Petroleum Arrangement Contracts

In exercising the provisions of the Petroleum Development Act the Petroleum Regulations 1974 provides PETRONAS with the power to issue licenses for carrying out activities related to petroleum exploration and production.
Investors wishing to participate in exploration and production activities must apply and receive license from PETRONAS. The licenses take the form of a Petroleum Arrangement (PA) contract between PETRONAS and the investors (to be referred as contractors), where one of the parties is designated as the operator.
The vast majority of PA contracts applicable today is in the form the Production Sharing Contract (PSC). 
The PA contract is the main document for governing the activities in any given oil and gas upstream acreages in Malaysia. It sets out the terms, conditions, rights and responsibilities of the parties involved. A typical PA contract specifies, among others:
  • Scope and duration of contract
  • Fiscal terms
  • Map of contract area
  • Minimum work commitments and minimum financial commitments
  • Participating interests of the contractors
  • Conduct of management of operations
  • Requirements for work programming and budgeting
  • Methods of segregation and valuation of hydrocarbons
  • Cost recovery mechanism