Attend this practical and interactive three-day training course and enhance your knowledge in the following key areas:
- The fundamental economic principles underpinning production sharing contracts (PSC’s)
- The history and evolution of production sharing contracts (PSC’s)
- The PSC structure, content and flowchart
- Cost recovery, profile share, bonuses, sliding scales
- Royalty and Taxation
- Ring fencing
- Key economic issues in PSC negotiations and bidding
Plus:
- Production Sharing Contract Fiscal Modelling Workshop
- Global case studies
Course overview
This course explores the structure and mechanisms of production sharing contracts (PSC’s) and the economic principles that underpin them. Studying the underlying processes and commercial drivers, participants will examine case studies to illustrate the economic structure of these complex agreements.
The PSC Economics course brings the theory to life, allowing course attendees to build and interpret their own PSC model based on a real life field development.
Course objectives
- Learn about the history, evolution & structure of PSC’s
- Investigate cost recovery & profit sharing
- Examine fiscal mechanisms & ring fence calculations
- Identify taxation liability & allowances
- Construct a production sharing contract spreadsheet model
- Interpret model outputs to enhance investment decision making
- Understand petroleum economic fundamentals to aid PSC negotiations and licence round bidding
Who should attend
- Production sharing partners
- Economists working in the industry
- Lawyers involved in the industry
- Analysts working in the industry
- Auditors working in the industry
- Technical personnel working in the industry
- Business development and commercial managers
Day 1
An introduction to production sharing contracts and upstream economic analysis
- The history and evolution of production sharing contracts (PSC’s)
- The basic PSC, contractor and government relationship
- The PSC structure, content and flowchart
The fundamentals of upstream economic analysis
- Discounted cashflow
- Discount rate, discount factor and discount method
- The cost of capital and the hurdle discount rate
- Capital budgeting techniques (NPV, IRR, DPIR, payback)
- Valuing an asset, making development & investment decisions
- Inflation, cost escalation, real versus nominal cash flows
- Managing and quantifying risk both deterministically and probabilistically
Day 2
Cost recovery
- Cost recovery mechanism
- Recoverable costs
- Cost oil, cost gas and NGL’s
- Excess cost recovery
- Cost recovery modelling in Excel
Cost recovery case studies: Angola, Indonesia, Equatorial Guinea, Egypt, Syria, Gabon
Profit sharing
- The profit pool
- Profit sharing
- Profit gas and profit oil
- Profit sharing modelling in Excel
Profit sharing case studies: Angola, Indonesia, Equatorial Guinea, Egypt, Syria, Vietnam
Bonuses
- Signature & commerciality Bonuses
- Production Bonuses
- Cost recoverability
- Bonus modelling in Excel
Bonus case studies: Gabon, Vietnam, Sudan, Oman, Syria
Sliding scale fiscal mechanisms
- Production rate sliding scales on production rate and volume
- R-Factor and rate of return methods
- Step versus incremental methods
- Influencing activity through sliding scales
Case studies: Angola, China, Equatorial Guinea, Bangladesh, Algeria, Nigeria, Sao Tome, Tunisia, Libya
Taxation
- The basis of the taxation liability
- The CT ring fence
- Chargeable income
- Capital allowances
- Liability and payment phasing
- The treatment of tax losses
- Tax holidays
- Taxation modelling in Excel
Case Studies: Cameroon, Albania, Sao Tome, Algeria, Indonesia, Mozambique, China, India, Jamaica, Cote d’Ivoire, Egypt, Libya, Cyprus, Gabon
Day 3
Ring fences
- PSC ring fence
- Taxation ring fence
- Ring fence calculations and examples
- Ring fences in a strategic context
Case studies: Cambodia, Cuba, Malaysia, Angola
The economics of PSC’s
- Contractor cash flow
- Government cash flow
- Cost carry arrangements
- Comparison with royal and taxation systems
- Optimisation of PSC terms
- Working interest vs entitlement
- The treatment of abandonment expenditure in PSC’s
Case studies: Algeria, Angola, Libya, Vietnam, Equatorial Guinea
Production Sharing Contract Fiscal Modelling Workshop
- A PSC based case study modelling the fiscal terms in Microsoft Excel(TM)
- Understanding the PSC fiscal structure and algorithms
- Determining the field, economic and fiscal data and building the input decks
- Step by step construction of the PSC model
- Running the economic cases and evaluating the results
- Analysis of the sensitivities
- Electronic copy of model solution provided to delegates
Summary and closing remarks
-
Tim James
Tim James joined Beardall, Parry & Associates, a UK based petroleum reservoir consultancy, in January 2004 and is now a Principal Economist in the BP&A Department of FRL. During this time he has undertaken a range of economic evaluations across the Middle East, North and West Africa, Pakistan, India and NW Europe. He has also provided upstream economics and risk analysis training courses both in the UK and Norway.
Tim trained and qualified as a Chartered Management Accountant and moved into the oil and gas industry with Premier Oil plc in 1995 working in both Pakistan and London. For the two years to the end of 2003 he worked as their UK Commercial Analyst in an analytical and management role covering a wide range of commercial activities including field valuations for development, acquisitions and disposals, asset management, gas contract management and the administration of the Sales and Marketing function.
Prior to that, he was UK Finance Manager with responsibilities for the maintenance of economic models, management of budgets and half and full year financial reporting. Tim spent time in Premier's islamabad office where experience was gained in both financial and project accounting.
Courses run by this instructor
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
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25-28 Jun 2012 (London, UK)
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11-13 Sep 2012 (London, UK)
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22-24 Oct 2012 (London, UK)
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1-5 Oct 2012 (Singapore, Singapore)
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16-19 Jul 2012 (London, UK)
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19-21 Sep 2012 (London, UK)
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21-23 Nov 2012 (Lagos, Nigeria)
Attend this practical and interactive three-day training course and enhance your knowledge in the following key areas: The fundamental economic principles underpinning production sharing contracts (PSC’s); The history and evolution of production sharing contracts (PSC’s); The PSC structure, content and flowchart; Cost recovery, profile share, bonuses, sliding scales; Royalty and Taxation; Ringfencing; Key economic issues in PSC negotiations and bidding, featuring: Nigeria PSC economic modelling workshop, The economic impact of the Petroleum Industry Bill (PIB) and Global case studies
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4 days of course modules that focus on the review and examination of the key elements of the supply chain from upstream activities of exploration, development and production through transportation to downstream sector that involves trading, refining, petrochemicals and final distribution to the consuming markets.
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This course is designed for professionals who need to develop an understanding of the unique aspects of the energy industry, including the oil and gas commercialisation and business development or facilities evaluation and commercialisation.
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8-10 Oct 2012 (Singapore, Singapore)
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25-29 Jun 2012 (London, UK)
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For operator drilling contractor and service company personnel that desire a specialised familiarisation, understanding and comprehension of Deepwater Drilling Operations, equipment, processes, systems and activities.
17-20 Sep 2012 (London, UK)
This four day training course is specifically designed for
professionals involved internationally in the oil and gas
industry, it offers a unique opportunity to rapidly
increase your understanding of the legal issues involved
in various international scenarios and to improve your
techniques and skills in drafting a variety of
international contracts.
12-14 Nov 2012 (Hong Kong, Hong Kong)
This 3 day course concentrates on a review and analysis of energy trends over the next 20 years. While predicting future energy trends can be fraught with uncertainties, attention is given to reviewing and analysing a variety of key market drivers, applying sensitivities and discussing probable outcomes.
12-15 Nov 2012 (Singapore, Singapore)
14-16 Nov 2012 (Almaty, Kazakhstan)
This course explores the structure and mechanisms of production sharing contracts (PSC’s) and the economic principles that underpin them. Studying the underlying processes and commercial drivers, participants will examine case studies to illustrate the economic structure of these complex agreements.
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This course has now expired please email us to find out when the course will next be running.