Merak Fiscal Model Library

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Libya PSC (2006)

Fiscal Term Description
Fiscal Regime Type Production Sharing Contract.
Law 24 of 1970 (as amended by GSPLAJ) and EPSA model contract for Bid Round 3 Areas 19, 20
Governing Legislation 43 and 82
Primary Production Allocation: NOC participates in share of production (Revenue Interest)
according to rate stipulated in the winning contractor bid. The bidding procedure sets the
following rates as the maximum Second Party Allocation for each of the 4 contract areas:
• Contract Area 19
30%
• Contract Area 20
35%
• Contract Area 43
35%
State Participation • Contract Area 82
25%
• Exploration and appraisal costs are borne at sole risk of Contractor.
• Development costs are shared equally (50:50) between NOC and Contractor.
• Abandonment cost is shared equally (50:50) between NOC and Contractor, the Abandonment
Fund deposit schedule is to be determined (UOP Accrual is assumed as model default).
• Operating Costs are shared according to the negotiated Primary Production Allocation (i.e.
Operating Interest equals to Revenue Interest).
Signature bonus is paid by contractor and not cost recoverable. The signature bonus is a bidding
Signature Bonus parameter and cannot be less than US$ 10 MM per Contract Area.
Commercial Discovery US$ 1MM per each commercial discovery
Bonus
US$ 5 MM .when cumulative production surpasses 100 MMboe and US$ 3 MM for each additional
Production Bonus 30 MMboe of production thereafter
At least 10% of contractors’ own employee’s costs (direct and indirect) during exploration phase
Training Fee and negotiable thereafter.
Model assumes contractor is responsible for the training fee. Training Fee is not cost recoverable.

Minimum work programme is also a bidding parameter but the following programs outline the
minimum requirements per Contract Area
Minimum Exploratory Area 19 Area 20 Area 43 Area 82
Work Programme 2D Seismic 2,000 kms 2,000 kms 1,000 kms 1,000 kms
3D Seismic 1,000 km2 1,000 km2 1,000 km2 500 km2
Wildcat Well 2 1 1 2

Royalty NOC pays the royalty on behalf of Contractor.

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Libya PSC (2006)

Fiscal Term Description

• 100% of Revenue after Primary Production Allocation to NOC is eligible for Contractor Cost
Recovery.
• Bonuses are not cost recoverable.

Contractor Cost Recovery • Contractor’s share of exploration and development costs are expensed.
• Contractor’s operating costs are recoverable.
• Contractor’s share of Abandonment Fund Deposit is recoverable.
• Unrecovered costs are carried forward indefinitely.
For Contract Areas 19, 20 and 43, production available after Contractor Cost Recovery (“Excess
Petroleum”) will be allocated to Contractor according to the formula,
Contractor’s Share of Excess Petroleum = A Factor * Excess Petroleum, where
Excess Petroleum = Total Production Value * Bid parameter for Second Party Allocation in %
- Cost Recovery
For Contract Area 82, production available after Contractor Cost Recovery (“Excess Petroleum”) will be
allocated to Contractor according to the formula,
Contractor’s Share of Excess Petroleum = B Factor * A Factor * Excess Petroleum
The remainder goes to the NOC.

B Factor applicable only to Area 82 is determined by a production-based incremental sliding scale

according to values below
Oil Production (Bbl/d) B Factor (%)
0 – 20,000 100
20,001 – 30,000 80
30,001 – 60,000 50
Profit Sharing
60,001 – 85,000 30
> 85,000 20
B Factor for Gas is set equal to 1.

A Factor is determined by a direct sliding scale based on R Factor,

R Factor = Contr Cum. Revenue / Contr Cum. Costs
Where; Revenue = Contr Cost Recovery + Contr Profit Sharing
Costs = Contr Bonuses & Fees + Contr Opex + Contr Capex
The A Factor sliding scale is negotiable, the following is indicative:
R Factor A Factor (%) A Factor (%)
Areas 19, 20, 43 Area 82
<1 100 100
1 - 1.5 90 85
> 1.5 - 3 70 60
>3-4 50 40
>4 30 20

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 Libya PSC (2006)

Fiscal Term Description

• NOC pays income tax and on behalf of the contractor.
Income Tax • If tax rate is entered, model will estimate value of Tax in Barrels for reserves (for US
companies).
Withholding Tax None.
Ring Fencing Ring fence is assumed to be around the contract area.

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November 2006 Page 3 of 3

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