in oil exploration in Nigeria. While the agitation raise issues which are germane to the continued exploration of petroleum in that region this work will be concerned with the contractual basis of petroleum exploration in Nigeria; and how these contracts affect the various Nigerian communities. The relationship between the Nigerian communities and the entities engaged in oil exploration is a symbiotic one, it is granted as a result that conflicts are usually anticipated or are bound to occur; it is also envisaged that such conflicts can be provided for by contract where the parties are free to contract. The current contracts applicable in Nigeria will be analyzed with a view to ascertain if the adequately address the grey areas which has been the bases of friction and persistent conflict. It may also be that the enabling laws regulating the oil and gas industry in Nigeria contributes to the re-occurrence of conflicts or more appropriately empowers a party while disempowering the other party. To this ends an in-depth look on the enabling laws as it addresses such issues/concepts as “Ownership” in the oil and gas industry in Nigeria. Nigeria operates a Federal constitution which established three tiers of Government at various levels. The roles of these tiers of Government in petroleum contracts will be analyzed while useful opinions and suggestion will be proffered. This paper examine, analyse and compare different types of Petroleum Contracts in Nigeria in relation to how they affect the interest of the host nigerian communities. it also seek to address the origin of the short change of the host communities, either form the Petroleum Legislations in Nigeria or the Contracts. The Paper is divided into four chapters, of Historical Backgrounds, Petroleum Contracts, The Niger Delta as a case study and Proposals and Recommendations
SPE Economics & Management, 2015
Summary The petroleum fiscal system (PFS) is a key determinant of investment decision in the exploration and production (E&P) of oil and gas. It describes the relationship among the host governments, the investors, and community stakeholders with respect to how costs are recovered and profits are shared equitably. A comparative economics of the performance of fiscal regimes becomes imperative because it affects stakeholders in making informed decisions on the oil-and-gas business investments worldwide. This paper evaluates the structure, conduct, and performance of production-sharing contracts in Angola, Equatorial Guinea, Gabon, and Nigeria in the Gulf of Guinea (GOG). These countries hold approximately 90% of the GOG proved reserves. Economic analysis of the same E&P phases with hypothetical field and cost data under different PFSs are presented and discussed for comparative PFS performance evaluations. Comparison of the effects of front-loaded government take, profit oil split, a...
Exploration and production of hydrocarbons in different regions is controlled by regulatory system which is classified in to concessionary and contractual system. The contractual system is further divided in to production sharing and service contracts. Generally, any fiscal system is designed to facilitate maximum benefit to the host government keeping in mind risk taken by the operator in discovering and developing the resources to provide them profitability in oil price dynamics. Main objective of present study is to take an overview of the fiscal systems in operation all over the globe, their comparison based on salient points focussing on advantages and disadvantages of each and finally their quantitative assessment carried out on four geographic regions, namely India, Brazil, Nigeria and Norway. These examples are taken specifically considering their resources, regularity framework, and efficiency. It is seen that the concessionary system is adopted by countries with higher potential for production and thus examples were taken from areas where working condition is difficult and environment is harsh. The production sharing contract is a reasonably common fiscal system known for intricacy in the sharing of production and tax structure. Quantitative analysis of these systems is attempted here for India, Brazil, Nigeria and Norway. The assessment was based on parameters given in the fiscal terms of selected countries with uniform production and variable cost estimation. Four different oil price scenarios including one scenario based on cyclicity of oil price were considered for comparison. NPV for operators and proportional share with government were calculated (three different scenario) and possible reasons for the variation are discussed.
International Journal of Energy Economics and Policy, 2020
This article explains the current significant change in the business activities of the Oil and Gas Industry which Indonesia is experiencing. Production sharing contract (PSC) has been one of the mechanisms to flourish Indonesia's Oil and Gas Industry. It creates good cooperation and understanding between the state and the contractors. However, cost recovery PSC, although long-established, has been generating a lot of problems. These problems were mounting up to the point where changing the financing scheme of the PSC seemed to be more feasible rather than creating policies that would stop the contractors from asking for reimbursement. This article will explore whether the government's shift from cost recovery PSC to gross split PSC is a necessity or a premature move. The result of this research shows that the change is both a necessity and a premature move. On one hand, it is a necessity because the deterioration of the state revenue is worrying. On the other hand, it is a premature move because concrete regulations do not follow this shift, and it discourages the contractors.
2021
This study aims to: 1) analyze empirically and test the effect of cost recovery in the Production Sharing Contract (Oil and Gas Production Sharing). 2) empirically analyze and test the effect of cost recovery in the upstream Oil and Gas Industry on State Revenues. The unit of analysis of this research is the upstream oil and gas industry managed by the Indonesian government with a Production Sharing Contract system with 44 companies or contract operator cooperatives. The population includes those who work as operators of cooperation contract contractors and SKK MIGAS with 62 manager levels, 51 professionals and 18 university researchers. And the researchers also used secondary data in SKK MIGAS in the 1984-20019 period. This research uses a qualitative approach, and the analysis of the data used is descriptive analysis, because the data analysis is done not to accept or reject hypotheses, but in the form of descriptions of observed symptoms, which are not always in the form of numbe...
Review of Nigeria’s Petroleum Industry Bill (PIB)
European Journal of Engineering Research and Science, 2020
Since the discovery of Crude Oil in 1875, the Petroleum Industry has gradually improved in value due to the series of valuable products gotten from crude oil. The significant impact of crude oil as a source of energy has made exportation and importation of this mineral a lucrative business around the world, having turned to be the major source of revenue for most producing countries. Crude oil has contributed to about 80% of Nigerian Government revenue and foreign exchange since 1958, making it a key player in the economic plan of the country. Its importance in Nigeria has made the Legislature introduce lots of policies and laws governing the Oil and Gas business in the country. However, Nigerians with different views over the years have clamored for an improvement of these policies to enable the benefits of Her resources fairly get to the grassroots, producing communities and states while improving foreign investment policies in the country. These demands led to the introduction of...
POLITICS OF OIL REVENUE SHARING FORMULA IN NIGERIA: ISSUES AND CHALLENGES
Abstra International Journal of Management and Business, 2021
This paper is entitled the politics of oil revenue sharing formula in Nigeria: issues and challenges examine the existing revenue sharing formula in Nigeria and the position of the Niger Delta states. It made use of secondary and primary data mostly from the Nigeria National Petroleum Corporation (NNPC). The paper found out that existing oil revenue sharing formula is unacceptable to the Niger Delta states hence the continuous agitations for resource control or increase in allocation. Based on the findings, the paper recommended Production-Sharing Agreements (PSAs) formula as a better method. The formula is among the most common types of contractual arrangements for petroleum exploration and development. Under a PSA, the state (host) as owner of mineral resources, engages a foreign oil company (FOC) as a contractor to provide technical and financial services for exploration and development operations. The challenges of development in the case of Niger-Delta states are not a function of non-availability of funds, rather they have to do with the non-transparent and efficient management of the available resources. Full resource control without resource management is an effort in futility. This implies that substantial development revenue exists but it is misappropriated. Therefore, what is needed and badly lacking in the Niger-Delta accountability.
Compatible Concept of Contract Law with Oil and Gas Production Sharing Contract in Indonesia
IOSR Journal Of Humanities And Social Science (IOSR-JHSS), DOI : 10.9790/0837-2409031021 Series. 3 (September. 2019) 10-21 e-ISSN: 2279-0837, p-ISSN: 2279-0845. www.iosrjournals.org, 2019
The practice of Gross Split and Cost Recovery contracts for oil and gas production sharing results in inconsistency in the concept of oil and gas production sharing contract. This inconsistency will contribute to inability to reach the natural resource management as mandated by the fourth paragraph of the preamble of the 1945 Constitution, related to Article 33, point (3) of the 1945 Constitution, related to Article 1 and 2 of the Agrarian Law, related to Article 4 of oil and gas law, related to Article 25 in point (1) of Government Regulation No 55 of 2009. The regulations for oil and gas production sharing contract which is public and private have not been integrated into one guideline, and thus private, and public laws are often used as the guideline. Based on the comparison of the two types of oil and gas production sharing contracts, Gross Split contract might degrade the principle of ownership by the state in managing oil and gas compared to Cost Recovery contract. This disadvantage is evident from the lack of government role in supervising and monitoring the management of oil and gas, and this lacking government role can reduce the chain effect of the national economy. Key words : contract, oil and gas production sharing contract, Gross Split and Cost Recovery contracts
This research paper analyses the existing laws and regulatory frameworks in the oil and gas sector with a particular focus on Uganda's oil and gas industry. This research analyses the background of the country's oil and gas industry with specific reference to the adaptation of the Production sharing agreement (PSA) model in as far as oil and gas contracts are concerned. The research commences by undertaking an in depth analysis of the basic laws, regulatory, policy and institutional frameworks concerning the management and administration of the oil and gas sector. The research then focuses on the legal framework on the PSA model pertaining to the ownership of the resources, the issuing of licenses and concessions, in as well as efforts undertaken to safeguard the effects of signing PSAs on aspects of environmental protection. This research is also designed to critically analyse the weaknesses and strengths of the current legal regime as well as identifying the gaps in laws relating to the applicability of PSAs and measures being taken to tackle such gaps in the regulatory framework of the country and exploring the ways in which aspects of transparency and effective management of the oil and gas industry are concerned. The research paper also discusses if other factors such as the different stakeholders like media houses, civil societies, Non-governmental organisations and International Oil and gas companies have a had a role to play in influencing the PSA model as the most appropriate choice of the Ugandan oil and gas contracts . Conclusively the research puts forward recommendations regarding how the gaps in the legal framework on the PSA model should integrate or regulate the identifiable influences of other stakeholders in Uganda‟s oil and gas industry.