Oil and Gas Management



Table of Contents

Introduction2

Task 12

The basic structure and terms of a typical PSC2

A comparison of relative merits of PSC and Tax & Royalty regimes4

Proposal for the selection of structure6

Results under PSA terms6

Results under Tax & Royalty Terms7

Indication of the robustness of the investment opportunity to ChevTex10

Task 211

Evaluation of Bids11

Selection Criteria12

Method of Payment14

Firm price14

Ceiling price14

Expenditure Limit15

References17

Appendix19

Oil and Gas Management

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant information relating to oil and gas management. In this paper, first we will conduct critical analysis of the ChevTex's investment decision. Chevron Texaco (ChevTex) is continuing to expand its interests in West Africa. Having already built a position within a number of states, further expansion into a newly emerging play in a country with no previous oil and gas industry is being considered. The Economic Evaluation spreadsheet models would be used to justify our proposals. The data is modified for robustness assessment and sensitivity analysis work. Secondly, we will create a bid evaluation scheme to measure the quality of the bids before the offers arrive. Finally, in appendix, we will include an assessment of the attractiveness of these potential PSC and Tax & Royalty regimes with some others in place elsewhere in the global oil & gas industry. We will research into the terms offered to investing companies within a variety of different oil and gas producing countries in order to establish a basis for assessment of the relative attractiveness of the terms.

Task 1

The basic structure and terms of a typical PSC

Production Sharing Agreement (PSA) is a form of contract for oil & gas concessions, in which one or more oil companies and the host country are involved in the share of oil and natural gas production to a specified scale. Production Sharing Agreement (PSA) is a special type of agreement on the organization of a joint venture [9]. Typically, a production sharing agreement is a contract between a foreign mining company (contractor) and the state-owned enterprise (government party), authorizing the contractor to carry out exploration and exploitation within a certain area (contract area) in accordance with the terms of the agreement.

The powers of the state are based on [3]:

possession of an exclusive license granted in accordance with applicable laws governing the operation of mineral resources, in this case the region of the agreement coincides with the area of the license or

Exceptional resolution at a general (and responsibilities) to conduct operations with mineral resources throughout the country without a specific commitment.

A distinction is made between cost oil and profit oil. Cost oil is the proportion of feed oil, the oil company's earnings to cover the investment and running costs due. The profit oil is the share of funding that goes beyond and is set for a key (primary split) split. So during the amortization period, 100% of the oil produced is considered as a cost of feed to Oil Company, usually a cost-Oil-agreed limit, which defines the maximum amount funded as a ...