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Oil and gas fiscal designs and systems

About this course

The fiscal terms and structures of upstream permits and agreements between investors and governments determine whether a specific oil and gas field can be developed on a commercial basis and how costs and profits will be divided over the field’s life cycle.

Comparisons of the economic performance of production sharing contracts (PSCs), tax and royalty, service, risk and joint-venture contracts identify strengths, weaknesses, risks and opportunities associated with specific contracts. The roles played by national oil companies (NOCs), indigenous companies and communities is increasing and issues of fiscal stability are challenging for both international oil companies (IOCs) and governments.

There are many contractual issues, going beyond just the fiscal terms, that must be considered when designing and negotiating upstream agreements. These are identified during the course and reinforced through the use of examples and exercises.

The course involves presentations, exercises and case studies.

Who should attend?

This course is designed for a multi-disciplined audience with diverse commercial, technical, corporate, operations, planning, legal and risk management backgrounds from the oil and gas sector. Course content addresses issues and skills relevant to professionals working with or negotiating upstream petroleum contracts and licences, including: analysts, accountants, asset managers, bankers, contractors, economists, engineers, geologists, government regulators and representatives, financial controllers, insurers, investors, lawyers, national oil company and ministry personnel, negotiators, planners, portfolio managers, project managers, risk analysts, strategists and taxation administrators and advisors.

Day One – Key features of upstream licence agreements
•    Upstream fiscal designs: their objectives and concepts
•    Contrasting host government and international oil company perspectives
•    Concepts of economic rent and why governments seek to optimise it
•    Petroleum legislation and issues it needs to address
•    Review the content of a generic petroleum law
•    Title to resources, legal jurisdiction and offshore complexities
•    Mineral interest agreements: concessions, licences and leases
•    Production sharing contracts (PSCs): origin, rationale and structure
•    Review content of a model production sharing contract
•    Establishing title to resources and reserves
•    Work and financial commitments, guarantees and schedules
•    Contract durations and relinquishment schedules
•    Progressive and regressive taxation mechanisms
•    Spectrum of taxation instruments applied
•    Fiscal stability versus instability and asset appropriation
•    Flexible drivers and sliding scales to adjust fiscal instruments
•    Cost recovery mechanisms: cost oil and gas, uplift and amortisation

Day Two – Establishing meaningful and workable contracts
•    Competitive bidding rounds, ‘Winner’s curse’ versus bidding realities
•    Review of competitive bidding case studies
•    Signature and other bonuses
•    Managing E&P licence agreements: accountability and control issues
•    Purpose of the Joint Operating Agreement (JOA)
•    Review the content of a model JOA
•    Authorising and budgeting for expenditure
•    Joint venture operating and accounting principles
•    Authority for expenditure, cash calls, liftings and billings
•    Procurement and tendering issues
•    Foreign exchange and cost allocation
•    Limits on cost recovery, production allocations and tax allowances
•    Ring fencing of costs and revenues
•    Interface with supplier and service company agreements

Day Three – Managing and financing upstream contracts
•    Comparison of generic fiscal designs from selected countries
•    Local content, indigenous suppliers and community issues
•    Operating and management committees and voting rights
•    Integrating other contracts with upstream licensing terms
•    Farmout agreements: roles of farmor and farmee
•    Review the content of model farmout agreement
•    Unitisation agreements and case studies
•    The regressive nature of royalties and options to make mitigate it
•    Progressive taxes and their impacts on fiscal performance
•    Options for financing field developments and contractual issues
•    Loan interest tax treatments: deductions, allowances and credits
•    Contractual risks and how to address them
•    Clauses specific to gas, condensate and natural gas liquids (NGLs)
•    Oil price caps, posted oil and gas prices and domestic supply obligations

Day Four – Dealing with state involvement and disputes
•    Carried interests, back-in and buy-back concepts
•    Equity participation involving state-owned companies
•    NOC and IOC relationships and joint ventures
•    Rights of assignment, pre-emption and divestment issues
•    Some governments invoke  their rights of pre-emption
•    Planning negotiations
•    Negotiating strategies and tactics to achieve workable terms
•    Team negotiations
•    Cultural issues impacting contract negotiations
•    Sole risk and non-consent options
•    Dispute resolution and arbitration
•    Approval of field developments and other work programme
•    Safety, environment, decommissioning and trailing liability issues
•    Documentation and learning from contractual experience

EI Member £3,100 (£3,720  inc VAT) 
Non-member £3,300 (£3,960 inc VAT)

Contact

For more details on any of the training courses please contact Marjan Azodi in the EI training team on:

T: +44 (0)20 7467 7155

E: mazodi@energyinst.org