1. April 11th 2011 Gustavo Montenegro
PETROLEUM TAXATION PSA vs. TAX/ROYALTY REGIMES …A 15 MINUTES PERSPECTIVE / ONE MESSAGE
April 11th 2011
Gustavo Montenegro

2. PETROLEUM TAXATION DIFFERENT NAMES Tax / Royalty PSA EPSA
THE BASICS
CHARACERISTICS
DIFFERENT NAMES
Tax / Royalty
PSA
EPSA
Service Contracts
COMMON ELEMENTS
TAX RATE
COMPLICATED MECHANISM
Depreciation
Uplift
Interest
State Participation
Loss carried forward

3. SYSTEMS AROUND THE GLOBE
PETROLEUM TAXATION
PETROLEUM TAXATION
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4. MARGINAL TAX SAMPLE
PETROLEUM TAXATION
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5. MARGINAL TAX SAMPLE
PETROLEUM TAXATION
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6. THE MESSAGE THE MORE THE MERRIER BETTER NOW THAN LATER
PETROLEUM TAXATION
DEDUCTIONS
TIMING
THE MORE THE MERRIER
BETTER NOW THAN LATER

7. TIMING PETROLEUM TAXATION ASSUMPTIONS DEPRECIATION
TOTAL CAPEX = MUSD 400
YEARLY DISBURSEMENT = MUSD 100
MARGINAL TAX
NORWAY (NOR) = 78%
PSA = 78%
DEPRECIATION PERIOD
NOR = 6 YEARS
PSA = 6 YEARS
DEPRECIATION START
NOR = On disbursement
PSA = Production start
YEAR
MUSD (10%)
55 MUSD / 253 MUSD = 22%
78% Marginal Tax = 17% lower NPV terms*
* 22% x 78% = 17%

8. PSA SYSTEMS -BASICS Cost oil
Production
COST OIL
PROFIT OIL
Cost oil
Part of the production which is allocated to cover the contractors costs
CAPEX & OPEX
Profit oil
Part of production to be distributed betweeen government and contractor

9. PSA SYSTEMS -EXAMPLE Net Revenues 40% 60% COST OIL PROFIT OIL X KBPD Y
…if
excess money
after paying
CAPEX
OPEX
carried forward to next year
X KBPD Y
60% %
75% %
85% % NO
Loss
YES x% y%
Government
Contractor
* 22% x 78% = 17%

10. SIMPLIFIED COMPARISON
TAX ROYALTY
PSA
40% Cost Oil
60% Profit Oil at 75% Tax
78% Net tax
YEAR
MUSD (10%)
55 MUSD / 253 MUSD = 22% difference
78% Marginal Tax = 17% lower NPV terms*

11. SUMMARY PSA ARE WORKABLE SYSTEMS MARGINAL TAX IS RELEVANT
BUT DEDUCTIONS & TIMING ARE THE VALUE DRIVERS
CURRENT PSAs
UNDER-INVESTMENT ON GREEN FIELD DEVELOPMENTS
NO INCENTIVE TO VALUE FUTURE FLEXIBILITY
FOCUS ON BIG FIELDS
SMALL & MARGINAL RESOURCES NOT MATERIAL
EOR MIGHT NOT BE ATTRACTIVE
BETTER NOW THAN LATER
BUT THE ONE WITH THE INVESTOR SHOULD BE PRIORITIZED

12. www.poyry.com www.econ.no Oslo Stavanger
Postboks 5, 0051 Oslo NORWAY Biskop Gunnerus’ gate 14A, OSLO Norway
Telephone: Fax:
Stavanger
Kirkegaten Stavanger NORWAY
Telephone: Fax:
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