Economic analysis of the production sharing contract in nigerias deepwater okunola oluwafemi a. Oil producers like nigeria are not just on the verge of a national petroleum industry legal revolution in its. Production sharing contract will be brought into discussion. Production sharing agreement psa is a contract between one or more investors and the government in which rights to prospection, exploration and extraction of mineral resources from a specific area over a specified period of time are determined. The contractor shall a be responsible to the government for the execution of the petroleum operations contemplated hereunder in accordance with the provisions of this. This contract is a production sharing contract, the scope of which is the exploration, appraisal, development and production of hydrocarbons in the contract area and the supply of required infrastructure within and outside of the contract area up to the delivery point, all at the contractors sole risk and expense. Subsequently, it will look at the main features of concessions by analyzing the brazilian regulatory framework for oil activities. A billdeep offshore and inland basin production sharing contract. Model production sharing contract under the petroleum act. Dec, 2019 the president of the federal republic of nigeria recently signed into law the deep offshore and inland basin production sharing contracts amendment act 2019 the amendment act. In the early 1990s, when nigeria sought to increase its petroleum production.
Production sharing contract measures the president today indicated his support of legislation concerning production sharing contracts for offshore and inland basin crude oil and gas extraction. Productionsharing agreements oxford institute for energy. Production sharing contracts production sharing contracts or agreements psc hereafter are ubiquitous in much of asia, africa and the middle east, with only a handful of countries in these regions adopting a royaltytax or concession rt regime or some hybrid. Production sharing agreement a guide or the oi and gas sector ased on eerience rom the asian egion 2012. This contract is a production sharing contract, in accordance with the provisions herein contained. They participate in the petroleum industry in joint ventures with nnpc, as operatorscontractors in the nigerian deep water under production sharing contracts with nnpc. Contract area means the area specified in article 3 hereof and delineated on the map set out in annex a, as modified and reconfigured from time to time in accordance with the stipulations of this contract.
Amendment of the deep offshore and inland basin sharing contract act, cap d3, lfn, 2004. Deep offshore and inland basin production sharing contracts decree. The 2005 hydrocarbons law includes two main instruments. Under these arrangements, the nnpc is the holder of the concession while the ioc is the contractor. How to scrutinise a production sharing agreement a guide or the oi and gas sector ased on eerience rom the asian egion 2012.
The federal military government hereby decrees as follows. This study aims to compare expected returns from exploiting petroleum resources of selected countries nigeria, indonesia. Concept of production sharing contract psc government petronas contractors pda psc entire ownership of nations petroleum resources is vested to petronas. The production sharing contract psc was widely introduced in 1993 to address some of the issues faced by the joint operating agreement joa and also to. The chargeable tax on petroleum operations in the contract area under the production sharing contracts shall be split between the corporation or the holder and the contractor in the operations. At the end, this dissertation will compare both regimes from a contractual perspective in order to answer whether it is really necessary to adopt a new regulatory framework based on a production sharing contract for the subsalt area in brazil. This decree has been amended by deep offshore and inland basin production sharing contracts amendment decree no 26 of 1999. The case for publishing petroleum contracts in nigeria natural. Show full abstract makes the contracts more flexible, allows to adapt production sharing agreements to any type of fields, to transfer the main economic elements of the contract from the sphere. The psc act which grants certain fiscal incentives to exploration and production companies operating in the deep offshore and inland basin area of nigeria allows the fgn to adjust the revenue sharing formula in the psc whenever the price of. These multinationals account for about 97% of nigerias oil reserves and production. Deep offshore and inland basin production sharing contracts. The first and the most important feature of a psc is that the title of the oil and gas remains with the state and not the ioc. Several oil producing countries, particularly the developing ones have adopted it as a contract for the exploration and development of their oil and gas resources.
Petronas has exclusive rights to exploit nations petroleum resources. Production sharing contract in nigeria has some distinct features from other forms of contractual arrangements in the upstream petroleum subsector. Petronas, as a custodian, manages the petroleum resources of the nation. However, in contrast to production sharing contracts, in a service contract the iocs. The deep offshore and inland basin production sharing contract act, cap d3, lfn 2004 in this act referred to as the principal act is amended as set out in this act. A comparative analysis of production sharing contracts of. In our previous three budgets, we set the stage for our. This jva in nigeria was associated with poor funding, due to the imbalance in the financial capacity of the different joint venture partners, especially the. Exploration and production agreements provided by the 1986 hydrocarbons law includes joint ventures, partnerships, production sharing, and risk service contracts. National assembly passes oil production sharing contract bill.
Nigeria, indonesia, malaysia and equatorial guinea. Renegotiation of nigerias production sharing contracts. Production sharing contract psc is an arrangement used in the. Upstream production tends to be subject to more complex fiscal terms bonuses, royalty, production sharing, additional profits taxes corporate income tax usually payable or replaced with a special petroleum profit tax oil and gas production treated separately or together for tax purposes. Amendment of nigerias production sharing contract regime. Production sharing contract in nigeria overview legal. The amendment act modified the erstwhile deep offshore and inland basin production sharing contracts decree of 1999 the principal legislation or the decree. A comparative analysis of production sharing contracts of selected developing countries.
In a service contract, similar to a production sharing agreement, the closest legal framework, the international oil company brings the technology and makes the upfront capital investment. Pricewaterhousecoopers limited a nigerian limited liability company. Revenue sharing arrangements in production sharing agreements illustrate this point vividly. The deep offshore and inland basin production sharing. Nigeria with several 100 percent cost recovery contracts. Production sharing contract psc is an arrangement used in the upstream sector for the exploration and development of petroleum resources. Production sharing contracts psc have offered exploration and production companies and oil producing countries such as nigeria a unique arrangement for the development of petroleum resources, particularly within the deepwater offshore area. Together with partners in lower and middleincome countries, iied has been working to strengthen local and national capacity to examine contractual issues with a sustainable development lens. Economic analysis of the production sharing contract in nigerias. The president recently assented to the deep offshore and inland basin production sharing contract amendment bill 2019.
A legal analysis of production sharing contract arrangements. Model psc under the petroleum act page 2 production sharing contract dated this agreement is a production sharing contract made under the petroleum act between the, acting on behalf of the democratic republic of timorleste the ministry. Production sharing contract in the nigerian oil and gas sector hg. Sharing contract psc provisions that permit royalty payments according to the. The main features of a good psc includes the following. The fundamental distinction between psc and rt regimes lies in the. Production sharing contract in the nigerian oil and gas sector nigeria had in the past years engaged in joint venture agreement jva for the exploration of her petroleum resources. Production sharing contract in the nigerian oil and gas. Production sharing contract measures kpmg united states. The production sharing contract psc was widely introduced in 1993 to address some of the issues faced by the joint operating agreement joa and also to provide a suitable agreement structure for encouraging foreign investment in offshore acreage. It is an agreement born in response to the funding problem faced by the old jv arrangement as well as the desire of the nigerian government to open up the sector for more foreign participation. Nigeria has adopted it for the exploration and development of the offshore and inland basin. The production sharing contract psc the psc is today the toast of nigerian petroleum industry. Fiscal regimes, petroleum contracts, and natural gas.
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