Merak Fiscal Model Library: Trinidad PSC (2005)

Merak Fiscal Model Library
A world-class collection of standardized fiscal models
Trinidad PSC (2005)

Fiscal Term Description
Fiscal Regime Type Production Sharing Contract
Petroleum Act 1969 (as amended), Model Production Sharing Contract 1996.
Governing Legislation
Applies to Oil & Gas (excludes NGL)
• The government through National Oil Company or National Gas Company may elect to
State Participation participate up to 25% of working interest in development phase.
• Contractor recovers the carried costs via Cost Recovery Allocation (First-In-First-Out Basis).
• They include (as described below): Signature Bonus, Surface (or Acreage) Rental,
Administrative Charge, Training Fee, Research & Development Contribution, Scholarship Fund
Financial Obligations and Production Bonus.
• User should enter escalated values on the Burden Custom Tab
Signature Bonus • Signature Bonus is negotiable.
• $1.50/hector in year 1, increasing by $0.25/hector every year until year 9 ($3.50/hector), then
Surface Rental increases by 6% every year thereafter.
• Surface Rental is payable every quarter.
• Administrative Charge is negotiable, paid annually, following is indicative.
Administrative Charge
• $200,000/year, increasing 6% every year until the end of contract.
• Training Fee is negotiable, paid annually, following schedule is indicative.
Training Fee • $125,000/year, increasing 6% every year until commercial discovery.
• $250,000/year, increasing 6% every year after commercial discovery.
• R&D Contribution is negotiable, paid annually, following schedule is indicative.
R&D Contribution • $125,000/year, increasing 6% every year until commercial discovery.
• $250,000/year, increasing 6% every year after commercial discovery.
Scholarship Fund • Amount paid yearly to the MEEI
Production Bonuses due on the negotiable Production Levels (L1, L2, L3 and L4) reached:
Production Rate (BOE/D) Bonus ($M)
L1 Negotiable
Production Bonus
L2 Negotiable
L3 Negotiable
L4 Negotiable
• Abandonment Budget is to be agreed between the government and contractor.

• The Abandonment Fund Deposits are calculated by UOP accrual starting 5 years (or 20
Abandonment Fund quarters) before anticipated end of the project and is cost recoverable as Other Costs.
*The abandonment fund accrual periodicity is subject to negotiation in the contract. By default it is
set to quarterly.
April 2006 Page 1 of 3

Trinidad PSC (2005)

• Cost Recovery limit is negotiable determined by the direct sliding scale of Cumulative
Production (calculated Quarterly). Following table shows indicative rates,
Cost Rec Limit Oil
Cum Production (MBOE)
(%)
< 25,000 50
25,000 – 50,000 40
> 50,000 30
Cost Rec Limit Gas

Cum Production (MMscf)
(%)
Cost Recovery
< 150,000 60
150,000 – 300,000 50
> 300,000 40
• The allocation of the Cost Recovery Revenues is done on First-In-First-Out basis.

• Unrecovered costs are carried forward until end of project.
• Bonuses and Fees are not cost recoverable.
• Operating and Exploration Costs are expensed.
• Development Cost is depreciated in 4 years with custom method (40%, 20%, 20% & 20%).
• Abandonment Fund deposits are recoverable.
• Contractor’s share of profit is determined by Incremental Sliding Scales for Oil and Gas (Monthly):
Contr’s Profit Oil (%) Crude Oil Price (&/BBL)
Prod. Rate Oil (BOPD) <= 20.00 <= 30.00 <= 40.00 > 40.00
< 25,000 45 45 40 35
25,00 to 50,000 44 42 37 30
50,000 to 75,000 43 38 33 23
> 75,000 40 30 20 15
Profit Sharing
Contr’s Profit Gas (%) Gas Price ($/Mcf)
Prod. Rate Gas (Mcf/d) <= 1.00 <= 1.50 <= 2.00 > 2.00
< 150,000 45 45 40 35
150 ,000– 300,000 44 42 37 30
300,000 – 450,000 43 38 33 23
>450,000 40 30 20 15

Trinidad PSC (2005)

• Income Tax is paid for by the government.
• The Tax rate is 55% (Petroleum Tax 50% + Unemployment Tax 5%).
• Contractor’s Provisional Income is contractor after tax net income (Revenue –Deduction) is
calculated for the Taxable Income on the gross-up basis.
• Contractor’s Revenue is Contractor’s Cost Recovery + Profit Sharing + NOC Carry Payback.
• Contractor’s Deduction is Operating Costs + Bonuses & Fees + Tangible Cost Depreciation +
Intangible Costs Depreciation + Contractor Abandonment Fund Deposit Contribution.
All Tangible Costs Depreciation receives 20% initial allowance and is depreciated 20% in
Income Tax the first year and 12% in subsequent years (i.e. 40% 1st year, and 12% each on year 2 – 6).
All Intangible Costs Depreciation receives 10% initial allowance and is depreciated 20%
Declining Balance (i.e. 28% 1st year, and 20% Declining Balance in subsequent years).
• Negative Provisional Income will be carried forward until fully recovered.
• Contractor’s Taxable Income in each year is grossed up from the Contractor’s Provisional
Income using the following formula;
- Gross Up Income = (Provisional Income x Tax Rate) / (1 – Tax Rate)
Withholding Tax There is a Remittance Tax that applies to money that is sent to foreign countries
Ring Fencing Around the Block for Cost Recovery, Profit Sharing and Taxes.
Periodicity It is quarterly for CR, Profit Share and Taxes.
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Merak Fiscal Model Library

A world-class collection of standardized fiscal models

Trinidad PSC (2005)

• Abandonment Budget is to be agreed between the government and contractor.

April 2006 Page 1 of 3

Fiscal Term Description

Cost Rec Limit Gas

• The allocation of the Cost Recovery Revenues is done on First-In-First-Out basis.

April 2006 Page 2 of 3

Fiscal Term Description

Schlumberger Information Solutions

April 2006 Page 3 of 3

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