International Petroleum Fiscal Systems

www.petroEDGEasia.net

In collaboration with

INTERNATIONAL PETROLEUM FISCAL SYSTEMS 18 – 22 July 2016 | Kuala Lumpur, Malaysia

Your Expert Course Director: TIM JAMES Principal Economist

Robertson CGG Company – Beardall-Parry Department

What past participants said about Tim: “Tim is a very accommodative coach. Thanks!” Salamander Energy “Training provided by Tim makes us feel like expert ourselves even though it is not our background” Front End Enginer, Petronas Carigali Sdn Bhd

Conduct this training course in-house for more effective savings! Call us at +65 6741 9927 or email to [email protected]. For more information, visit us at www.petroedgeasia.net


Course Overview We are currently in the midst of one of the deepest downturns in the industry in recent years. Companies have to adjust to the new realities of a lower oil price and the possibly painful cost adjustment that goes with it. When the oil price was $100 per barrel, both sides in production sharing contracts or concessionary fiscal systems were making good returns and were therefore perhaps not too concerned that fiscal

structures were optimised. But things are different now. It is essential that companies understand the finer nuances of the petroleum fiscal system to ensure they are structured optimally in this price environment.

What are the implications for cost recovery in this price environment?

Are the fiscal terms structured in a way to ensure my company gains from any cost reduction exercise it undertakes

What the entitlement reserve bookings looking like for year end?

As an IOC (International Oil Company), is now the time to negotiate new terms with the government? How do we do it? As an NOC (National Oil Company) should I be looking at negotiating a carry to reduce capital exposure?

This course will enable delegates to answer the above questions and many more! It explores the structure and mechanisms of production sharing contracts (PSC’s), concessionary tax/royalty systems, and risk service contracts and includes 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. This course brings the theory to life, allowing course attendees to design their own fiscal system and build and interpret their own PSC model based on a real life field development.

Course objectives: Learn about the history, evolution and structure of fiscal systems

Investigate cost recovery and profit sharing in a PSC Understand the interaction with royalties Examine fiscal mechanisms and ring fence calculations Identify taxation liability and allowances

Design and optimize a fiscal system in a competitive bid scenario….and argue the case! 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? This five day practical course is an ideal course for delegates wishing to develop a deeper understanding of petroleum fiscal systems and the economic principles that underpin them. Delegates should have a reasonable knowledge of Microsoft Excel ™ and bring a laptop loaded with Microsoft Office™ to the course.

Typical course participants are likely to be: • 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

Delegates will be provided with electronic copies of all workshop solutions and examples, and a comprehensive hard copy course manual.

mailto:[email protected]

https://www.nrgedge.net



5-DAY COURSE AGENDA

DAY 1 Introduction

Why do we need fiscal systems?

The relationship between NOC, IOC and government The evolution of fiscal systems

An overview of Global Fiscal Systems

Production Sharing Contracts

Tax & Royalty Systems Risk Service Contracts

Pure Service Contracts Global examples to illustrate and compare different systems

Production Sharing Contract

Legal basis and the ‘Model Production Sharing Contract’ Calculating Cost Recovery, Excess Cost Recovery and Profit Share

Bonuses (signature, commerciality & production bonuses)

Case studies: Angola, Indonesia, Equatorial Guinea, Egypt, Gabon, India, Congo Brazzaville, Vietnam, Sudan, Oman, Trinidad & Tobago

Delegate cost recovery exercise

DAY 2 DAY 3

Tax & Royalty Systems Government Royalties and overriding Royalties

Corporate Income Tax (CIT) Depreciation, Capital Allowances

Treatment of tax losses Double taxation and tax treaties Field Based taxes

Supplementary/’Windfall taxes’ Liability & Payment phasing

Import/Export Duty Environmental taxes

The treatment of abandonment costs Case studies: Namibia, Brazil, UK, Poland, Netherlands,

Thailand, Norway, Tunisia, Australia, Nigeria

Delegate exercises to calculate Royalties & CIT Sliding Scales

Different methods of sliding scale (production, R-factors, rate of return, hybrids)

Step vs Incremental methods Understanding the issues around each method Selecting an appropriate sliding scale to influence activity

Progressive vs Regressive systems Selecting an appropriate scale for ‘self-adjusting

mechanism’ Global examples Case studies: Angola, China, Equatorial Guinea, Vietnam,

Bangladesh, Algeria, Nigeria, Sao Tome, Tunisia, Libya, India, Romania, Faroes, Tunisia, Nigeria

Service Contracts

Why service contracts?

Service contracts vs PSC vs Tax/Royalty systems Case Study: Malaysia Risk Service Contract

Government Take Government aims when designing a fiscal system

What do we mean by ‘government take’ Measuring and comparing countries

How to calculate marginal government take Carried Interests Case Studies to illustrate fiscal

incentivisation/disincentivisation: Norway, Libya, UK, Bahamas

Review of fiscal systems including a selection from those of:

Tanzania

Australia Angola Ghana

Brazil Argentina

Colombia Indonesia

Vietnam India Namibia

Malaysia Norway

USA Canada

PNG Ringfencing

The taxation ringfence The PSC ringfence

Ringfencing and its impact on asset value Case Studies: UK, Faroes, Denmark, Australia, Italy, Ireland, Angola, Cambodia, Cuba, Malaysia ,Angola, Nigeria




DAY 4 DAY 5

How do we assess value? Review of economic parameters Discounted cashflow

Calculation of Net present value (NPV), Internal Rate of return (IRR), Profit to Investment ratio (DPIR)

Economic limit, payback

The pros and cons of the different metrics we can sue to assess value

Booking reserves: the concept of tax barrels Delegate exercise to calculate economic metrics

Fiscal System Design Workshop An exercise to set the terms in a production sharing contract. Terms will have to meet corporate hurdles and need to be attractive to the host government. This will be based on a Microsoft Excel model. Delegates will be provided with sets of input assumptions and economic scenarios on which to calculate suitable economic metrics and carry out appropriate sensitivity analysis. Based on their analysis, the delegate will recommend a set of fiscal terms and argue their case!

Production Sharing Contract Fiscal Modelling Workshop A PSC based case study modelling the Vietnam fiscal terms

in Microsoft Excel™ Understanding the PSC fiscal structure & algorithms of the

contract

Determining the field, economic & fiscal data and building the input decks

Step by step construction of the PSC model Running the economic cases & evaluating the results

Analysis of the sensitivities

Model solution provided to delegates after the course Summary and Closing Remarks After the course delegates will be sent fully functioning electronic copies of the fiscal model solutions as well as all excel based examples studied during the course.

Your Expert Faculty:

TIM JAMES Principal Economist Robertson CGG Company – Beardall-Parry Department

Tim has extensive oil and gas industry knowledge having worked in various economic, finance and commercial roles for 20 years.

Tim, a qualified Chartered Management Accountant, is currently Principal Economist in Robertson’s Petroleum and Reservoir Engineering

Group based in Wallingford, Oxfordshire, UK. He has experience of fiscal jurisdictions and the commercial environment globally having

undertaken numerous economic assignments ranging from the evaluation of farm in opportunities, licence round fiscal bidding advice and

Competent Persons Reporting through to full corporate acquisition valuations.

Tim is an experienced economics trainer to the oil industry, national oil companies and governments directing regular petroleum

economics, fiscal and risk courses globally.

Prior to joining CGG, Tim was Director of Economics for Beardall Parry & Associates economics consultancy, and before that was with

Premier Oil for nine years, first in their Pakistan office and then as Commercial and Finance Manager for the NW Europe region. Experience

at Premier Oil included a variety of project, commercial, asset management and finance roles covering areas such as field valuations for

development, acquisitions and disposals, building economic models in both Microsoft® Excel and Merak PEEP®, management of gas

contracts, management of budgets, statutory financial reporting and crude sales and marketing.

What past participants have said about previous economics training courses by PetroEdge: - “Very good course for non-economists for understanding the basics of Petroleum Economics & PSCs” Executive Analyst, PETRONAS

“Great course, has opened up my eyes and share a lot of light on many “grey areas” of my knowledge of the industry” Legal Executive, Brunei National Petroleum Company

“The course was an ideal introduction to the economics that drive the upstream Petroleum decision making process and the external influences that can impact upon these

decisions.” Middle East & Asia Pacific Regional Accounting Centres Director, Baker Hughes

“A good course and overview with a very knowledgeable trainer” Petroleum Engineer, APA Group

“General overview on Petroleum Economics & PSC modelling workshop brings enlighten and comprehensive understanding regarding the subject” Senior Project Engineer -

Project Management Division, SKK Migas

“PetroEdge courses are focussed and well designed to be applicable to a narrow-medium audience-therefore good value.” Sales Manager, CGG Multiclient & New Ventures

“A thoroughly interesting and comprehensive understanding of the practise of context of economics in the petroleum industry” Senior Compliance Officer, NOPTA

“This course has broaden my ideas on the production sharing concepts and I think it will be effective if applied in the Mining Industry” Policy Officer, Department of mineral

policy & Geohazards Management (PNG)




EARLY BIRD RATE

Register by 17th June 2016

STANDARD RATE petroEDGE recognises the value of learning in teams. Group bookings at the same time from the same company receive the following: 3 or more at 5% off 5 or more at 7% off 8 of more at 10% All other promotions including early bird are exclusive of the group discount.

KUALA LUMPUR | MALAYSIA 18 - 22 JULY 2016

SGD 5,699 SGD 5,899

In-House Training Yes, I would like to organise this training on-site and save on total course fees! For further information about On-site Solutions, please +65 67419927 or email [email protected]

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INTERNATIONAL PETROLEUM FISCAL SYSTEMS

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International Petroleum Fiscal Systems