2014 Global oil and gas tax guide

Tax regime definitions

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Concession

Under a concession, an oil and gas company is granted exclusive rights to exploration and production of the concession area and owns all oil and gas production. Under concession an oil and gas company typically pays royalties and corporate income tax. Other payments to the government may be applicable, such as bonuses, rentals, resource taxes, special petroleum or windfall profit taxes, export duties, state participation and others.

Production Sharing Contract (PSC) Production Sharing Agreement (PSA)

Under a PSC/PSA, a national oil company (NOC) or a host government enters into a contract directly with an oil and gas company. A company finances and carries out all E&P operations and receives a certain amount of oil or gas for the recovery of its costs along with a share of the profits. Sometimes PSC/PSA requires other payments to the host government, such as royalties, corporate income tax, windfall profit taxes, etc.

Service contracts

Under a service or risk service contract, an oil and gas company finances and carries out petroleum projects and receives a fee for this service, which can be in cash or in kind. The fees typically permit the recovery of all or part of the oil and gas company’s costs and some type of profit component.