Overview of PSCs Baker McKenzie IBP.Final.pdf

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Who is Using PSCs Now? Argentina Bangladesh Bolivia Cameroon Chile Egypt Ethiopia Malaysia Vietnam Yemen Trinidad and Tobago Equatorial Guinea Georgia India Indonesia Iraq Kazakhstan Madagascar Nigeria Peru Russia Thailand
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29 Key Provisions in PSCs Minimum Work Obligation Local Content Bonus & Taxes Cost Recovery Relinquishment Commercial Discovery Term Stabilization Management and Control
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30 Key Provisions in PSCs Minimum Work Obligation Local Content Bonus & Taxes Cost Recovery Relinquishment Commercial Discovery Term Stabilization Management and Control
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31 Contractor / National Oil Company Joint Management The “Sharing” in Production Sharing Contracts extends beyond oil and gas. The early concession system gave the host government no say in the exploration and production program. One of the main purposes of the Production Sharing Contract system is to exert state control over the exploration and production of oil and gas in the national territory.
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32 Contractor / National Oil Company Joint Management Advanced form of concession contracts already exert considerable control on the concessionaire. Look at the control points in the ANP Concession contract:
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33 Examples of ANP Concessionaire Control Points ANP disposes of relinquished blocks and enforces relinquishments by Concessionaire. (Clauses 3 and 5) ANP may draw on the letter of credit for noncompliance by the Concessionaire with the Minimum Exploration Program. (Clause 5) The ANP must authorize long-term production tests. (Clause 6) Evaluation Plans must be approved by the ANP. (Clause 6)
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34 Examples of ANP Concessionaire Control Points ANP decides on postponement of declaration of commerciality. (Clause 7) ANP approves any extension of the Production Term. (Clause 8) Approves Installations Deactivation Programs. (Clause 8) The ANP approves Development Plans. (Clause 9) and Production Programs. (Clause 10) May require the concessionaire to supply the national market. (Clause 11)
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35 Examples of ANP Concessionaire Control Points The ANP controls Unification of Operations. (Clause 12) Remove Operator if it has committed a material breach of the agreement. (Clause 13) The ANP has a general oversight function. (Clause 14) Require the Concessionaire to post a Deactivation and Abandonment Guarantee. (Clause 18) Collect liquidated damages from Concessionaire for failure by the Concessionaire to comply with local content requirements of the concession. (Clause 20)
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36 Contractor / National Oil Company Joint Management The PSC in Indonesia illustrates the beginning of sharing control along with production sharing. Clause 5.3.1 of the Indonesia PSC provides: Pertamina shall have and be responsible for the management of the operation contemplated hereunder, however, PERTAMINA shall assist and consult CONTRACTOR with a view to the fact that CONTRACTOR is responsible for the Work Program.
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37 Contractor / National Oil Company Joint Management The next step is a joint management committee.
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