It was this year the elfs odudu blend, offshore oml 100 cam onstream. Components of production sharing contract in kenya. It is not a coincidence that the countrys first psc arrangement was with ashland oil company in 1974. In contrast, production sharing contract psc arrangement is the common system of oil and gas contractual arrangement between government and foreign oil companies, in which the focs bear the exploration, drilling and development expenditures, the host government has the right to participate in the venture as a working interest owner at a. Spe member abstract nigeria, as a member of the oil producing and exporting countries opec, today operates various forms of joint venture arrangements. Most of nigeria s oil fields are small and scattered, and as of. Article eight either party may request a revision of this agreement by giving written notice to the other party. Head of state, commanderinchief of the armed forces. The principle and nature of law of contract in nigeria.
Concession contracts may then be awarded for such projects as a. The principal legislation is the ppt act, but this is complemented by the deep offshore inland basin production sharing contract act for production sharing contracts pscs. Nigeria had in the past years engaged in joint venture agreement jva for the exploration of her petroleum resources. The contractor shall a be responsible to the government for the execution of the petroleum operations contemplated hereunder in accordance with the provisions of this. Pdf stabilisation and renegotiation clauses in production. Productionsharing contracts now dominate the world of upstream exploration and development for oil and gas, with some exceptions in europe, in the us and in some latin american countries which have during their privatisation period in the 1990s reintroduced mineral. Production 14 2008 2007 millions of euros production from working interests 1 thousands of barrelsday 121. However, considering the inherent difficulties associated with joint. According to abbagana, in april 2016, the commission drew the attention of government to the fact that three main contract types namely joint venture, production sharing and service contracts are in use in the nigerian oil and gas industry. The signed production sharing contracts have the following key component.
Renegotiation of nigerias production sharing contracts. A billdeep offshore and inland basin production sharing contract. Production sharing contract dated this agreement is a production sharing contract made under the petroleum act between the, acting on behalf of the democratic republic of timorleste the ministry and and each a contractor and collectively, the contractors. Trends in productionsharing contracts in nigeria authors e.
Under these arrangements, the nnpc is the holder of the concession while the ioc is the contractor. Traditional extension systems focus on increasing agricultural productivity, use a topdown approach and often emphasise the transfer of technology. In africa there is an estimated 1 extension worker per 4,000 farmers, compared with 1 per 200 hundred farmers in developed countries. The production sharing contract psc the psc is today the toast of nigerian petroleum industry. Production sharing contract psc is an arrangement used in the. In the early 1990s, when nigeria sought to increase its petroleum production. Model production sharing contract under the petroleum act. Oil and gas exploration and production laws in nigeria. Under production sharing contract arrangements, the nnpcs contractors bear the cost of petroleum operations within the contract area and, in return, can recoup costs after defraying royalty. Production sharing contract in the nigerian oil and gas sector hg. At the end, this dissertation will compare both regimes from a contractual perspective in order to answer whether it is really necessary to adopt a new regulatory framework based on a production sharing contract for the subsalt area in brazil. This study aims to compare expected returns from exploiting petroleum resources of selected countries nigeria, indonesia. Deep offshore and inland basin production sharing contracts. This model for extension, however, is becoming outdated in the more competitive, marketoriented climate of todays agriculture.
This decree may be cited as the deep offshore and inland basin production sharing contracts amendment decree 1999 and shall be deemed to have come into force on 1st january 1993. Nigerian employment agreement legal forms documatica. The production sharing contract psc was widely introduced in 1993 to address some of the issues faced by the joint operating agreement joa and also to. The law here guides against the misuse or misapplication of the formation of the various steps or stages obviously involved in the formation of a truly binding contract which the law can enforce.
An employment agreement is used when an employee is hired or rehired, and states the compensation the employee will receive, and any other terms and conditions of employment that may exist. Although they do not have the force of law, they are a step in the right direction. Maximization of returns and benefits are the major determinants state considers for adopting particular petroleum fiscal regime in the course of exploiting its petroleum resources. Production sharing agreements as a form of international.
Production of petroleum in nigeria 1987 5 jerl 273290. Nigeria new guidelines on procurement and award of contracts. Nigeria has a total of 159 oil fields and 1481 wells in operation according to the department of petroleum resources. Pricewaterhousecoopers limited a nigerian limited liability company. Farmouts are a means of spreading costs and sharing geological information. The building and construction sector has been relevant in the development of the nigerian economy. The first article looked at opportunities created by the sharing economy and shed light on consumer attitudes toward sharing derived from extensive market research conducted in germany, india, and the us. The ppt rate varies depending on the contract type and years of operation from the date of commercial production. At one point or another one has to agree with others to achieve his goals. Jul, 2015 all contracts are based on a model production sharing contract psc issued as a schedule to the regulations issued under section 6 of the act. Production sharing agreements onestage sharing mechanism 1995 federal law on production sharing agreements 1. Most of nigerias oil fields are small and scattered, and as of.
All contracts are based on a model production sharing contract psc issued as a schedule to the regulations issued under section 6 of the act. Dec 20, 20 nigeria ventured into production sharing contract arrangement after the arab oil embargo of 1973, which contributed to a profound seismic shift in the relationship between oil producing countries and their oil consuming counterparts. Housing is a major component of the building and construction sector. How to write agreements contracts business nigeria. Contracts for large natural resource investments are usually very complex, raising challenges for negotiators, implementers, and scrutinisers. The nnpc is the holder of the opl and oml which constitute the contract area. The deep offshore and inland basin production sharing. Collective bargaining and conflict resolution in nigerias.
Oil and gas exploration and production laws in nigeria lexology. A comparative analysis of production sharing contracts of. The mamba complex, discovered in 2011, is the biggest operated discovery in enis history. The first and the most important feature of a psc is that the title of the oil and gas remains with the state and not the ioc. Production sharing contracts now dominate the world of upstream exploration and development for oil and gas, with some exceptions in europe, in the us and in some latin american countries which have during their privatisation period in the 1990s reintroduced mineral. Revenue sharing arrangements in production sharing agreements illustrate this point vividly. Joint venture agreement jva and production sharing contract psc. Two major fiscal regimes are adopted for exploiting petroleum resources. Oil producers like nigeria are not just on the verge of a national petroleum industry legal revolution in its. Production sharing contract in nigeria has some distinct features from other forms of contractual arrangements in the upstream petroleum subsector.
Nigerias tax framework and its implications for businesses. The case for publishing petroleum contracts in nigeria natural. From the fgns perspective, given that some of these pscs were negotiated and entered into over 20 years ago, there is a need to update them to reflect current realities and also to. Download limit exceeded you have exceeded your daily download allowance. New guidelines on procurement and award of contracts nigeria has issued new guidelines on public procurement and contract award procedures. Farmout agreements mainly used by oil companies in trading for leases to assemble blocks of acreage needed to develop their prospects. Seen from above table and figure, nigerian psc 2003 sections 2. From 1908, when oil exploration first began in nigeria by a german company, the nigerian bitume. The proportion of agriculture budgets allocated to extension services varies from country to country, for example, from 5% in zambia to 50% in. The contractor is appointed and given exclusive rights to carry out the exploration and production operations in the contract area for a period of 30 years. Formation of binding contract the article considered the importance of a truly and legally binding agreement in mostly commercial transactions in nigeria that would ultimately translate into such that the law would enforce.
Ogel 1 2005 browse issues journal ogel journal oil. Tactics for minimizing conflicts zikmann, 1992 looked at the construction industry has been extremely fragmented and the problems posed by those working in it has compelled the leadership in the project manager to institutionalize a. Model production sharing agreement for petroleum exploration. Nigeria ventured into production sharing contract arrangement after the arab oil embargo of 1973, which contributed to a profound seismic shift in the relationship between oil producing countries and their oil consuming counterparts.
This decree may be cited as the deep offshore and inland basin production sharing contracts decree 1999 and shall be deemed to have come into force on 1 st january, 1993. Having carefully examined the fiscal terms of each contract and the associated. Alternative models have emerged that recognise other actors than. Production sharing contracts news latest breaking stories. Snepco signed the production sharing contracts in a sixth participation. Mozambique revises its petroleum legal framework in light.
We are pleased that we are able to focus with this first ogel issue in 2005 on productionsharing contracts. The production sharing contract psc was widely introduced in 1993 to address some of the issues faced by the joint operating agreement joa and also to provide a suitable agreement structure for encouraging foreign investment in offshore acreage. Read all the latest news, breaking stories, top headlines, opinion, pictures and videos about production sharing contracts from nigeria and the world on today. Such a request will be responded to within six months from the date of submission. Joint development authority model production sharing contract of 2004 extract clause 1 definitions clause 2 bonuses 2. The niger deltas main environmental and social challeng es result from oil. Other key changes are the establishment of the legal basis to award a separate concession contract for the processing and conversion of petroleum not already included in the scope of an existing exploration and production concession contract. Model psc under the petroleum act page 2 production sharing contract dated this agreement is a production sharing contract made under the petroleum act between the, acting on behalf of the democratic republic of timorleste the ministry. Acting chairman of rmafc, shettima abbagana, said this in a statement issued by ibrahim mohammed, spokesperson for the commission on thursday in abuja. The parties would include the host governmentconcessionaire of the field and the opcs either in a joint venture, production sharing contract or other arrangement and the construction contractor, who would be awarded. Production sharing contract measures kpmg united states.
Sharing contract psc provisions that permit royalty payments according to the. This rule making process of collective bargaining confers the jurisprudence status on it in labour relations. How to write agreements contracts by onyekachi umah, esq. The second article examined companies strategic options for turning potential threats posed by the sharing economy. The contractor shall a be responsible to the government for the execution of the petroleum operations contemplated hereunder in accordance with the provisions of this contract and is hereby appointed and constituted the exclusive legal entity. The illegality may be borne out of sheer ignorance or mere mischief. Typically, employment agreements cover such topics as rate and frequency of payment, vacation time, confidential obligations. The leak in july 2014 of an important addendum to a production sharing agreement psa between norwegian national oil company statoil and the government of tanzania has ignited a debate on whether tanzania got a good deal from granting these extraction rights for a block now expected to produce large amounts of commercial natural gas. This is the last of three articles on the sharing economy. Legal issues in the management of nigerias production sharing contracts from a study of the nigerian national petroleum corporations national petroleum investment management services perspective. A guide to the nigerian energy sector oil corporate. Tax issues in nigerian oil and gas contracts a critique of. Production sharing contract will be brought into discussion. The most productive region of the nation is the coastal niger delta basin in the niger delta or southsouth region which encompasses 78 of the 159 oil fields.
The construction contract will be structured as an epci engineering, procurement, installation and commission turnkey contract. Trends in productionsharing contracts in nigeria onepetro. Together with partners in lower and middleincome countries, iied has. Psa a contract, under which the state as the owner of mineral resources gives to a company as a contractor exclusive rights on a paid basis to explore and develop a deposit while providing technical and financial services. Components of production sharing contract in kenya oilnewskenya. Deepoffshoreandinlandbasinproductionsharingcontracts. It is an agreement born in response to the funding problem faced by the old jv arrangement as well as the desire of the nigerian government to open up the sector for more foreign participation. Mozambique revises its petroleum legal framework in light of. Jan 07, 2019 under production sharing contract arrangements, the nnpcs contractors bear the cost of petroleum operations within the contract area and, in return, can recoup costs after defraying royalty. These arrangements which reflected state of the art of industry at the time, ranged from simply tax and royalty only through equity sharing to production. The psc act which grants certain fiscal incentives to exploration and production companies operating in the deep offshore and inland basin area of nigeria allows the fgn to adjust the revenue sharing formula in the psc whenever the price of. This is a oneoff fee payable to the government by the company upon signing of an oil exploration contract. Conflict management in nigerian construction industry.
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