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Deepwater exploration, development and production present unique challenges to operators. Safe operations and protecting the environment are primary requirements. Minimizing risks and maximizing recovery are also among their top priorities. With average worldwide rig day rates remaining higher than $300,000 (drillships and semisubmersible rigs), there is no room for unexpected costs resulting from nonproductive time. […]

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At the beginning of this section we discussed the relative components of the various schemes including ownership, the manner in which entitlement to hydrocarbons is given or calculated, the manner in which payment is made, and operational freedom. No one single parameter defines a contract style.  There is a tendency to observe that tax/royalty contracts […]

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The UK offers a concession-style agreement, and the general style is applicable to other countries as diverse as Argentina, Australia, Norway and the United States. UK licenses are for the most part awarded on the basis of competitive work program bids in licensing rounds. However, there is an element of discretion in the award process […]

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Indonesia is the originator of the classic Production Sharing Contract, or PSC. Under this contract foreign oil companies fund all aspects of exploration and exploitation on behalf of Pertamina, the national oil company. In return, companies are entitled to lift hydrocarbons according to a “production sharing” formula. The formula has changed slightly over the years […]

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Iraq Service Contracts In 2008 Iraq embarked on the first of what, to date, has been three rounds of service contract awards to the international petroleum industry. Each of the contracts has been slightly different, but all have followed the same general principle of service contract structure; namely that the IOCs (treated in consortium as […]

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Country Examples The following five examples provide overviews of petroleum regimes in five countries. These are not to be considered definitive interpretations but as overviews designed to show the complexities of different systems. (As an aside, this blog entry will be published July 2nd, 2011. This is my 35th wedding anniversary. I am a lucky […]

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Ring fencing Ring fencing is simply the level at which each fiscal or administrative component is to be calculated or administered. The level can be as low as the field/deployment area or up to the entire contract area; in some cases the entire region or country. While PSC fiscal components of cost oil, profit oil, […]

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Production Sharing Contracts The first production sharing contracts (PSC) were signed in 1967 with Indonesia. The two parties to the PSC are the NOC and the IOCs, referred to as the “Contractor”.  Unlike tax/royalty systems, PSCs (in some countries also known as Production Sharing Agreements (PSA) generally transfer title to the produced hydrocarbons at the […]

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Concessions While many major fields were developed under the concession model, this is generally a historical artifact.  In the first two-thirds of the 20th century it was not uncommon for sovereign nations to grant large concessions to operators. This was in a time of relatively low and nearly constant oil prices and a time when access […]

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Types of International Petroleum Fiscal Regimes I am continuing to defer the petroleum economics section updates based on questions from blog readers. I am now commencing a series on International Petroleum Fiscal Regimes that will go for nine blog entries. In this series I will describe the issues in different oil and gas fiscal regimes […]

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