World Fiscal Systems for Oil & Gas

Introduction:

This course provides participants with an intimate knowledge of petroleum upstream fiscal systems including royalties, production sharing, concessions, joint venture and service agreements. Furthermore, an in-depth assessment will be conducted on the administration of fiscal systems as well as standalone vs. incremental analysis by utilizing a powerful economic model, you will assess how various economic factors can impact a fiscal system from both a government and investor perspective. The knowledge gained will equip you to negotiate better contracts and concessions, identifying optimal investment opportunities and gaining practical, up-to-date knowledge on “real-life” examples.

Course Objectives?

By the end of this course participants should be have well knowledge for:

• The nature and details of all the important fiscal features around the world
• The wide variety of fiscal systems based on concessions, production sharing contracts, joint ventures, service contracts and other arrangements in the value chain
• The underlying economic characteristics of various fiscal systems
• How government policies impact on fiscal systems
• Competitive worldwide frameworks for investing in the oil and gas sector
• How to carry out advanced economic analysis on Excel spreadsheets

Who should be attend?

• Government officials
• Country managers & external affairs
• Managers
• CEOs & CFOs
• Tax advisers & fiscal issues planners
• Legal counsels
• License administrators
• Negotiators
• Executive strategy & planning managers
• Portfolio managers
• Commercial advisers
• Accountants
• Business development & corporate
• New ventures managers
• Engineers & geophysicists
• Lawyers
• Economists & business analysts

Course Topics:

• Introduction
• Introduction to Excel based spreadsheet for “stand alone” analysis
• Review of profitability indicators, such as NPV, IRR, EMV and profitability ratios
• Price sensitivity and Divisible Income analysis
• Government take and government revenue analysis Bonuses, Rentals, Royalties , Gross Revenue features
• Signature bonuses through bidding, negotiation and directly determined by government.
• Production bonuses
• Rentals and acreage management.
• Fixed and sliding scale royalties, royalties in kind and cash, alternative procedures for determining royalty values. Royalty concepts.
• Price sensitive royalties.
• Severance Taxes.
• Mineral Extraction Tax.
• Consolidation and Ring-fencing.
• Gross revenue determination
• Deduction of other payments to government.
• Treatment of signature bonuses for tax purposes.
• Deduction of operating costs and headquarter costs.
• Alternative capital depreciation methods.
• Deduction of interest
• Loss carry forward and carry backward.
• Refunds for tax value of exploration.
• Depletion allowances.
• Tax rates and globalization of corporate income tax.
• Tax credits.
• Worldwide corporate income tax systems, tax credits, tax treaties.
• Tax treaties.

• Production Sharing
• Special features: FTP, price caps, deemed interest, excess cost oil.
• Special terms for gas.
• Production sharing and royalties.
• Production sharing and corporation income tax.
• Joint stock companies and joint operating agreements
• Joint stock companies.
• Participation from Day 1.
• Payments upon participation
• Fixed rate carried interest.
• Special state company financing features.
• Carried interest and corporate income tax
• Carried interest and production sharing.
• Special Taxes based on Gross Revenues.
• Surtaxes, Hydrocarbon Tax.
• Special Taxes based on Net Revenues.
• Progressive and Special Taxes and Profit Shares (continued)
• IRR based taxes.
• IRR based profit oil and royalties.
• R-factors.
• Price Sensitive R-factors.
• Combination of R-factors and production-based profit oil.
• One and Two-way adjustments of price progressive features.
• Special Taxes and corporate income tax Value Added Taxes, Import Duties.
• Value added taxes, credits, refunds.
• Value added tax problems.
• Import duties, Temporary importation, Exemptions.
• Export duties.
• Property Taxes.
• Abandonment issues
• Booking of Reserves Incremental analysis
• Introduction to Excel based spreadsheet for “incremental” analysis
• Progressive analysis: corporate income tax, royalties.
• Progressive analysis: production sharing and carried interest
• Progressive analysis: IRR and R-factor based features
• Analysis of gold plating.
• Classification of fiscal systems
• Legal and Economic classification
• Concessions, Production Sharing Contracts, Joint ventures and Hybrid Systems. Country review of fiscal systems
• Sharing of divisible income: progressive, neutral, regressive and hybrid systems
• Front end and back end loading
• Geological risk and government take Level of Government Take
• Fiscal Stability.
• Determination of level of government take
• Competition among governments for investment Risk Sharing
• Sharing of risk between government and companies: Price risk, cost overrun risk, reserve risk, economic risk and gas marketing risk Government Policies
• Resource policies
• Economic policies
• Administrative policies
• Internal distribution of government take Worldwide Future Trends
• Anticipated world and petroleum industry developments
• Government take development
• Large resource access
• Unconventional resources
• Long term fiscal trends
• Impact of globalization and increased attention to the people Low Oil Prices and Climate Change
• Oil demand scenarios
• Gas demand scenarios
• Oil Price Framework, Pivot Point Oil Price Low Oil Prices and Government Take
• Detailed discussion of price progressivity, neutrality and regressively.
• Price progressivity under low oil prices Climate Change Policies
• Carbon taxes
• Eliminate subsidies
• Promote gas development
• Reduce fiscal stability Low Price Policies
• Price progressivity over wide price range
• Minimum Government Take
• Discourage excessive investment under high prices
• Improve alignment between governments and petroleum industry
• Modify State Participation Final Comment