Chế độ tài chính Hợp đồng dầu khí cơ bản (Petroleum fiscal regimes)

Petroleum Fiscal Regimes
Basic Concepts
Dr. Alfred Kjemperud

Opening Statements
• The fiscal arrangement is the
Government’s most important tool for
managing petroleum resources
• It is mandatory for all managers and
technical personnel in the Government
and industry to understand the basics
of fiscal arrangements

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

2

1


Government Options
• Value of National Resources Determining Factors
The resource base
The market – oil price
Terms and regulations

Dr. Alfred Kjemperud

3

CCOP, Pattaya, September 2003

Income

PDO

Contract signing

Activities and cash flow

Government

Time

Costs
Pre-license

Dr. Alfred Kjemperud

Exploration

Development

Production

CCOP, Pattaya, September 2003

Production
Rehab.

Abandonment

4

2


General Objective

The objective of petroleum
resource management is:
To maximise the value
of the petroleum resource

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

5

Company objective
To attain maximum net
present value of the
petroleum resources
Build equity

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

6

3


Government Objectives
• Provide a fair return to the
state and the industry
• Avoid undue speculation
• Limit undue administration
• Provide flexibility
• Create healthy competition
• Create a market efficiency

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

7

The role of the authorities
Definition of policy
Setting of terms
Promotion
Licensing
Monitoring and supervision
Adjustment of terms as required
Managing the impact

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

8

4


Petroleum Fiscal Regimes
• Covers :

Legislative issues
Tax issues
Contractual issues

• There are more fiscal systems
in the world than there are
countries due to:
Negotiation of Terms
Numerous vintages

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

9

Legal/Contractual Framework
The Constitution

The fundation which is the basis for all other regulations
The Law
E.g. tax law
Petroleum Law and Legislation
Not all countries have a separate petroleum law. If that is the
case the contract has to cover all aspects
Production sharing Contract
Concessionary agreement in countries using that system
Joint Operating Agreements
Between partners in a field (can also be the state company)

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

10

5


Economic Rent
• The Classic Definition by
Economists

The produce of the earth derives
from labour and capital
The produce is divided between:
Labourers
(Wages)
Owners of Capital (Profit)

Owners of Land (Rent)

Rent = Value - Cost

Dr. Alfred Kjemperud

11

CCOP, Pattaya, September 2003

Resource Rent

Allocation of revenues from Production
•Bonuses
•Royalties
•Prod. Sharing
•Taxes
•Gov. Participation

After Johnston (1995)

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

12

6

Regressive - Progressive
Cost recovery phases

ov
ery

ry

st
dis
c

ov
e
ed
isc

Po

Pr

Government Risk

Before cost recovery

Royalties

Bonuses

Profit Tax

Production Sharing

Regressive

Progressive

The non profit based government takes (bonus and royalties) are regressive i.e. the lower
profitability the higher effective tax

Dr. Alfred Kjemperud

13

CCOP, Pattaya, September 2003

Regressive system
100 %

Regressive

Progressive

Individual taxes

80 %

85 %

Cummulative taxation

60 %

40 %

20 %

Ap
pl
ic
at
io
n
Si
fe
gn
e
at
ur
e
bo
D
nu
is
co
s
ve
Pr
r
y

od
b
on
uc
t io
us
n
fe
e/
R
Pr
oy
od
al
uc
ty
t io
n
Sh
ar
in
g
In
Sp
co
m
ec
e
ia
Ta

lP
x
et
ro
le
um
R
Ta
ep
x
at
ria
tio
n
Ta
x

0%

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

14

7


Progressive system
100 %

Regressive

Progressive

Individual taxes

80 %

85 %

Cummulative taxation

60 %

40 %

20 %

Ap
pl
ic
at
io
n
Si
fe
gn
e
at

ur
e
bo
D
nu
is
co
s
ve
Pr
r
y
od
bo
uc
nu
t io
s
n
fe
e/
R
Pr
o
od
ya
lty
uc
t io
n

Sh
ar
in
g
In
Sp
co
m
ec
e
ia
Ta
lP
x
et
ro
le
um
R
Ta
ep
x
at
ria
tio
n
Ta
x

0%

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

15

Rent vs. Risk
• The Profit Margin for the Oil
Companies must be large
enough to accommodate
failures
 Nine out of Ten exploration possibilities
are unsuccessful

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

16

8


Risk- & Non Risk-Takers
• Fiscal Terms must account
for the large Risk in the Oil
Business
Oil Companies are High Risk Takers
Companies can reduce risk by

diversification
Governments are Low Risk Takers
Governments can reduce risk by
introducing a Regressive tax system
(Bonuses and Royalties)

Dr. Alfred Kjemperud

17

CCOP, Pattaya, September 2003

Global Exploration Market

Government Take

High
Low interest from
Oil Companies
Low potential for any
Government take

dF
e
z
i
tim
p
O

i

s
erm
T
l
sc a

Low

Poor

Dr. Alfred Kjemperud

High interest from
Oil Companies
Potential for higher
Government take

Geological Promise

CCOP, Pattaya, September 2003

Good

18

9

Value of Discovery after Tax
Illustrated as Field Size

Necessary Field Size to match low est
tax regime (Ireland)
Reference Field Size (25 MMBBL)

160
144
140
117
120

MMBBL

104

104

99

94
100
75

80

63
60
46

49

45

40

40
25
20

An
go
C
am la
er
oo
n
C
hi
na
G
ab
on
In
di
In
do a
ne
sia

Ire
la
nd
M
al
ay
si
a
N
ig
er
ia
N
or
w
Ph
ay
ilip
pi
ne
s
Vi
et
na
Ba
m
ng
la
de
sh

0

A 25 million bbl field in Ireland gives the same profit after tax for the oil company as a 144 million bbl field in Indonesia

The Importance of Fiscal Regimes
Dr. Alfred Kjemperud

19

CCOP, Pattaya, September 2003

UK Tax Reform
45

350

Tax revenue relative to Total revenue (%)
Absolute tax revenue (MM£)
Oil Price (£/ton)
Production (MM tons o.e.)

40

35

300

250

%

M M to n s £/to n

30
200

MM£

25

20

150

15

100
10
PRT removed
for new fields

5

Royalty
removed for
new fields

50

0

0

77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98
Years

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

20

10


Petroleum Fiscal Systems
• Two Families
Concessionary system
Allows private ownership to
mineral resources

Contractual systems
The State retains ownership to
mineral resources

Dr. Alfred Kjemperud

21

CCOP, Pattaya, September 2003

Fiscal Systems Classification

Petroleum Fiscal Arrangements
Petroleum Fiscal Arrangements
Concessionary Systems
Concessionary Systems

Contractual Systems
Contractual Systems
Norway
Norway
United Kingdom
United Kingdom

Service Contracts
Service Contracts
Pure Service Contracts
Pure Service Contracts

Production Sharing Contracts
Production Sharing Contracts

Risk Service Contracts
Risk Service Contracts

Indonesian (profit)

Peruvian (gross)

Pakistan
Pakistan

Limited usage
Limited usage

Argentina
Argentina

Indonesia

Tunisia
Tunisia

Mexico
Mexico

Brazil
Brazil

Angola

New Zealand
New Zealand

Venezuela
Venezuela

Yemen

The Philippines
The Philippines

Albania

Nicaragua

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

22

11


Systems around the World
Concessions (R/T System)

Far East

Australia
Brunei
Korea, South
New Zealand

Pakistan (On)
PNG
Thailand

Timor Gap B

Argentina
Bolivia
Colombia
Costa Rica

Falkland Is.
Paraguay
T&T (On)

Abu Dhabi
Ajman
Dubai
Fujairah
Canada
United States

Neutral Zone
Sharjah
Turkey

Former Soviet
Union

Latin America

Middle East

North America

Dr. Alfred Kjemperud

PSC
Bangladesh
Cambodia
China
India
Indonesia
Laos
Malaysia
Azerbaijan
Georgia
Kazakstan
Kyrghystan
Belize
Cuba
Guatemala
Guyana
Jamaica
Bahrain
Iraq
Joran
Libya

SC

Mongolia
Myanmar
Pakistan (Off)

Timor Gap A
Vietnam
Nepal
Sri Lanka
Russia
Turkmenistan
Uzbekistan

Philippines

Nicaragua
Panama
T&T (Off)
Uruguay

Brazil
Honduras
Chile
Panama
Ecuador Peru
Haiti
Venezuela
Iran
Kuwait (OSA)
Saudi Arabia

Oman
Qatar
Syria
Yemen

23

CCOP, Pattaya, September 2003

Systems around the World
R/T System

Africa

Europe

Dr. Alfred Kjemperud

C. Afracan Rep.
Chad
Congo (K.)
Ghana
Madagascar
Malawi
Mali
Morocco

Namibia
Niger
Senegal
Seychelles
Somalia
South Africa
Tunisia (Old)

Australia
Bulgaria
Czech Republic
Denmark
France
Greece
Hungary
Ireland

Italy
Netherlands
Norway
Poland
Portugal
Romania
Spain
UK

PSC
Algeria
Angola
Benin
Cameroon
Congo (Br.)
Cote D'Ivoire
Egypt
Eq. Guinea
Ethiopia
Gabon

Gambia
Kenya
Albania
Malta
Poland
Turkey

CCOP, Pattaya, September 2003

SC

Liberia
Libya
Madagascar
Mozambique
Nigeria
Sudan
Tanzania
Togo
Tunisia (New)
Uganda
Zambia

24

12


Concessionary System
• Oil company have exclusive right to

explore and produce at its own risk
and expense
• Oil Company Owns production
• Oil Company often pays Royalty and
Surface rental to Government
• Oil Company Pays Taxes on profit
• Oil Company owns equipment
• Oil company has right to export
hydrocarbons

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

25

Production Sharing
Contract
• The Contractor gets a
share of production usually
in kind
• The Contractor never holds
title to oil
• The Contractor share the
risk with the Government

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

26

13


Risk Service Contracts
• The Contractor share the
risk with the Government
• The Contractor gets a
share of Profits usually as
money
• The Contractor never holds
title to oil

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

27

Technical Assistant (EOR)
Contracts
•
•
•
•
•

Dr. Alfred Kjemperud

Joint Venture
PSC
Oil Company Financing
DMO (Domestic Market Obligation)
Base Oil or Determined Oil

CCOP, Pattaya, September 2003

28

14


P
A l ure
l c JV
os
t/r
isk
Ty shar
ed
Go pic
th ver al J
ro nm V
ug e
h nt
Ex ca
pl rri
or ed
ati

Fu
on
Go ll C
Ex ver ar
pl nm ry
or
ati ent JV
on ca
an rrie
dD d
ev thro
FS
elo ug
Go U t
pm h
y
v
Re er pe
en
n
h
un a b m JV
t
til . A e n t
ca nd ca
sh
r
flo Dev ried
w elo th
fro pm rou

m
g
O p e nt h
era
tio
ns

JV Burden on Contractor

Light

Heavy

Burden on Contractor

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

29

Direct State Participation
• Free Ride
Have access to all information
Can choose the goodies

Does not pay for pre-license exploration
Does not pay for R&D

• Carried interest

The State can be carried through:
Exploration
Exploration +Development

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

30

15


Elements in a PSC
•
•
•
•
•
•
•
•

Work Commitment
Bonus Payment
Royalties
Cost Recovery (Cost Oil)
Profit Oil
Government participation
Domestic Market Obligation

Ring fencing

Dr. Alfred Kjemperud

31

CCOP, Pattaya, September 2003

Indonesia- PSC

Mother of all PSCs

(4th Gen.)

Contractor

•(85/15 Split)
Royalty:
FTP split
Cost Oil :
Profit Oil:
Tax Rate:

Government
Gross
Revenues

0%
20%
100%

28.8462%
48%

100

5.8

First Tranche
Petroleum
20 %

14.2

14.2 %

Net Revenues
80

28.0

Cost Oil
35 %

Profit oil
52

•Effects
The split does not change
with the level of cost
Effective Gov. take is 85%

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

15.0

Profit oil to
Contr.

37.0

28.8462 %

Taxable
20.8

-10.0

Tax

10.0

48 %

38.8

After tax
entitlement

10.8

Net Cash
Flow

61.2

15 %

Take

85 %

61.2

32

16


Work Commitments
• Acquisition of Seismic Data
Shooting, where and when
Processing
Kilometres or Minimum
Expenditure

• Drilling Obligations

Number of Wells , where and when

Stratigraphic interval
Minimum Expenditure

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

33

Bonuses
• Signature Bonus

Paid upon contract signing

• Discovery Bonus

Paid upon first discovery

• Production Bonus

Paid when production reaches a
specified level
• Bonuses makes a fiscal regime
regressive and are unpopular with
oil companies

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

34

17


Royalties
• Calculated from Gross Revenue
• Can cause premature
abandonment
• Ranges from zero to 20%
• Sliding scale (Example.)
 First Step
 Second Step
 Third Step

Dr. Alfred Kjemperud

Up to 5.000 bopd
5.001-10.000 bopd
Above 10.000 bopd

5%
10%
15%

CCOP, Pattaya, September 2003

35

Special Royalty Schemes

• The Philippines have a
negative Royalty up to 7,5%

(Philippine Participation Incentive Allowance - FPIA)

• New Zealand have a hybrid
system 5% Royalty or 20 %
Accounting Profits Royalty
• Rate Royalty $/bbl (Columbia,
Russia)

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

36

18


Negative Royalty Scheme
Philippine RSC Flow Chart
Contractor

Government
Gross Revenues
100
FPIA

7.5

7.5 %
Net Revenues
92.5

32.4

Cost Recovery
35 %
Revenues for sharing
60.13

24.1

Profit share

36.1

40 %
Taxable
24.1
Tax paid by Gov.

Dr. Alfred Kjemperud

0.0

0%

7.5

FPIA (% of Gross)

0.0

31.6

Service Fee

32.4

Cost Recovery

63.9

Entitlement

36.1

46.7 %

Take

53.3 %

CCOP, Pattaya, September 2003

37

Cost Oil (Cost Recovery)

• Cost Oil usually has an upper limit
• Cost oil normally includes:

Unrecovered costs carried over from
previous years
Operating costs
Expensed capital costs
Current year DD&A ( Depreciation, Depletion &
Amortisation)

Interest on Financing
Investment Credit (Uplift)
Abandonment cost recovery fund

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

38

19


Cost Recovery
Range of Cost Recovery Limits (%)

0

20

Cruel

Dr. Alfred Kjemperud

40

60

Unusual Low End Upper End Rare
Typical
Typical

80 100
Concessions
+ a few
PSCs

CCOP, Pattaya, September 2003

39

Profit Oil
• Profit oil = Net revenue - Cost recovery
 Net revenue = Gross revenue - Royalties

• Profit oil is analogue to taxable income in
a concessionary system and Service fee
in a service agreement
• Profit oil is split between Government
and Contractor

• Profit oil is usually, but not always taxed

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

40

20


Ratio-Factor (R-factor)
• Objective
Sharing between the Government
and the contrator is based on
Profitability

• Design
Both revenue and cost are
included in the calculation
Contractors cumulative revenue
R=

Dr. Alfred Kjemperud

Contractors cumulative cost

CCOP, Pattaya, September 2003

41

Different R- Factors
• Cumulative revenues/Cumulative cost
• Cumulative Revenue-Cumulative Opex/cumulative
Capex
• Cumulative Revenue – Cumulative Profit
Share/Cumulative Investments + Cumulative Opex
• Cumulative net income/Cumulative Costs

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

42

21


Peruvian onshore

R-Factor
0.0 < R < 1.0
1.0 ≥ R < 1.5
1.5 ≥ R < 2.0
2.0 ≥ R

Dr. Alfred Kjemperud

************ROYALTY RATE *************
$25/bbl

≤ $15/bbl
≥ $35/bbl
19%
23%
27%
24%
29%
32%
30%
35%
37%
36%
39%
42%

CCOP, Pattaya, September 2003

43

Domestic Market Obligations (DMO)
• A certain volume of oil to be sold to the Government
• Discounted Price
• Local Currency. Predetermined exchange rate
• Example - Indonesian DMO





•

•

Production:
1 MMBBL
Oil price:
20 USD/BBL
Discount:
2 USD/BBL
Contractor’s profit oil: 28.8462% of total production
DMO:
25% of Contractors profit oil

1MMBBL*(20USD/BBL-2USD/BBL)*25%*28.8462%= 1,298 MMUSD
1,298MMUSD/20USD/BBL=0.0649 MMBBL= 6.49% of total production ( Pure
volume calculation: 28.8462%*25%=7.21%)

Dr. Alfred Kjemperud

CCOP, Pattaya, September 2003

44

22


The Importance of Tax Holidays
25.0

Production curve (100 %)
20.0

MMBBL

Protected by 5y tax holiday (62 %)
15.0

10.0

5.0

0.0
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Years

A 5 years tax holiday represents 25% of project time,
but 62 % of produced volume (Undiscounted)
Dr. Alfred Kjemperud

45

CCOP, Pattaya, September 2003

Global Exploration Market

Government Take

High
Low interest from
Oil Companies
Low potential for any
Government take

dF
e
z
i
tim
p
O

i

s
erm
T
l
sc a

Low

Poor

Dr. Alfred Kjemperud

High interest from
Oil Companies
Potential for higher
Government take

Geological Promise

CCOP, Pattaya, September 2003

Good

46

23