Non-implementation of PSC law costs Nigeria N7trn

— 14th December 2017 From Juliana Taiwo-Obalonye, Abuja The Federal Executive Council (FEC) has approved the amendment of Section 15 of the Production Sharing Contract (PSC) law, which none implementation has cost the nation an estimated $21billion (about N7.602trillion) in revenue to International Oil Companies (IOCs). When the Act is amended, close to $2 billion (about N700 billion) extra revenue will be earned for the federation. The Minister of State for Petroleum Resources Dr. Ibe Kachikwu, disclosed this to State House Correspondents at the end of the over five-hour Council meeting presided over by Vice President Yemi Osinbajo. Kachikwu explained that Nigeria has in the last 20 years lost a total of $21billion (about N7.602trillion) in revenue to International Oil Companies for its failure to implement the Production Sharing Contract (PSC) law. The Minister said council gave approval for his ministry to begin the process of reviewing section 15 of the Act which has cost the nation trillions of Naria. According to him, the Ministry of Petroleum Resources is to collaborate with the office of the Attorney General of the Federation in amending the section of the Act. The PSC is an agreement put in place in 1993 in response to the funding problem faced by the old Joint Venture (JV) arrangement as well as the desire of the Nigerian government to open up the sector for more foreign participation. It governs the understanding between the Nigerian National Petroleum Corporation (NNPC) and all new participants in the new inland deep and ultra deep-water acreages. As provided in the Act, the contractor bears all cost of exploration and production without such cost being reimburseable if no find is made in the acreage. It also provides that cost is recoverable with crude oil in the event of commercial find, with provisions made for Tax Oil, cost Oil and Profit Oil after which the balance after deduction of Tax Oil and Cost oil which is to be shared between the NNPC and the contractor in an agreed proportion. Kachikwu explained that there was a provision in 1993 that once the price of crude exceeds $20 a barrel, “the government will take steps to ensure that that premium element is then distributed at an agreed premium level for the federal government. But over the last 20 years, nothing really was done. From 1993 to now, cumulatively, we have lost a total of $21 billion just because government did not act”. The minister added: “we did not exercise it. In 2013 there was a notice to oil companies that we were going to do this but we didn’t follow through in terms of going to council to get approval. “One of the things we’ve worked on very hard over the last 20 years is to get that amendment because once we do, the net effect for us is close to $2 billion extra revenue for the federation.”

MEO Australia on track for drilling of Indonesian gas appraisal well

Wednesday, September 19, 2012 by Bevis Yeo MEO Australia (ASX: MEO) is on schedule to spud its appraisal well in the Gurame oil and gas field off northern Sumatra on 22 September after it received handover of the Hercules 208 jack-up drilling rig yesterday. The Gurame SE-1X well was selected as the lowest risk drill-ready candidate with the highest probability of advancing the Best Estimate Prospective Recoverable Resource of 497 billion cubic feet of gas and 57 million barrels of oil towards commercial development. Managing director Jürgen Hendrich said there was no question that a substantial in-place resource is present at Gurame and the company was excited about the prospects of a commercial development. He noted that while the blowout at the discovery well demonstrated that hydrocarbons were capable of flowing at the field, commercial flow rates under controlled conditions had not yet been achieved. “We have designed the well to maximise the chances of achieving a commercial flow rate. If this can be demonstrated, the prospects of developing the Gurame resource and delivering value to shareholders will take a tremendous step forward.” Gurame The Gurame field in the Seruway Production Sharing Contract was first discovered in 1968 and has been delineated by six wells, several of which recovered oil from the two target horizons. A modern transition zone 3D seismic survey was acquired by the previous operator, however no wells have drilled the deeper targets using this data. Gurame SE-1X will test the main Baong and Belumai reservoirs within a structural closure that is substantially higher than where oil samples were recovered in previous wells. MEO expects the target reservoirs at this location to be naturally fractured and gas bearing, a combination which should enhance the potential to achieve a commercial flow rate. The Seruway PSC is located within the offshore portion of the North Sumatra Basin, Indonesia and contains multiple existing gas and oil discoveries as well as undrilled prospects MEO has a 100% interest in Seruway. Proactive Investors is a market leader in the investment news space, providing ASX “Small and Mid-cap” company news, research reports, StockTube videos and One2One Investor Forums. Register here to be notified of future MEO Australia articles. ============ Dried-up wells : As gas reserves fall, deep wells need hefty investment PPL says wells can last anothe­r 10 years with money inject­ion. By Our Correspondent Published: September 29, 2012 Sui gas fields are being depleted fast, but with investments in deep wells, which need a huge investment of $40-45 million each, these can be utilised for another 10 years. PHOTO: FILE KARACHI: Slow recoveries are hampering further investment in depleting Sui gas fields, making it very difficult to inject money into developing deep wells, said Asim Murtaza Khan, MD and CEO of Pakistan Petroleum Limited (PPL). Speaking to hundreds of shareholders and PPL employees sitting in a jam-packed hall here on Friday, Khan said Sui gas fields were depleting fast but with investments in deep wells, which need a huge investment of $40-45 million each, these could be utilised for another 10 years. At the gathering – the 61st annual general meeting of PPL – most of the shareholders were keen to know why PPL was investing in Iraq where they thought risk factor was running high. They put up various questions before the management. Replying to a question, Khan said, “We have carefully considered security conditions in Iraq before taking this decision and we think that benefits actually outnumber the risks.” “Unfortunately, most of the oil and gas installations in the world face security risks, but it does not mean that one should leave all such places,” he stressed. PPL was not the only oil company which was exploring oil and gas in Iraq. There were various other companies including firms from India, the UAE and Turkey, which showed that things were going fine despite security concerns, he said. “Furthermore, the government of Iraq has given us assurances about the security situation.” PPL has five years to complete exploration in the oil-rich Middle Eastern country, unlike Pakistan where such contracts are signed for just three years. More than once, the shareholders asked the management what the company was doing for uplifting the Baloch communities, especially those which were living on the periphery of oil and gas fields. Addressing the shareholders’ concerns, the management spoke at length about the activities of the company in Balochistan. PPL has given at least 1,700 jobs to Bugti tribesmen, established a 50-bed hospital with 10 company-paid qualified doctors and annual expenses of Rs10 million on medicines. The tribesmen are also getting free gas. In the education sector, bright students are being provided 50 scholarships for study in different universities of the country and there are plans to add 30 more scholarships. Responding to a question from the media, Khan revealed that 20% of operational expenses of the company in Balochistan were on security issues. Khan said the company was also focused on fast-track exploration and development activities to bring new discoveries on stream through extended well-testing and early production. The AGM approved financial statements together with auditor’s report for the financial year ended June 30, 2012. It also approved final cash dividend of 65% for ordinary share capital and issue of bonus shares in proportion of 1 ordinary share for every 4 ordinary shares held by members. This is in addition to an interim cash dividend of 50% already paid to the shareholders, bringing total distribution for the year to 115% cash dividend and 25% bonus shares. Published in The Express Tribune, September 29th, 2012. . ==============

The Benefits of a PSC: IRAQ: Investment amid ongoing disagreement over production sharing contracts in Kurdistan

investor48 Hi All, BP have had their own TSC renegotiated to the detriment of traq. The terms are so unfavourable to the icg that its contents are kept under wraps! The initial enthusiasm of the oil companies in the south has gone. The deals are so bad that the ICG expects the companies to try to 'fiddle' their costs back and hence every invoice/payment due will be being queried to the north degree with many not being paid IMO. Rather than being the triumph that the ICG makes out the TSCs are simply the classic bad contract that is too lean. It's a mistake that's been made a 1000 times before in other industries. IMO it's only a matter of time now before we hear that the next phases of many of the mega projects in the south are facing massive delays. It must also be very likely that the oil companies are trying to renegotiate the TSCs as we speak. Exxon has given them, completely unintentionally of course, a bigger lever to try to do this. The PSC's have brought enormous benefits to oil producing nations that required the capital and technical expertise of the Oil Majors,that helped the many developing countries kicked start the devlopment of their oil and gas industries,starting from upstream and later moving downstream. In Kurdistan,we have also seen schools and homes being built by the PSC contractors that operate within their vicinity.In Malaysia,and in particular in the state of Trengganu where ExxonMobil first discovered oil 200km offshore,this sleepy fishing state of the early sixties,is now a vibrant hub of major downstream activities as well. In Indonesia,it's success of a vibrant oil industry both upstream and downstream is attributed to the PSC's where it had it's inception. Kurdistan,progress is not by chance but by very well thought out strategies that are neccessary to bring about greater economical activities kicked start by awarding PSC's to explore for Oil and Gas in Kurdistan. In the case of the TSC's whilst Baghdad is deemed to have done a great job in awarding minimial profits to the Oil Majors and NOC's,the sheer minimum profits to the Majors,does not warrant them do build schools,amenities,etc,etc back to the Iraqi communitites. The sheer bureaucracy of Baghdad,stifled with corruption and abuse,the savings made from these bids,will not benefit the Iraqi people at large but for a few little Napoleons in the Ministry of Oil and politicians!Even if these projects were to take place,it will take a long time to implement because of the bureaucracies! The KRG's success in awarding the PSC's,will not see it turning and unwinding the clock backwards and this mismatch with Baghdad in awarding oil contracts,are clear evidences that Shahristani's policies have not worked so far,and doomed to fail,IMHO. Only with the passing of the Oil and Gas Law acceptable by all the major political groups,will see Erbil and Baghdad compromise,some face saving,and Iraq be able to move forward and have some stability!Until Iraq can ramp up it's production significantly,would we see better amenities like power and water supply and better sanitation for the Iraqi people. As for Kurdistan,the PSC's are just the beginning and one can clearly see how much more Kurdistan could achieve,once it has it's own oil and gas pipelines running to Turkey!!The KRG knows they have the right formula for success,where as Baghdad just wants to control and using the pretext of control,to ensure that the Kurds progress will be checked!! One way or another,if Mailki failed to get the Oil Law passed,a new Shia leader will replace him,if the KRG is successful in using political dialogue to bring this impasse to a close,otherwise an independant Kurdistan with Turkey playing a major role are on the cards. The US will have no choice but to support the KRG,and it is the Shia Government led by Maliki that is to be blamed as they have not honoured a political agreement that returned them to power and provened that they are dangerous and untrustworthy! Best wishes to all ================= IRAQ: Investment amid ongoing disagreement over production sharing contracts in Kurdistan Votes for this Posting Voted 5 times. Message http://www.energyasia.com/public-stories/iraq-investment-amid-ongoing-disagreement-over-production-sharing-contracts-in-kurdistan EnergyAsia, December 28 2011, Wednesday) --- The following is an edited commentary by law firm Herbert Smith. Disagreement between Iraq’s Federal Government and the Kurdish Regional Government over control of oil and gas reserves in the semi-autonomous region is yet to be finally resolved but that has not stopped an increasing number of major international oil companies from choosing to invest in Iraqi Kurdistan. Kurdistan, which the Federal government claims holds 200 billion barrels of oil, may control anything from 20% to over 33% share of Iraq’s oil reserves. Pursuant to regional legislation passed in 2007, the Kurdistan Regional Government (the KRG) has signed more than 35 oil production sharing contracts (PSCs) with foreign companies. Officials representing the Federal government, including Deputy Prime Minister for Energy and former Oil Minister Hussain al-Shahristani, have challenged the validity of both the KRG’s petroleum legislation and PSCs. Some companies that have signed PSCs with the KRG have been excluded from participating in the tender rounds for oil and gas service contracts conducted by the Federal Government, including the current fourth round tender for exploration blocks. A dispute over the treatment of oil produced from two blocks subject to PSCs signed by the KRG, Tawke and Taq Taq, which began in June 2009, led to production being halted in October 2009. Following lengthy negotiations, Iraq’s federal State Oil Marketing Organisation resumed exports of crude from KRG controlled fields in February 2011 through the Kirkuk-Ceyhan pipeline. The details of the current revenue sharing arrangements and timing of payments relating to these exports are unclear but it appears to allow producing companies (Genel Energy, Sinopec and DNO) to recover their costs, at least, pending a more comprehensive agreement. The KRG’s Minister of Natural Resources, Ashti Hawrami, has estimated that Kurdish oil production could reach 200,000 b/d by end-2011, and one million b/d between 2013 and 2015. While the arguments between Baghdad and the KRG over Iraq’s northern oil reserves could be described as primarily political, the legal debate centres on the interpretation of the Federal Constitution. This document allocates power between the Federal and regional governments, the KRG being the only regional government currently recognised (other areas within the federation being governorates). Articles 115 and 121 overlap to give regional governments the authority to legislate in all areas of law not exclusively reserved for the jurisdiction of the Federal government. They also give regional legislation priority over any conflicting federal legislation in such areas. Article 110 sets out the scope of Baghdad’s exclusive powers while Article 114 identifies powers which are to be shared by Baghdad and regional governments, but neither includes any reference to oil and gas. The law relating to oil and gas is specifically addressed by Articles 111 and 112. Article 111 is limited to the general principle that oil and gas are owned by the people of Iraq as a whole, but Article 112 provides the most guidance and cause for debate. The first limb of Article 112 provides that the Federal government may “undertake the management of oil and gas extracted from present fields” with the relevant governorates and regional governments, subject to an obligation to distribute revenues fairly by reference to population and taking into account any historical revenues withheld from the governorate or region. The second limb provides that the Federal government may “formulate the necessary strategic policies to develop oil and gas wealth” with the relevant governorates and regional governments, subject to an obligation to maximise the Iraqi people's benefit from such wealth. The most relevant legislation currently in force is the Oil and Gas Law of the Kurdistan Region - Iraq (Law No. 22 of 2007), which, as noted above, underpins the PSCs signed by the KRG. This law is expressed to be consistent with the constitutional provisions outlined above and excludes the application of all other laws seeking to regulate the petroleum sector in Kurdistan. Federal legislation to reform and govern the petroleum sector has been stalled in Iraq’s Council of Representatives since 2007 for a number of reasons, including disagreement over its provisions for the balance of power between Baghdad and the governorates and regions. Revised drafts circulated by the relevant parliamentary committee and then the Council of Ministers in August 2011 have remained ambiguous or silent on this point. It remains to be seen if and when a new law will be passed. Baghdad and the KRG have a longstanding agreement that all petroleum exported from Iraq should be marketed through the federal State Oil Marketing Organisation and the KRG should receive 17% of the resulting revenues. Their disagreement is over the extent of the KRG’s rights to regulate the petroleum sector in Kurdistan and, in particular, to enter into contracts relating to the exploitation of oil and gas in the region. Baghdad argues that, by unilaterally passing regional legislation and signing PSCs, the KRG has breached its constitutional obligation to act in concert with the Federal government, rendering the legislation and the contracts void. The KRG’s position is that first, the general provisions of the constitution allow the KRG autonomy in relation oil and gas law as it is not reserved for the Federal government, and that the specific provisions of Article 112 do not apply for a number of reasons. The KRG says there were no producing fields in Kurdistan when the constitution came into force in 2006; Article 112(1) relates only to management of petroleum after it is extracted (i.e. in relation to transportation and export); and that Article 112(2) is limited to policy formation in areas such as agreeing production levels in the context of OPEC quotas, rather than regulation and contracting. ==================