International Petroleum Fiscal System and Production Sharing Contracts Courses

Figure 1. David Johnston, as the course’s trainer, was taken photos together with all course’s participants on the last day of the course.

On 2 – 6 September 2019, one of PYC researcher, Massita Ayu Cindy attended courses about International Petroleum Fiscal System and Production Sharing Contracts Courses in Jen Tanglin Hotel, Singapore. The course was held for five days by Conference Connection and invited David Johnston as the trainer. David Johnston has been working with Government and oil companies together with Daniel Johnston & Co on contract design, financial analysis, negotiations, and expert witness work. Ten participants from various backgrounds and countries such as Indonesia, Malaysia, Brunei, Singapore, Japan, Nigeria, and United States attended the courses.

The course was started with the basic theory of international petroleum fiscal systems around the worlds, including Indonesia’s famous PSC Net Split (Production Sharing Contract), followed by some exercises both using manual calculation and excel model. Participants were free to request specific contract scheme explanations, especially within their country since there are thousand contract schemes existed. There is also explanation regarding Gross Split PSC scheme that currently applied in Indonesia and how it will affect the government takes, and contractor take. To analyse the contract scheme there are six factors that have to be determined, namely (1) Government Take; (2) Effective Royalty Rate (ERR); (3) Entitlement; (4) Saving Index; (5) Progressiveness; and (6) Profit to Investment Ratio (R Factor). It is easier for people to understand whether a contract scheme tends to have regressive, neutral or progressive characteristics through scientific calculation . The regressive contract scheme will decrease government takes from time to time, while progressive contract scheme will help government to increase their take based on the contractor expenses. The course also recommends how to make contact scheme progressive since most of the existed contract scheme now days tend to act as the regressive contract scheme.

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