Economic Aspects of Production Sharing Contracts

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Overview

Overview

We are currently in the midst of one of the deepest downturns in the industry in recent years. Companies have to adjust to the new realities of a lower oil price and the possibly painful cost adjustment that goes with it.

When the oil price was $100/bbl+ probably both sides in the production sharing contract were making good returns and were therefore perhaps not too concerned that the fiscal structure of the PSC was optimal. But things are different now…….

It is essential that companies understand the finer nuances of the PSC fiscal terms to ensure they are structured optimally in this price environment.

What are the implications for cost recovery in this price environment?
Are the fiscal terms structured in a way to ensure my company gains from any cost reduction exercise it undertakes?

What the entitlement reserve bookings looking like for year end?

As an IOC, is now the time to negotiate new terms with the government? How do we do it? As an NOC should I be looking at negotiating a carry to reduce capital exposure?

This course will enable delegates to answer the above questions and many more
It explores the structure and mechanisms of production sharing contracts (PSC’s) and the economic principles that underpin them. Studying the underlying processes and commercial drivers, participants will examine case studies to illustrate the economic structure of these complex agreements. This course brings the theory to life, allowing course attendees to build and interpret their own PSC model based on a real life field development.

Course objectives:

  • Learn about the history, evolution and structure of PSC’s
  • Investigate cost recovery and profit sharing
  • Understand the interaction with royalties
  • Examine fiscal mechanisms and ring fence calculations
  • Identify taxation liability and allowances
  • Construct a production sharing contract spreadsheet model
  • Interpret model outputs to enhance investment decision making
  • Understand petroleum economic fundamentals to aid PSC negotiations and licence round bidding

Methodology

As with all Euromoney Training courses, this programme makes use of case studies and exercises to ensure that you leave the course, ready to apply your new knowledge.

Who should attend this training course?

This three day practical course is an ideal next step from our introductory course on upstream petroleum economics and risk analysis for delegates wishing to develop expertise in PSCs. Delegates should have a reasonable knowledge of Microsoft Excel ™ and bring a laptop loaded with Microsoft Office™ to the course.

Typical course participants are likely to be:

  • Production Sharing Partners
  • Economists working in the industry
  • Lawyers involved in the industry
  • Analysts working in the industry
  • Auditors working in the industry
  • Technical personnel working in the industry
  • Business development and Commercial Managers

Delegates will be provided with electronic copies of all workshop solutions and examples, and a comprehensive hard copy course manual.

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