Académique Documents
Professionnel Documents
Culture Documents
Benny Lubiantara
December, 2011
Disclaimer:
The views expressed in this presentation represent my personal views; This presentation contain references to materials from third parties whose copy right must be acknowledged by citing the sources of reference.
Presentation Outline
Theoretical Background Update on Selected Countries Observations and Trends Possible Applications (in Indonesia)
Theoretical Background
Simplified Flow-charts
Royalty Tax
Gross Production Royalty Costs Deductions Royalty Cost Oil (Cost Recovery) Profit Oil (P/O) Income Tax Companys Production Cost Oil (Cost Recovery)
PSC
Gross Production
Service Contract
Gross Production
Ctrs Fee
Ctrs Tax
NOC
IOCs
Authors illustration - adopted from various sources: Al-Kasim (2008), Thurber, M.C et al (2011), Tordo, et al, (2011)
NOC
IOCs
Authors illustration - adopted from various sources: Al-Kasim (2008), Thurber, M.C et al (2011), Tordo, et al, (2011)
NOC
IOCs
IOCs
NOC
Saudi Arabia
Malaysia Kazakhstan
Russia Iran
Venezuela Angola
10
Authors illustration - adopted from various sources: Al-Kasim (2008), Thurber, M.C et al (2011), Tordo, et al, (2011)
Private companies
Private companies
Australia
Authors illustration - adopted from various sources: Al-Kasim (2008), Thurber, M.C et al (2011), Tordo, et al, (2011)
11
12
Algeria
2005 : Law 05-07 & its Amendments
Providing a clear simple and competitive fiscal regime and contractual conditions Separating the operations of the state from Sonatrach Establishing two independent regulatory Agencies (ALNAFT & ARH) Establishing transparency in contract awards The windfall profit tax
State/ MEM State/ MEM
Sonatrach
ALNAFT
Regulatory Authority
Foreign companies
Sonatrach
Company X
Company Y
14
Source: Djermane, O, Recent Changes in the Algerian Hydrocarbon Law, Vienna, April 2008
Algeria
The Windfall Profit Tax:
Applies to partnership contracts under 1986 law , on exceptional profits made by foreign partner when monthly arithmetic mean of Brent Price > 30 $/barrel, The rate is between 5% and 50% based on the type of contract and the daily production.
Brazil
Royalty/Tax Model:
Typical T&C: Royalty: 5 - 10%, Special Participation Fee (SPF) = 0 40%, Income Tax = 30%,
Petrobras:
Royalty/Tax
Production Sharing Agreement (PSA) ? - SOC, 100 % Gov. Share (Pre_salt Petroleum SA/PPSA)
16
Iran
Buyback Contract
The IOC, acting essentially as a contractor, provides all the capital required to finance a specific development or rehabilitation project. The contractor is paid back capital expenditure and associated financing costs plus an agreed profit over a specified period, usually 3-6 years from the date of the first production, from up to 60-65% of the fields output. The profit or ROR on the IOCs investment varies from project to project, is normally between 15 and 20%. NIOC takes over the operation of the field upon the commencement of production and is responsible for the operating costs. The contractor holds no equity in the field.
Source: Otman, W.A, The Iranian Petroleum Contracts: Past, Present and Future Perspectives , OGEL, VOL 5, April 2007
17
Iran
Production
Sale of Oil/Condensate by NIOC
- Up to 60 - 65% - Equal Installment During Recovery Years - Up to Maximum X% ROR - Grossed up to Compensate Tax
Adopted from : Ebrahimi, S.N, An Overview on Regulatory, Fiscal and Contractual Aspects of NIOCs Buy-Back Contract, Vienna, April 2008 18
Iraq
Technical Service Contract (TSC)
19
20
Zubai r
2.00
1,200,000
182,775
201,000
100
200
1.90
2,325,000
244,000
268,000
100
2500
2.30
450,000
96,000
n.a.
n.a.
1.15
1,800,000
120,000
100
250
1.39
1,800,000
175,000
150
300
Hal faya
1.40
535,000
70,000
150
200
Garraf
1.49
230,000
35,000
100
150
Badra
5.50
170,000
15,000
100
100
10 11
5.00 6.00
120,000 110,000
30,000 20,000
100 100
150 100
Adopted from: Arab Oil and Gas, Vol XXXIX No 929, 1 June 2010
21
Nigeria
Nigerian Fiscal Terms
LEGAL FRAMEWORK
Concessionary System
Royalty/Tax system. Operator owns part Interest or all of license/Lease
Contractual System
Operator is contractor to the License/Lease holder (NNPC).
Multinationals in JVs
55 - 60% NNPC Equity interest Governed by the MOU and the JOA Multinational operators have minority interests ~95% of Nigeria oil production
Indigenous Producers
60% or more Equity held by Indigenous company 40% or less Interest held by technical partners who, in some cases, carry Indigenous Co. s cost and recover from production NNPC - 50% back - in to Ind. Prod Equity ~5% of Nigeria oil production
Royalty: 16.67% - 20% Tax Rate: 65.75/85% Capital Recovery: 5 years ITA: 5 515% ITA*): 5 - 15% 5 MOU applies
Royalty: 16.67% - 20% Tax Rate: 65.75/85% Capital Recovery: 5 years ITA: 5 -15% MOU does not apply
Contractor :
Royalty Tax ITA
CITA
Shallow Water
For W.D. <200m Sliding royalty Tax Rate:
Deepwater (WD>200M)
Sliding royalty rate based on water depth Lower tax rate - 50%/Flat ITC rate - 50% for PSC signed 1993, Post 1993 ITA Sliding profit oil share to contractor based on cum production MOU does not apply
Leaseholder - PPTA
16.67 - 20% 65.75/85% 5 - 15%
65.75/85%
ITA : 5 - 15%
MOU applies
Source: Muhammad, Uthman, The Nigerian Oil Industry Fiscal Terms, Vienna, April 2008
22
Nigeria
CONCESSIONARY SYSTEM
EXAMPLE OF A JV CONCESSIONARY SYSTEM- GOVT/COY
NNPC
60%
COY
40%
(NON - OPERATOR)
(OPERATOR)
JV
Annual Budget Allocation 60% GOVT. Revenue Opex & Capex
PRODUCTION
FEDERATION ACCOUNT
The overall production from JVs account for approximately 90% - 95% of Nigerias crude oil production, with Shell produces nearly 50% . Source: Muhammad, Uthman, The Nigerian Oil Industry Fiscal Terms, Vienna, April 2008 23
Venezuela
Principal Actor(s) Historical Overview
1910 1975, Ministry (MENPET) 1976 1998, NOC (PDVSA) 1999 Present, Ministry (MENPET) Minimum effective Royalty Rate increased to: 30% for PDVSA (new Hydrocarbon Law, 2002) 16.67% for existing contracts with private parties (2004) 33.33% for everybody since 2006 Income Tax Rate increased to 50% (2007) Fiscal Floor: Royalty + Income Tax never less than 50% of Gross Revenues. Export Tax about to be created
PDVSA is required by law to be the majority shareholder in all joint ventures (2002) In Practice: minimum of 60% All existing OSA and Association Agreements were invited to migrate to the new law (2005/7)
Source: Mommer, B, Venezuela Fiscal Regime, Vienna, April 2008 24
Source: Runi M. Hansen, The Arctic Comparative Analysis of the Fiscal Regimes, Presented during the 22nd Petroleum Taxation Conference, Oslo, 2 3 November 2011
25
Source: Gaute Erichsen, Petroleum Activities in the Artic Whats up at the NCS, Presented during the 22nd Petroleum Taxation Conference, Oslo, 2 3 November 2011 26
Source: Runi M. Hansen, The Arctic Comparative Analysis of the Fiscal Regimes, Presented during the 22nd Petroleum Taxation Conference, Oslo, 2 3 November 2011
27
28
Yearly average
120
Historical Perspective
100
Contract Renegotiation
80
40
Growing Intl NOCs Inc. Participation & Nationalization OPEC 1973 Oil CrisisPSC -2 - New Blocks offered - Attractive T&C
20
Old Concession
PSC -1
0
PSC -3
Incentive (IP) CR Issues
Link:NOC
29
30
Re-negotiation?
Kazakhstan
Bolivia
18% - 82%
Giant Gas Fields, - Royalty = 18% 82% - 18% - Direct Tax on HC = 32% - State Participation = 32%
Venezuela
Operating Service Agreement - Minimum Royalty Rate = 33.3% - Income Tax = 50% - Fiscal Floor: Royalty + Income Tax never less than 50% of Gross Revenue
Authors illustration, compiled from selected sources: Johnston (2006), Kahale III (2010), Mommer (2008).
31
Canada, Alberta (Concession, Royalty rates increased, 2007) Vietnam (PSC, Export duty rates increased, 2008) Bolivia (Concession, Contract overhauled, 2005 2007) Kazakhstan (PSC, Law passed to allow retroactive changes to PSC, 2008)
Source: Cameron & Kellas, Contract and Fiscal Stability, Rhetoric and Reality, September 2008 *) Latin, Promises must be kept **) Latin, At this point of affairs; in these circumstances. Contract will no longer be binding as soon as the state of facts and conditions upon 32 which they were based changes to a substantial degree.
> Link
Is the there any relationship between upstream costs and type of contract?
Adopted from: Attar & Alomair, Evaluation of Upstream Petroleum Agreements and E & P Costs, OPEC Review, December 2005
34
Profitability Based ?
More advanced & complicated terms and conditions (commercially). Borrow elements from other systems.
The involvement of NOC & Local companies.
35
Service Contract
Iran (Buy back) Iraq (Technical Service Assistance) Venezuela (Service Contract)
37
$/bbl
38
Yearly average
120
What Next ?
Contract Renegotiation
Access to Reserves (Link) Major IOCs are forced to enter Service Contract More focus on EOR and Unconventional Oil and Gas Oil Sand, Heavy oil, Shale Oil/Gas, GTL, Ultra DW, Arctic Partnership NOC with IOC, NOC with NOC and NOC with Oil Services Companies
100
80
40
Growing Intl NOCs Inc. Participation & Nationalization OPEC 1973 Oil CrisisPSC -2 - New Blocks offered - Attractive T&C
20
Old Concession
PSC -1
0
PSC -3
Incentive (IP) CR Issues
- One size fits all model does not exist! - The Need to have Flexible T & C
39
40
41
42
Contractors Perspective: 55% : 45% 60% : 40% PSC - 85% : 15% 65% : 35%
IRR Contractor
MARR
Project Profit
Possible Implications:
Direct Sharing Model (DSM), X % : Y % (ex: 60% : 40%) Contractors Profit = 40% x GR - Costs
Less incentive to make capital investment than PSC (from the contractors time value of money perspective), since it implies that only 40% Access to Gross Revenue (AGR), compare to PSC with 80% - 85% AGR. Due to the natural production decline, the easiest way to maintain profit is to lower the costs (i.e. no more investment) Consequently: higher decline rate (faster production decline) is expected it also means, lower production, lower GR, and finally lower share of governments (X%), compare to PSC.
Multiple Splits
DSM - Sliding Scale ROR
90%
Government Take
85%
80%
75%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
45
46
Profitability
Profitability
47
Profitability
Profitability
48
Trade-off between front-end loaded features (bonus, export duty, royalty, cost recovery ceiling, etc.) and back-end loaded features (Profit Split, Income Tax, Supplementary Tax, etc.)
49
Licensing Exploration
Marginal Fields/Projects
Existing Contracts
Extension Contracts?
Abandonment
Win-Win (?): Improve profitability of marginal projects Capture a large share of excess profit
50
EOR Projects
Marginal Fields/Projects
Production
(Optimization, EOR)
Existing Contracts
Tax or POS vs. State Participation (Link)
Extension Contracts?
NOC, Local Co, Direct Gov. Participation
Abandonment
Lowering asymetric information between Gov and IOC (Norwegian Model) Cost recovery issue will be minimized
Higher NOC (up to 100%) Participation depending upon the risk profiles
Higher NOC Share Less issue on commercial Terms and Conditions More Issue on the ability of NOC to finance the current and upcoming E & P projects
51
Terima Kasih
52
53
Source: Center for Energy Economics (CEE), Commercial Frameworks for National Oil Companies, Working Paper, Revised March 2007
54
55
Profit Oil Linked to: Production (daily or cummulative) Price (price caps or base prices) Revenue (price and production) Cost Recovery Simple Indicators (fixed share, location, etc) Rate of Return
Source: Palmer, K and McPherson, C.P, New Approaches for Profit Sharing in Developing Countries, Oil and Gas Journal, 1984
56
PSC
Gross Production
Service Contract
Gross Production
Ctrs Fee
Ctrs Tax
57
58
59
Government Take
Government Take
Government Take
60
50%
50%
Adopted from : Barrows, Malaysian R/C PSC Model Contract, 2006 Adopted from: Amr Rezk, Economic Modeling for Upstream Petroleum Projects, 2006
61
41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80
Uzbekistan India Ethiopia Syria Gabon Ireland Egypt UAE - Dubai Indonesia Thailand Ecuador Colombia Cameroon Netherlands Tunisia Pakistan Malaysia/Thailand JDA Yemen Italy Timor Sea JPDA Philippines Sudan Morocco Bulgaria Poland Bangladesh Romania New Zealand Mongolia Georgia Kenya Cote d'Ivoire Chile Argentina Germany Greenland Slovakia Cuba Turkey Hungary
*)IHS Energy notes: Exploration performance statistics for the US and Canada are not directly comparable to those of the rest of the world because IHS does not have a comparable individual field database for these countries
62
Ranking Based on: Resources Added (mmboe) divided by New Field Wildcats (NFW)
Source: PEPS, IHS Energy*) 2010 Data
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
*)IHS Energy notes: Exploration performance statistics for the US and Canada are not directly comparable to those of the rest of the world because IHS does not have a comparable individual field database for these countries
63