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Report on Fiscal System Structure of Petroleum Rights and Contract Agreements

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Added on  2020-06-05

Report on Fiscal System Structure of Petroleum Rights and Contract Agreements

   Added on 2020-06-05

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PETROLEUM CONTRACTSAND ECONOMICS TASKS
Report on Fiscal System Structure of Petroleum Rights and Contract Agreements_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1PSC Fiscal System Structure.......................................................................................................1CONCLUSION................................................................................................................................4REFERENCES................................................................................................................................5
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INTRODUCTIONThe report is based on fiscal system regime of petroleum in Ghana. Ghana is leading inproduction of oil since 2010. The budget of the government in the exploration of oil resourceshas been declining every year along with the decline in economic growth rate. This has forcedthe government of Ghana to support of IMF in 2015. All these situations have led to the negativeimpact on the citizens of Ghana about their economy. The present report Fiscal system structureof petroleum rights and contract agreements. This agreement mainly includes Tax and Royaltycontract, Product sharing contract, service contract and Comparing system. This report is mainlyfocused on product sharing contract, its legal framework, Key principles of PSC to hostgovernment, weaknesses and proposed revisions in context with Ghana.PSC Fiscal System StructureProduct sharing contractsIt is a contract between Resource extraction companies and government related to theamount of resources (in case of Ghana, there resources are Oil) will each receive after theextraction. Resources are extracted by either government or private companies. Privatecompanies have to give a share of resources that are extracted by them to the government ofcountry. The agreement between the two about the share of resources they will receive is referredas Product Sharing agreement. This agreement gives rise to the Product Sharing Contract (PSC).This is an agreement between government and contractor that includes the policies like all theexploration risk is to be borne by contractor and all the development and production cost. Thesecosts are born by contractor in return of stipulated share of this production that resulted from thiseffort. However, in case of commercial delivery, these costs are recoverable. It is familiar to thepetroleum industry and transfers risk to the investor.Ghana's legal frameworkAccording to Farimani, Mu and Taherifard, (2017) generation of revenue throughproduction of oil and gas industries will directly benefit Ghana because of its peculiar regime.The benefits from the production mainly depends upon the legal and fiscal regimes that areadopted for the purpose of upstream oil and gas production. However, Iledare (2014) criticallyevaluated the three major areas of petroleum legal framework as:1
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