Azerbaijan Upstream Fiscal and Regulatory Report - Stable PSA Regime Could Offer Favorable Terms for Underexplored Acreage


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Azerbaijan Upstream Fiscal and Regulatory Report - Stable PSA Regime Could Offer Favorable Terms for Underexplored Acreage

Summary

Azerbaijan Upstream Fiscal and Regulatory Report - Stable PSA Regime Could Offer Favorable Terms for Underexplored Acreage, presents the essential information relating to the terms which govern investment into Azerbaijans upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the states take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Azerbaijans upstream oil and gas investment climate.

Scope

- Overview of current fiscal terms governing upstream oil and gas operations in Azerbaijan
- Assessment of the current fiscal regimes state take and attractiveness to investors
- Charts illustrating the regime structure, and legal and institutional frameworks
- Detail on legal framework and governing bodies administering the industry
- Levels of upfront payments and taxation applicable to oil and gas production
- Information on application of fiscal and regulatory terms to specific licenses
- Outlook on future of fiscal and regulatory terms in Azerbaijan

Reasons to buy

- Understand the complex regulations and contractual requirements applicable to Azerbaijans upstream oil and gas sector
- Evaluate factors determining profit levels in the industry
- Identify potential regulatory issues facing investors in the countrys upstream sector
- Utilize considered insight on future trends to inform decision-making
1 Table of Contents
1 Table of Contents 1
1.1 List of Tables 2
1.2 List of Figures 2
2 Regime Overview 3
3 State Take Assessment 6
4 Key Fiscal Terms - Production Sharing Agreement 7
4.1 Bonuses 7
4.1.1 Signature Bonus 7
4.1.2 Discovery Bonus 7
4.1.3 Production Bonus 7
4.2 Acreage Fees 8
4.3 Training Fees 8
4.4 Compensatory Petroleum 8
4.5 Cost Recovery 9
4.5.1 Cost Recovery Limit 9
4.5.2 Recoverable Costs 9
4.6 Profit-Sharing 9
4.7 Direct Taxation 11
4.7.1 Profit Tax 11
4.7.2 Deductions and Depreciation 11
4.8 Natural Gas 12
4.9 State Participation 12
4.10 Stabilization Clause 12
4.11 Indirect Taxation 13
4.11.1 Import and Export Tax 13
4.11.2 Exemption from Primary Indirect Taxes 13
5 Key Fiscal Terms - Royalty/Tax 13
5.1 Mining Tax 13
5.2 Direct Taxation 13
5.2.1 Profit Tax 13
5.2.2 Deductions and Depreciation 13
5.3 Indirect Taxation 14
5.3.1 VAT 14
5.3.2 Property Tax 14
5.3.3 Land Tax 14
6 Regulation and Licensing 15
6.1 Legal Framework 15
6.1.1 Governing Law 15
6.1.2 Contract Type 15
6.1.3 Title to Hydrocarbons 15
6.2 Institutional Framework 16
6.2.1 Licensing Authority 16
6.2.2 Regulatory Agency 16
6.2.3 National Oil Company 16
6.3 Licensing Process 16
6.3.1 Direct Negotiation 16
6.4 License Terms 17
6.4.1 Duration 17
6.4.2 Obligations 17
6.5 Local Content 17
7 Outlook 19
8 Contact Information 20

1.1 List of Tables
Table 1: Summary 3
Table 2: Azerbaijan, Signature Bonuses (US$), PSAs 7
Table 3: Azerbaijan, Discovery Bonuses (US$), PSAs 7
Table 4: Azerbaijan, Production Bonuses (US$), PSAs 8
Table 5: Azerbaijan, Minimum Annual Training Funding Contribution (US$), PSAs 8
Table 6: Azerbaijan, State Share of Profit Oil (%), Shah Deniz (1996) and Shafag-Asiman (2010) PSAs 9
Table 7: Azerbaijan, State Share of Profit Oil (%), South West Gobustan PSA, 1998 10
Table 8: Azerbaijan, State Share of Profit Oil (%), Zigh and Hovsan PSA, 2006 10
Table 9: Azerbaijan, State Share of Profit Oil (%), Bahar Gum Deniz, 2009 10
Table 10: Azerbaijan, State Share of Profit Oil (%), Azeri-Chirag-Gunashli PSA (1994) 11
Table 11: Azerbaijan, Profit Tax Rates (%), PSAs 11
Table 12: Azerbaijan, SOCAR Participation (%), PSAs 12
Table 13: Azerbaijan, Annual Depreciation Rate (%), Fixed Assets, Profit Tax 13
Table 14: Azerbaijan, Annual Depreciation Rate (%), Asset Repair Costs, Profit Tax 13
Table 15: Azerbaijan, Land Tax, Manats/100 square meters, 2016 14
Table 16: Azerbaijan, Minimum Target Level of Local Personnel (%), Shafag-Asiman PSA, 2010 17
Table 17: Azerbaijan, Minimum Target Level of Local Personnel (%), Zykh and Govsany (2006) and Bahar Gum Deniz (2009) PSAs 18
Table 18: Azerbaijan, Minimum Target Level of Local Personnel (%), ACG (1994) and Shah Deniz (1996) PSAs 18

1.2 List of Figures
Figure 1: Regime Flow Chart - Production Sharing Agreement 4
Figure 2: Regime Flow Chart - Royalty/Tax 5
Figure 3: Azerbaijan, Indicative NPV10/boe, IRR and State Take Comparison - Internal, 2015 6
Figure 4: Azerbaijan, Indicative NPV10/boe, IRR and State Take Comparison - Regional, 2015 6
Figure 5: Azerbaijan, Legal Framework 15
Figure 6: Azerbaijan, Institutional Framework 16