Professional Documents
Culture Documents
CGE416-UPSTREAM Business Perspective
CGE416-UPSTREAM Business Perspective
UPSTREAM PETROLEUM
INDUSTRY
BUSINESS AND TECHNICAL
PERSPECTIVES
FKK, UiTM
Course Objectives
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Systems Context
Political System
Organizational System
Geological &
Geographical system
Economic System
Petroleum / Petrochemical
Industry
Enviromental System
Technological System
Petroleum Company
Objectives
Bidding/Acquisition
Exploration
Appraisal and Planning
Development
Production and (Transportation)
Abandonment
Influencing Factors in
Petroleum E&D Investment
Geological potential
Fiscal regimes
Political risk
Oil and gas price forecasts
Technological requirements
Existing infrastructure
Synergy with existing operations
Influencing Factors in
Petroleum Investment
Environmental considerations
Geographical locations
Potential exploration & development cost
The companys short term cash flow
Competitors
Alignments with companys goals, strategies and
objectives
Petroleum Agreements
1.
2.
3.
Concession system
Production sharing contract
Service contract (risk and
non-risk)
Concessionary System
Contractual System
Service Contract
Service Contract
Petroleum Agreement
Contractual terms
- terms deal with the non-fiscal aspect of the
Fiscal terms
Fiscal Terms
Political Risk
Political Risk
Price increase
Income tax change
Production restriction
Export restriction
Remittance restriction
Foreign exchange control
Currency devaluation
Embargos and boycotts
Reinvestment requirements
Upstream Operations
Exploration
Seismic surveys
Exploration
Appraisal Phase
Development Plans
Development Plans
Development Phase
Development Phase
Engineering/Design Phase
Construction Phases
Offshore-Installation
Production Phase
Stage 1
Stage 2
Development Phase
Engineering/Design Phase
- The process of system design involves the
application of specialized knowledge of structures,
petroleum engineering, chemical engineering and
costs data which is project specific.
Development Phase
Construction Phase
- Steel Jackets
-Concrete Gravity Structures
- Decks and Modules
An offshore platform is equivalent to a drilling rig,
petrochemical processing plant and small town all
concentrated to an area the size of a football field.
Development Phase
Devlopment Drilling
The drilling and production phase cannot start
until the construction of the facility is completed.
If separate drilling platform are used the drilling
may commence as soon as construction is
completed.
Drilling rigs are expensive to operate and a typical
4000 meter offshore well in the North Sea may
cost 1015 million compared to
1-2 million for a typical onshore well.
Production Phase
Abandonement
Malaysian
Petroleum Industry
Historical Facts
Exploration Successes
Exploration Successes
Reserve
Downstream
Downstream
Concession Agreement
(Malaysia)
MALAYSIAN PRODUCTION
SHARING CONCEPT
MALAYSIAN PRODUCTION
SHARING CONCEPT
Elements Controlled by
PETRONAS on PSC
Exploration Period
Development Period
Production Period
Production Sharing of Oil and Gas
Management of Operations
Consultation and Approval
Technology transfer
1976 PSC
1976 PSC
1976 PSC
1976 PSC
Out of its profit oil or gas, contractor has to make the following
payments :
a. Petroleum income tax to Malaysian government 45% of
the taxable income.
b. Export duty to Malaysian Government 20% Profit Oil
portion exported,
c. Research Cess to PETRONAS 0.5 % cost oil plus profit oil
d. Export Duty to Malaysian Government 20% profit oil,
portions exported.
e. Discovery Bonus to PETRONAS RM2.5 million before first
production.
f. Production Bonus RM 5.0 million when production reached
50 Kb/d (or, each multiple).per quarter
g. Supplemental payment to PETRONAS 70% of incremental
Profit Oil revenue when Oil base price ( Which escalates 5%
per year from 1975 Base Price of USD 12.71/bbl)
Management of Operations
Transfer of Technology
Malaysian staff.
Provide development and training programs for its
Malaysian staff.
Training programs for PETRONAS staffs.
1985 PSC
1985 PSC
1985 PSC
28 PSCs signed.
Minimum investment commitment of USD 368
million
125 exploratory wells.
Deepwater PSCs
Introduced in 1993
Based on 1985 PSC
Improvement on cost recovery, profit split and the
exploration, development and production periods
to reflect the higher costs, higher risks and
technology required in the deepwater operations.
Deepwater PSCs
Lead time
- Exploration Period 7 years
- Development Period 6 years
- Production Period 25 years
Cost oil ceiling 75%
Cost gas ceiling 60%
Deepwater PSCs
Introduced in 1997.
Profitability based fiscal regime.
To further stimulate exploration activities.
To provide incentives to develop smaller
discoveries.
To promote use of cost effective new technology
in E&D.
To balance the softening oil price and increasing
operating costs.
Royalty
Cost Recovery
Profit Oil and Gas
Export Duty
Payment for PETRONAS