Production-sharing agreements can be beneficial for governments in countries that do not have the expertise and/or capital to develop their resources and wish to attract foreign companies to do so. They can be very profitable deals for the oil companies involved, but often carry a significant risk. Petronas has awarded a Production Sharing Contract (PSC) to Vestigo Petroleum Sdn. Bhd. for the South East Collins Cluster under small field asset`s (SFA) newly introduced PSC terms. The new SFA PSC aims to monetize an inventory of small resource opportunities discovered in Malaysian waters, Petronas said on April 21. Rex reduces the risk of its portfolio of exploration and development assets with its proprietary Rex Virtual Drilling liquid hydrocarbon indicator technology, which can locate underground oil deposits using seismic data. Since its IPO in July 2013, Rex has made four offshore discoveries, one in Oman and three in Norway.The Rhu-Ara cluster contains two uncovered oil fields, while the Diwangsa cluster contains four open oil fields. Clusters will be awarded following Malaysia`s 2020 application cycle. The durations include a pre-development phase of up to two years, followed by a two-year development phase and a ten-year production period. Rex and DMSB hold 95% and 5% of the shares respectively, with Rex being the operator of the contracts. The production sharing contract refers to an agreement that typically describes the percentage of production that the host country and a group of companies will receive after deducting the cost of extracting fossil fuels.

The last PSC in Malaysia was announced in November 2014 with two blocks in the state of Sabah allocated to SapuraKencana Petroleum, M3nergy and Petronas. The PSC was signed today at a virtual ceremony. Mohamed Firouz Asnan, Senior Vice President of Malaysia Petroleum Management, signed on behalf of PETRONAS, while the contractors for the oil arrangement were represented by Si-Bo Joo, Chief Executive Officer of POSCO International, and Hasliza Othman, Vice President of Malaysia Assets, Upstream and Chief Executive Officer of PCSB. Also present was petronas Executive Vice President & Chief Executive Officer of Upstream Adif Zulkifli. According to the Arc Media Global think tank, while effective, the RSC is essentially a contract that significantly increases an operator`s exposure risks. KUALA LUMPUR (NewsRise) – Malaysia`s national oil company Petroliam Nasional, or Petronas, has awarded its first production-sharing contract for 2016 to three oil companies to explore a hydrocarbon block off the state of Sarawak. The cost freeze gives the government the guarantee of recovering some of the production (as long as the price of the crude oil produced is higher than the cost freeze), especially in the early years of production, when costs are higher. Since the early 80s, all large orders have always included a cost freeze clause. The cost freeze may be a fixed amount, but in most cases it is a percentage of the cost of crude oil. In production-sharing agreements, the country`s government assigns the execution of exploration and production activities to an oil company. The oil company bears the mineral and financial risk of the initiative and explores, develops and produces the field as needed. If successful, the company can use the money from the oil produced to recover capital and operating expenses called the ”cost of oil”.

The remaining money is known as ”profit oil” and is divided between government and corporation. In most production-sharing agreements, changes in international oil prices or the rate of production affect the company`s share of production. Production Sharing Agreements (PSAs) or Production Sharing Contracts (PSCs) are a common type of contract signed between a government and a resource extraction company (or group of companies) that refers to the amount of resource extracted from the country (usually oil) that each receives. Production-sharing agreements were first applied in Bolivia in the early 1950s, although their first implementation was similar to that of Indonesia today in the 1960s. [1] Today, they are widely used in the Middle East and Central Asia. The announcement comes at a time when oil prices have risen more than 25 percent since the beginning of the year after easing concerns about a glut in production and rising demand. Brent, the global benchmark for crude oil, was trading at $45.92 on Friday, less than half its value in June 2014. The amount of reimbursable costs is often limited to an amount called a ”cost freeze”. If the costs incurred by the Company are greater than the cost freeze, the Company is entitled to reimburse only the costs limited to the cost freeze. If the costs incurred are less than the cost freeze, the difference between the costs and the cost freeze is called ”excess oil”. Usually, but not necessarily, excess oil is divided between government and society according to the same profit oil rules.

If the achievable costs are greater than the cost freeze, the contract is defined as saturated. ExxonMobil`s subsidiary has invested more than $15 billion in Malaysia over the past 40 years. The company operates 43 platforms in 17 fields as one of the largest suppliers of crude oil and natural gas in Malaysia. Daily production is about 150,000 barrels (crude) of oil and about 1.2 billion cubic feet (crude) of natural gas. About 96% of the subsidiary`s 1,150 employees are Malaysian citizens. • Further strengthen future results by acquiring a 33.84% stake in the Brage field in Norway, which will enter into force on 1 January 2021. This will add an estimated production of 3,440 barrels of oil equivalent per day to Rex`s subsidiary, Lime Petroleum. For more information, see the presentation slides here. Vestigo, a subsidiary of Petrnoas Carigali Sdn. Bhd, operates the Irong PSC, SK315 PSC, PM335 PSC cluster and the risk sharing contract on the small fields of Tembikai Chenang.

It also holds non-operational interests in PM9 PSC and SK407 PSC. Performance-based agreements such as the Berantai RSC focus more closely on production and recovery rates compared to production-sharing contracts favored by oil companies. .