Malaysia PSC

Overview of Malaysian PSC

FIELD LOCATION MALAYSIA M’sia / Thai Development Area PM3 Commercial Arrangement M’siaVietnam Kangar

Georgetown

SABAH

Gurun Kuala Terengganu Kg. TOKARUN

Lumut

KERTIH Kemaman Kuantan

Meru

PENINSULAR MALAYSIA

KUALALUMPUR

Seremban

LNG PLANTS

SARAWAK

Segamat

Melaka

OIL AND GAS FIELDS*

JohoreBahru

FIELD DISCOVERED PRODUCING

OIL 134 47

GAS 178 14

MALAYSIA EXPLORATION AND PRODUCTION BLOCKS 9°

100°

98°

104°

102°

106°

108°

112°

110°

114°

118°

116°

120° 9°

VIETNAM

PALAWAN

( PHI LI PPINES)

THAILAND

 Malaysia / Thailand   Joint Development   Area

2      0      0      m   

PM3

Pulau  Bugsuk  Pulau  Balabac

Commercial Arrangement   Area

ND5 

ND4 

7°

H 

PM302  PM311

PM301

Pulau Langkawi

ND1

PM303 

PM313 

F  F 

PM312 

G  C 

A

Pulau Pinang

5°

PM314  PM309 

PM321

PENINSULAR

PM307 

S    t  r  a   i    t  s   o     f     M    PM322  e  l    a  k   a  

SK312  SK3 

PM305  SK302 

MALAYSIA

SK308 

SK5 

Pulau Pulau Sibutu Timbun Mata

SB306  Pulau Sebatik 

SK311 SK303 

ND6 

SK334 

ND7 

SK332 

SK305 

Pulau Subi  Besar 

Pulau  Djemadja

  9  9   0   0   3   3   K   K   S   S

5°

SB332   N  U  R  B

Pulau Tawitawi

SB331

 I  E

SK333 

PM308  Kepulauan  Anambas

SABAH

Pulau Labuan

SK 307  SK310 

SK306 

Pulau  Natuna

Pulau Tioman

M  J 

SK301

7°

SB305  SB301

E 

B 

Sulu Sea

SB330 

L

D 

B 

South China Sea

PulauSB304   Malawali Pulau  Jambongan

ND3 

PM306 

PM320 

3°

ND2 

SB303 

SB302 

K 

2  0    0    m  

Pulau  BalambanganPulau  Banggi

3° SK331

SK304 

SARAWAK SUMATRA

0 SI NGAPORE

1° 98°

100°

102°

104°

106°

200 Km

108°

Celebes Sea

KALI MANTAN

1° 110°

112°

114°

Development & Producing PSCs : 24

116°

118°

120°

CONCEPT OF PRODUCTION SHARING CONTRACT (PSC)

GOVERNMENT

PDA

Entire owne rship o f Nation's petroleum resources is ve ste d to PETRONAS. PETRONAS has e xc lusive rights to exploit Nation's pe trole um reso urce s.

PETRONAS, as a custodian, manage s the pe troleum res ource s o f the Nation. Formulates relevant policy and guidelines. Provide s ne ce ss ary ince ntives and c onducive inve stme nt environment for upstream petroleum business. Adds value to the pe trole um resources.

PETRONAS

PSC

CONTRACTORS

Conve rte d Conce ssion Syste m to Produc tion Sharing Contracts (PSC). Obligates Partners to provide all financing and insulate PETRONAS from risks. Provides a more equitable partnership. Stipulates contractual period, management of operations, re co ve ry of cos ts, division of  profit, obligations of partie s.

Plans and secures long term de ve lopme nt of Nation's pe trole um re source base . Promotes sustainable exploration, development and production of re so urce s for the maximum b e ne fit to the nation. Manage s pe rformance of PSC Partne rs. Brings in fore ign inve stme nt and technology.

EVOLUTION OF PSC INLINE WITH CHANGING ENVIRONMENT Revenue-over-cost (R/C)

DEEPWATER PSC

1985 PSC

1976 PSC

Convert existing Concession into PSCs CONCESSION AGREEMENT Oil companies and State government

To attract other oil companies besides ESSO and SHELL

Target for big players with deepwater experience

To attract new foreign investment through smart partnership concept

PSCs IN OPERATION IN MALAYSIA (As at January 2004)

50 1 9 76 P S C

D E E P W A T E R & R /C P S C

1 9 85 P S C

42

43

40 37 33 30

30

30

31 29

27

31

29 27

21

20

11

10 5

4

4

4

5

5

6

6

6

6 4

0 1976

1980

1984

1988

1992

1996

2000

46 44

41

SPLIT OF THE BARREL UNDER PSC Revenue (A) less Royalty (B)

Royalty

10% of (A) less Cost Recovery (C) Max 50% of (A)

Cost Recovery to Contr

equals Profit Oil

plus Profit to Contr

(A)- (B)-(C)

equals Entitlement to Contr

Profit to NOC equals Entitlement to NOC plus

less Tax

Contr tax paid

less

plus Tax

less

NOC tax paid

Expenses equals Contractor NCF

Contractor

equals

equals

Contractor NCF

GOV NCF

National Oil Company

Government

76 PSC Government Cash Flow

Less Royalty 10%

Actual Used Cost

Contractor’s Profit Oil Less PITA 38%

Contractor Cash Flow

Gross Revenue

Less Cost Cost Oil Ceiling 20% Profit Oil Split Contr : PET 30% :70%

PETRONAS Profit Oil

Less PITA 38% PETRONAS Cash Flow

85 PSC Government Cash Flow

Less Royalty 10%

Actual Used Cost

Gross Revenue

Less Cost Cost Oil Ceiling 50% Oil, 60% Gas Profit Oil Split Contr : PET Sliding

Contractor’s Profit Oil Less PITA 38%

Contractor Cash Flow

PETRONAS Profit Oil

Contr

PETH

First 10 kbd

50

50

Next 10 kbd

40

60

Ecxess 20 kbd

30

70

Less PITA 38% PETRONAS Cash Flow

ROC (Revenue Over Cost) PSC Government Cash Flow

Less Royalty 10%

Actual Used Cost

Contractor’s Profit Oil Less PITA 38%

Contractor Cash Flow

Gross Revenue

Less Cost Cost Oil Ceiling Depend on R/C

Unused Cost Oil Contr : PET

Profit Oil Split Contr : PET Depend on R/C

PETRONAS Profit Oil

Less PITA 38% PETRONAS Cash Flow

APPROACH : REVENUE-OVER-COST (R/C) INDEX One of the "yardsticks" to gauge Contractors' profitability at any time is by the RATIO of Contractors' Cumulative REVENUE over Cumulative COSTS. We define the above yardstick as Contractors' R/C Index Contractors' Cumulative Cost Oil +Profit Oil From The Effective Date

R/C Index =   v   e    R  .   m   u    C    &   s    t   s   o    C  .   m   u    C   s    '   r   o    t   c   a   r    t   n   o    C

Contractors' Cumulative Petroleum Costs From The Effective Date 2.50

Cumulative Revenue (PO+CO)

  x 2.00   e    d   n    I    C    / 1.50    R   s    '   r   o    t   c 1.00   a   r    t   n   o    C0.50

Cumulative Costs 0.00

0

2

4

6

8 10 12 14 16 18 20 22 24 26 28

Year

0

2

4

6

8 10 12 14 16 18 20 22 24 26 28

Year

R/C = 1; Represents PAYOUT (undiscounted), but true Payout (considering time value of money, tax payment, etc.) occurs when R/C is around 1.4 Outline

R/C TABLE Contractor’s R/C Ratio

COST OIL

PROFIT OIL

Cost Oil

Unused Cost Oil

Profit Oil

Ceiling

PET : Cont

0.0 < R/C