Overview of PSCs Baker McKenzie IBP.Final.pdf

Additional elements accounting for abandonment costs

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Additional Elements – Accounting for Abandonment Costs A "trigger point" defines when the funding period begins, regardless of the funding method. Typical trigger points are: % of reserves produced Number of years prior to project end Cumulative production Funds may be spread over the funding period using various techniques such as straight line or unit of production.
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Who Uses PSCs for Deep Water Development?
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105 Deep Water Government Take Information from Wood Mackenzie
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106 Deepwater Contract Terms: Mature Regimes Information from Wood Mackenzie
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107 Deepwater Contract Terms: Recent Trends Information from Wood Mackenzie
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Proposed PSC Legislation in Brazil
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109 Brazilian Model PSC Art. 27. The production sharing contract shall provide for two stages: I – the exploration stage , which shall include the activities of evaluation any oil or natural gas discovery, to determine its merchantability; and II – the production stage , which shall include the development activities. Art. 28. The production sharing contract for oil, natural gas and other fluid hydrocarbons shall not extend to any other natural resources , and the operator shall be obliged to inform its discovery, under the terms of item I of art. 30. Art. 29. The following items shall be essential clauses of the production sharing contract: I – the definition of the block object of the contract; II - the obligation for the contractor to assume the risks of the exploration, evaluation, development and production activities; III – the indication of bonds to be provided by the contractor; IV – the contractor’s right to receive the cost in oil, required only in the event of a commercial discovery; V – the limits, terms, criteria and conditions for the calculation and payment of the cost in oil ;
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110 VI – the criteria for determining the oil or natural gas value, in view of the market prices, product specialization and field location; VII – the rules and terms for the sharing of the excess oil , and it may include criteria related to the economic efficiency, profitability, production volume and the price variation of oil and natural gas, in compliance with the percentage established according to the provision set forth in art. 18; VIII – the attributions, the composition, the operation, the decision making manner and the settlement of disputes in the scope of the operating committee ; IX – the accounting rules, as well as the procedures to follow up and control the exploration, evaluation, development and production activities; X – the rules for the accomplishment of the activities, on contractor’s account and risk, which shall not imply any obligation to the Federal Government or accounting in the oil cost value; XI – the duration term of the exploration stage and the conditions for the extension thereof; XII – the minimum exploratory program and the conditions for its revision; Brazilian Model PSC Continued
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111 XIII – the criteria for elaborating and reviewing the production exploration and development plans
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