Revenue/cost production sharing contract (psc) fiscal regime on marginal gas fields in Malaysia: Case study

Abstract

Despite the increasing global demand for natural gas, there are many marginal oil and gas fields that lie idle and are not developed mainly due to the uneconomic feasibility of the project. One of the main factors hindering the monetization of these small fields is the unfavourable fiscal conditions. This is the main reason why many potential marginal fields that do not meet the economic criteria required for commercial development are stranded. Thus, this paper aims at assessing the existing Revenue/Cost (R/C) Production Sharing Contract (PSC) fiscal regime on marginal gas fields in Malaysia via sensitivity and scenario analysis studies. It is found that reduction in cost of capital, tax rate or other PSC payments parameters helps to improve the NPV however the analysis shows the R/C tranches consists of cost recovery limit, excess cost recovery and profit-sharing percentage are the significant factors driving the cash flow.