Oil and Gas Petroleum Taxation

Course Contents, Concepts and Issues

Part 1: Rationalizing Oil and Gas – Petroleum Taxation

• Functions of Tax
• Criteria for Assessing a Good Tax
• Compromises
• Economic Rent
• Types of Rent
• Scarcity Rent
• Differential or Ricardian Rent
• Quasi rent
• The Import-Conversion-Export Process
• Tax Instruments
• Gross Royalty
• Brown Tax
• Resource Rent Tax (RRT)
• Income Tax
• Qualitative Assessment of Main Tax Instruments
• Interaction of Tax Instruments

Part 2: Upstream, Midstream and Downstream Oil and Gas Operations

• Upstream Oil and Gas Sector
• Prospecting or Exploration
• Acquisition
• Drilling
• Developing
• Producing Oil and Gas
• The Midstream Oil and Gas Sector
• The Downstream Oil and Gas Sector
• Downstream Tank Farms
• Refining or Processing of the Crude or Gas
• Marketing
• Distribution
• Industrial Customers:
• Power Generators - Fuel Oil
• Railways – Gas Oil
• Haulage - Ultra-low Sulphur Diesel (ULSD)
• Buses and Coaches - ULSD
• Construction and Aggregates,
• Mining and Quarrying
• Origin of Petroleum: The Organic Theory:
• Igneous Rocks;
• Metamorphic Rocks;
• Sedimentary Rock;
• Common Types of Traps:
• Fault Traps
• Anticlines
• Salt Domes
• Exploration Methods and Procedures
• Geophysical Methods
• Gravitational studies
• Magnetic and Electromagnetic Evaluation, and Seismic Studies
• 3D Seismic
• 4D Seismic
• Reconnaissance Survey
• Drill Stem Test
• Proved Area
• Field
• Reservoir
• Oil and Gas Drilling Operations:
• Rigging Up
• Drilling Platform
• Drilling Rig
• Drill String
• Rat Hole
• Tripping In
• Tripping Out
• Obtaining and Installing Production Casing (steel pipe lining the wellbore)
• Installing Tubing
• Perforating
• Installing the Christmas Tree
• Constructing Production Facilities
• Installing Flow Lines.
• Types of Wells
• Development Well
• Injection Well
• Offset Well
• Exploratory Well
• Stratigraphic Test Well
• Service Well
• Dual Completion Well
• Dry Hole
• Producing Well
• Oil and Gas Recovery Processes:
• Primary Recovery Process
• Secondary Recovery Process
• Tertiary Recovery Process
• Blowout Preventers (BOP)
• Bottom-hole Pressure
• Bottom-hole Pump
• Offshore Drilling Operations
• Deepwater Oil and Gas Platforms;
• Deepwater Spar Production Facilities;
• Deepwater Oil Rigs;
• Dangers on the High-Sea

• Defining Petroleum Fiscal Regime
• Evolution of Petroleum Fiscal Regime
• Classification of Petroleum Fiscal Regime
• Concessionary Systems
• Contractual Systems
• Concessionary Systems
• Calculation of Government and Contractor Take
• Concessionary System Flow Diagram
• Basic Equations for Royalty/Tax Systems
• Concessionary Systems in Practice
• The UK Petroleum Fiscal Regime
• The Australian Concessionary System
• The Norwegian Concessionary System
• Qualitative Comparison of Concessionary System
• Contractual Systems
• Types of Contractual Systems
• Service Agreements
• Pure Service Agreements
• Risk Service Agreements
• Production Sharing Agreements
• Basic Equations for Contractual Systems
• Contractor Take
• Cash Flow Projection
• Important Elements of the Production Sharing Fiscal Structure
• Bonus Payments
• Royalties
• Sliding Scales
• Contractual Systems in Practice
• Indonesia’s Production Sharing Agreement
• The Chinese Production Sharing Model
• Iraq Service Contract
• Qualitative Comparisons of Contractual Systems

• Defining Production Sharing Contract
• Characteristics of Production Sharing Contract
• Production Sharing Contract and Taxation
• General Overview and Commercial Terms’
• Indonesian Production Sharing Contract
• Generation of Production Sharing Contract
• Sharing of production – Oil
• Cost Oil
• Profit Oil
• Investment Credits
• Equity Share – Oil
• Valuation of Oil
• Sharing of Production – Gas
• Production Sharing Contract in:
• Nigeria
• Philippines
• Sudan
• Libya
• Oman
• Qatar
• India
• Bahrain

• Background
• Development of UK North Sea Tax System
• Foundation of the Regime
• Tightening of the System
• Royalty Abolition
• Petroleum Revenue Tax (PRT)
• Measurement of Gross Profit
• Valuation of Oil
• Valuation of Gas
• Tariffs
• Field Expenditure
• Supplement
• Oil Allowance Relief
• Safeguard Relief
• Allowable Losses
• Transfer of Field Interest
• PRT Returns and Payment of Tax
• Supplementary Charge Imposition
• Doubling the Supplementary Charge

• Continental Shelf Act 1964
• Petroleum Act 1998
• The Role of the Department for Business, Innovation and Skills (BIS)
• Joint Operating Committee
• Terms Of A Petroleum Licence
• The UKCS Grids and Blocks
• Licence Coverage
• Licensing Criteria

• Royalty and the 1983 Changes
• Corporation Tax, Supplementary Charge and the 2002-2005 Amendments
• General Corporation Tax Rules
• Ring Fencing
• Ring Fence Profits
• Commencement of Trade
• Revenue Expenditure Reliefs
• Capital Expenditure Reliefs
• Ring Fence Expenditure Supplement
• Capital Gains Tax
• Transfer Pricing
• Taxation for New Entrants
• The UK Continental Shelf
• Selected International Comparison, incorporating UK