The key features of concessionary and contractual

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The key features of concessionary and contractual systems are summarized in Table 1. Table 2 outlines the main differences between concessions and production sharing contracts. 10 World Bank Working Paper Table 2. Main Differences between Concessionary Systems and Production Sharing Contracts Ownership of nation’s mineral resources Title transfer point Company entitlement Entitlement percentage Ownership of facilities Management and control Government participation (carried working interest) Ring fencing Production Sharing Contracts Held by sovereign state At the export point Cost oil/gas + profit oil/gas Typically 50–60% Held by the state More direct government control and participation More likely More likely Concessionary Systems Held by sovereign state At the wellhead Gross production less royalty Typically 90% Held by company Typically less government control Less likely Less likely Source: Johnston (1994b). Although in most countries, all matters related to petroleum exploration, development and production tend to be governed by sector specific legislation and regulation, countries that have recently reformed their hydrocarbon sector have shown a preference for the establishment of modular legal frameworks. In these cases, all matters related to hydro- carbon rights and their use are governed by the hydrocarbon law/regulations; all matters relating to taxation are defined in the tax code/regulations; all issues relating to environ- ment protection are defined in the environmental law/regulations; and so on. Thus, the hydrocarbon law incorporates other laws by reference. Modularity increases transparency and accountability, reduces administration costs, and facilitates compliance. 15 The topics typically addressed in modern legal frameworks are summarized in Appendix A. 15. A clear, simple and non-discretionary legal and regulatory framework is an important factor for attracting foreign investment. This affects the entire value chain from the award of exploration and pro- duction rights to the disclosure of information that affects the citizenry. There are various ways of improv- ing the transparency in the management and oversight of the sector: the standardization of the terms of exploration and production, the reduction of the discretion of the administrative authorities, the simpli- fication of awarding and permitting procedures, the development of an efficient and functioning open title system, the adoption of standardized form of agreements, the predefinition of standard shape form of blocks, the granting of greater operating freedom to the contractors, the adherence to international arbitration (in particular where the local court system does not provide sufficient guarantees), and the respect of international disclosure practice are examples in this direction.
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CHAPTER 4 Fiscal Regimes for the Petroleum Sector Tax and Non-Tax Instruments P etroleum activities around the world are subject to a great variety of taxation instru- ments. These include taxes that apply to all other sectors of the economy and taxes that are specific to the oil industry. In addition, non-tax forms of rent collection
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