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Production Sharing Contracts´ Contracts´

1976 Income Tax Act. 1999 Environment Protection Act. Continental Shelf. 1948 The Petroleum and Natural Gas Rules.PSCs ± Key Contractual Issues Legal Framework          Constitution of India. Exclusive Economic Zone and other Maritime Zones Act. 1961 Customs Act. 1986 Arbitration and Conciliation Act. 1962 Foreign Exchange Management Act. 1996 . 1950 The Oilfields (Regulation and Development) Act. 1959 Territorial Waters.

PSCs ± Key Contractual Issues Contractual Framework BIDDER 1 BIDDER 2 License Joint Bidding Agreement CONSORTIUM / CONTRACTOR Bid GOVERNMENT BIDDER 3 Production Sharing Contract  Work program & budget approvals  Exploration Activities DISCOVERY  Notification to Government  Appraisal and testing COMMERICAL mining lease  Development and production .

with prior approval of the Central Government Every license or lease granted to contain additional terms and conditions as provided for in an agreement between the Central Government and the licensee or the lessee (the PSC) Where license or lease to be granted by a State Government ± merely an obligation to µconsult¶ the State Government .PSCs ± Key Contractual Issues Parties     For offshore areas ± Grant of license and lease by the Central Government For onshore areas ± Grant of license and lease by the State Government.

.PSCs ± Key Contractual Issues Parties   NELP V ± Special emphasis on onshore basins Issues and options: * In the case of onshore PSCs: (1) delays in post contract clearances. (2) Involvement as confirming parties to contracts. and (2) procurement of mining leases from the State Government seen as a major bottle neck * Though µconcurrence¶ already received. States should be better involved by: (1) Involvement at bidding stage.

PSCs ± Key Contractual Issues Term  Exploration Phase ± multiple exploration periods EXPLORATION PHASE I 100% of contract area less discovery areas EXPLORATION PHASE II 25% of contract area not being discovery areas EXPLORATION PHASE III 100 % of contract area not being discovery areas 50% of contract area not being discovery areas 100% of contract area less discovery areas RELINQUISHMENT OF CONTRACT AREA .

PSCs ± Key Contractual Issues The µtake¶ REVENUE Royalty Cost Petroleum Profit Petroleum Profit Petroleum CONTRACTOR TAKE Tax GOVERNMENT TAKE .

PSCs ± Key Contractual Issues Cost petroleum   Cost petroleum linked to volume of petroleum produced and saved and µcontract costs¶ Control over costs ± a legitimate state concern .

PSCs ± Key Contractual Issues Production sharing and profit petroleum     Profit petroleum ± total value of product saved from a particular contract area ± calculated in specified manner Use of investment multiple Contractors bid on IM Complex proportions are intended to make sharing of oil more favorable to the Government at higher production levels .

PSCs ± Key Contractual Issues Thank you ! .

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