L3 TYPES OF AGREEMENTS BETWEEN FOREIGN COMPANIES AND HOST.pptx

Petroleum economic

1. TYPES OF AGREEMENTS BETWEEN FOREIGN COMPANIES AND HOST GOVERNMENT

2. Seismic survey contracts

3. SPEC SHOOT AGREEMENT

4. Benefits of Spec Shoot Agreements (English) Reduced Exploration Cost for Oil Companies Companies can access seismic data without paying the full acquisition cost. Risk Sharing The seismic company takes on most of the financial risk. Early Access to Data Oil companies gain a competitive edge in licensing rounds or farm-in opportunities. Multi-client Revenue Model Seismic companies can sell the same data to multiple clients, improving profitability. Faster Exploration Decisions Available data speeds up decision-making for block bidding or farm-in deals. Improved Data Quality

5. Spec shoots are often large-scale and high-quality surveys. No Need for Long-term Commitment Oil companies can buy access without entering exclusive long-term deals. Supports Small and Mid-size Operators These companies benefit from high-quality seismic without huge capital investment. Encourages Investment in Frontier Areas Governments encourage spec shoots in underexplored regions to attract investors. Regulatory Compliance Many governments require seismic surveys before offering new exploration blocks.

6. GROUP SHOOT AGREEMENT

7. Cost Sharing Multiple companies split the cost of expensive seismic operations. Aligned Interest All companies involved want high-quality data in the same area. Better Survey Design Custom survey design to meet all parties’ geological requirements. Reduced Individual Risk Each company pays less and shares in the benefit. Early Strategic Planning Participants get immediate access to the data for exploration and bidding. Data Exclusivity Only the group has access keeps competitors out. Government Support Often supported in underexplored regions by national governments.

8. CONCESSION CONTRACTS

9. A Concession Agreement is a legal contract where a host government grants a private company the rights to explore, develop, and produce hydrocarbons (oil & gas) from a specific area. The company usually: Pays royalties and taxes to the government Fully funds the project Owns the oil and gas it produces

10. Benefits of Concession Agreements (for Host Country & Company) 📌 For Host Government: No upfront investment required Income through royalties, taxes, bonuses Transfer of technology & employment opportunities 📌 For Oil Company: Ownership of production Long-term control over operations Flexible exploration and development planning

11. JOINT VENTURE AGREEMENT Host government forms an operating company jointly with contracting company for exploration and production of oil and gas.

12. JOINT VENTURE AGREEMENT

13. Immediate or Cancelled The IOC ( Immediate or Cancelled ) allows an investor to buy or sell a share as soon as the order is placed in the market, failing which the order will be removed from the system. It is a duration order and cancels out if it is not executed immediately.

14. PRODUCTION SHARING AGREEMENT A Production Sharing Agreement (PSA) also called a Production Sharing Contract (PSC) is a contract between a government and an oil company , where the company explores for oil/gas at its own risk and expense, and if successful, shares the production with the government.

15. 🛢️ PSA Process Flow (Simplified) Exploration Company funds and conducts exploration. Discovery If oil is found, company starts production. Cost Recovery A fixed % of oil (e.g., 60%) goes to the company to recover its costs. Profit Sharing Remaining oil is shared between government and company (e.g., 70% to government, 30% to company).

16. Benefits of PSA 📌 For Government: Retains ownership of natural resources Gets a share of profit without financial risk Gains technical and operational expertise from the contractor 📌 For Oil Company: Gains access to resources Can recover costs before profit is split May receive incentives or tax benefits

17. Risk Contract in Petroleum Economics A Risk Contract is a petroleum agreement where an oil company (contractor) agrees to explore, develop, and produce oil and gas at its own financial risk , and in return, gets a share of the production or a fee only if oil or gas is discovered .

18. Types of Risk Contracts: Production Sharing Agreements (PSAs) Contractor bears all risk Recovers cost from "cost oil" and shares "profit oil" Service Contracts (Risk Service Contracts) Contractor is paid a fee per barrel or a fixed return if oil is discovered Does not own the oil Joint Venture (JV) with Risk Clause Contractor and NOC share costs and risks, often with special terms for recovery

19. Service Agreements in Petroleum Economics A Service Agreement is a petroleum contract where a government (or national oil company, NOC) hires an oil company (contractor) to perform exploration and/or production services, and pays them a fixed fee or cost reimbursement — not a share in the oil or gas .