December Monthly Report ENG
December Monthly Report ENG
December Monthly Report ENG
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DECEMBER'2013'<br />
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MNR'–'KRG'|'MONTHLY'REPORT'<br />
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''Production'Sharing'Contracts''Explained'<br />
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What'is'a'Production'Sharing'Contract'(PSC)'<br />
In'oil'and'gas,'PSCs'are'a'common'type'of'contract'signed'between'a'government'and'an'Exploration'and'Production'(E&P)'<br />
company'to'define'how'much'of'the'production'each'party'will'receive.'PSCs'were'first'used'in'Bolivia'in'the'1950s,'however'<br />
were'relatively'uncommon'until'recent'times,'where'they'now'dominate'oil'and'gas'agreements,'especially'in'the'Middle'East'<br />
and'Central'Asia.'<br />
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Under'PSC'arrangements,'the'E&P'company'bears'the'financial'risk'until'such'time'a'discovery'is'made.'If'a'discovery'is'not'<br />
made,'no'cost'is'recovered'by'the'E&P'company.'However'if'a'discovery'is'made'and'the'field'begins'to'produce,'the'company'<br />
is'permitted'to'use'the'money'from'produced'oil'to'recover'capital' and' operational' expenditures,'known'as'"cost'oil".'The'<br />
remaining'money'is'known'as'"profit'oil",'and'is'split'between'the'government'and'the'company,'typically'at'a'rate'of'about'<br />
80%' for' the' government,' 20%' for' the' company.' Although' in' the' Kurdistan' region,' that' rate' is' typically' closer' to' 90%' for'<br />
government.'<br />
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